Economic. Our approach. Energy supply

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2 Economic Our approach As a company focused on delivering domestic gas supplies and meeting the world s growing energy needs in ways that are economically, environmentally and socially responsible, long-term profitability is essential to achieving our business goals and our continued growth. A strong financial and operational performance enables Arrow to deliver value to both the communities in which we operate and to shareholders. Our actions Delivering value to our shareholders Arrow is exploring approximately 41,500km 2 of CSG exploration tenements throughout Queensland. It is intended that the commercialisation of the CSG held in our tenures will deliver long term business value not only to our shareholders but also to the regional economies and Queensland more broadly. Producing coal seam gas makes a contribution to the present and future generations through the supply of reliable and cleaner energy and the diversification of the local economies in the areas in which we operate. During 2012 we achieved strong 2P reserve additions of approximately 1500PJ. Our LNG 2P reserves total is currently over 9500PJ and puts us on par or above levels held by other Queensland CSG companies at the time they took a FID on their CSG-LNG projects in Queensland. Arrow s vast energy resource will continue to contribute to meeting domestic energy needs, as well as supplying the needs of our proposed CSG-LNG export facility on Curtis Island. Arrow s two shareholders have committed to 100 per cent of the LNG off-take from our LNG project. Additionally, they provide significant financial security; some of the world s most advanced technology and access where necessary to skilled employees with vast experience in LNG projects. Energy supply Natural gas is a fundamental energy source for power generation and is a critical feedstock for conversion by industry into value-added consumer products. Its value to regional, state and national economies is significant and it has substantially lower greenhouse gas emissions when compared to the combustion of other fossil fuels. Our domestic gas business has been delivering cleaner energy to industry and households from our CSG fields in the Surat Basin since 2004 and the Bowen Basin since With approximately 1,200 gas wells across these fields, Arrow is able to supply gas to the Townsville (240MW), Daandine (33MW) and Braemar 2 (450MW) power stations. From our interests in these three gasfired power stations, we are capable of powering 800,000 average-sized Queensland homes. We also supply gas to local and industrial users in Townsville and Moranbah. Arrow is committed to maintaining supply to these domestic customers.

3 Arrow has a 15 year gas sales agreement with Dyno Nobel to supply 7PJ of CSG per year from the Moranbah Gas fields. The long-term competitivelypriced gas supplied by Arrow and AGL is used for onsite power generation and as feedstock in Dyno Nobel s 330,000 tonne per annum ammonium nitrate plant in Moranbah, Queensland. 16 The world-scale ammonium nitrate plant brings sustainable benefits to the Moranbah community including supply opportunities for local businesses and the employment of an operational workforce of about 80 people whose families are part the Moranbah community. Dyno Nobel s ammonium nitrate plant, Moranbah 17 Braemar 2: Safely and reliably delivering lowemission electricity The fourth of July 2012 marked the first anniversary of Arrow s full ownership and operation of Braemar 2. Braemar 2 is about 40km south-west of Dalby and is Queensland s second largest gas-fired power station. During 2012 Braemar 2 operated at record reliability and generated three to four per cent of Queensland s electricity. Its three 150MW Siemens turbines are powered by CSG giving the plant a smaller carbon footprint, with about 40 per cent less carbon emissions than coal-fired stations Braemar 2 power station, near Dalby

4 $1.2 billion We have to date spent and contracted over $1.2 billion worth of goods and services from a range of Australian suppliers. 18 Delivering value to communities Arrow s domestic gas business and proposed LNG project are making a positive contribution to regional development and provide a range of economic benefits to Queensland as a whole. This will include increases to direct and indirect employment, improvements and upgrades to local services and infrastructure, enhanced training and skills development, local business opportunities and an injection of wealth and vitality into local communities. Arrow is committed to creating sustainable employment and economic development opportunities for local industry. We will provide full, fair and reasonable opportunity for capable and competitive local businesses to participate in our procurement of goods, equipment and services and arrange timely training to support skills development. By providing practical support and early engagement with local industry, we will maximise the benefits that local employment can bring to the communities in which we operate. During November 2012, Arrow held its first Local Supplier Briefing session in Dalby. More than 90 people attended the session representing approximately 60 businesses. The session provided early information about local contracting opportunities, the process of registering with Arrow, and other essential information about Arrow s operations. It also provided the opportunity for a two way dialogue where local business owners could raise concerns and seek information from senior Arrow staff members. We have to date spent and contracted more than $1.2 billion worth of goods and services from a range of Australian suppliers for engineering, construction, design and civil building work. More than $850 million of that has been contracted to Queensland businesses, mostly in regional towns where Arrow is based. Approximately 40 per cent has been contracted to companies in regional areas. Dalby businesses have won more than $50 million worth of work and the wider Surat region has shared more than $150 million worth of work between 130 businesses. Arrow will continue to build on the opportunities for local suppliers by implementing an Australian Industry Participation Plan (AIPP). The AIPP sets out specific actions that Arrow and its contractors will implement to ensure that local suppliers are given full, fair and reasonable opportunity to compete. Some of these actions include using the Industry Capability Network (ICN) Gateway to promote local supply More than $850 million of that has been contracted to Queensland businesses, mostly in regional towns where Arrow is based. Arrow will continue to build on the opportunities for local suppliers by implementing an Australian Industry Participation Plan (AIPP). $850 million 19

5 20 opportunities, conducting public supplier briefings and ensuring all tenderers compete under the same standards, terms and conditions. Arrow is working in collaboration with the Queensland Government to develop a capability development program to support local suppliers. Additionally, Arrow has invested in a program called Whanu Binal that will support Indigenous people and businesses to develop their capability to meet the oil and gas standards. This program has already realised success in building skills and employment opportunities for 15 Indigenous people, with seven already gaining employment in the industry. We are already in discussions with state and local governments on the development of a multi-million dollar affordable housing strategy. Significant expenditure is also planned on roads leading to and within the areas of our operation, as is continued financial support for skills development programs. Arrow is developing a regional approach to skills and training requirements beyond the CSG industry in non-mining industries within its operational areas. This approach involves regular reviews of community workforce requirements and current skill sets. Thus it ensures that training strategies meet these needs and identify the range of skills required for the community workforce in regional centres. Arrow is committed to investing in education and training programs that assist in building a skilled and diverse community workforce and create shared value in the communities in which it works. Training pathways for students and school leavers are being identified to assist students in gaining employment upon graduation, both in mining and non-mining related industries. Existing Arrow training programs and initiatives include: Go Women in Engineering and Science and Technology (Go WEST) conducts networking and/or mentoring activities for female staff and students in the Surat Basin. Education Queensland Industry Partnership (EQIP) delivers courses designed to enable high school students to successfully transition into the local workforce and provides employers in the resource sector with new graduates who possess relevant skill sets. Queensland Minerals and Energy Academy (QMEA) partnership designs and facilitates a range of programs to encourage students to pursue careers in Queensland s CSG/ LNG industry and is a joint initiative between the Queensland Government, the Queensland Resource Council and major CSG/ LNG proponents. Dalby State High School partnership involves Arrow funding six scholarships in 2013 for the school s Agricultural Futures and Agricultural Professionals programs which are intended to support the region s ability to meet future agricultural workforce requirements.