Blue Energy : December 2021 Quarterly Activities & Cash Flow Report

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

31 January 2022

QUARTERLY ACTIVITIES REPORT

to 31 December 2021

Blue Energy Limited (ASX: BLU, 'Blue Energy', 'Blue' or 'the Company') is pleased to report on activities during the quarter ended 31 December 2021 across its exploration acreage in Queensland and the Northern Territory, in which the Company's key gas and oil projects are located.

KEY HIGHLIGHTS

• 300% gas resource upgrade to ATP 854 in the Surat Basin, QLD (ATP 854 is 25 km west of the main CSG gas fields for GLNG and has gas pipeline infrastructure passing through the permit)
• Joint Federal/State Government Bowen Basin Concept Study supports North Bowen development and gas pipeline construction, and highlights preferred pipeline routes
• Federal government Expression of Interest process established for pipeline pre-FID funding
• Blue goes to market seeking quotes for services for the North Bowen drilling program
• Environmental Authority upgrades for Production Licence Applications ready for lodgement

ATP 854 Gas Resource Upgrade: Blue received a resource upgrade for its ATP 854 permit in the Surat Basin from its independent reserve certifier, Dallas-based Netherland Sewell and Associates Inc (NSAI), post quarter's end (see ASX announcement dated 25 January 2022 for full details). 1C, 2C and 3C Contingent Resource categories received 300% increases in aggregate. Total 3C Contingent Resources for the permit have increased from 101PJ to 398PJ with this latest review. The gas resource upgrade is a result of an independent review conducted by NSAI of existing Blue Energy data together with available industry data which has been established in the period since the initial gas resource estimation.

This gas resource upgrade is timely, given the gas offtake agreements Blue Energy has executed to supply gas to Origin Energy and EnergyAustralia at the Wallumbilla hub. These agreements are for the 10-year supply of up to 400 PJ of gas. Gas from ATP 854 will be considered as a potential initial supply option for these supply agreements and to augment the Company's North Bowen Basin Gas reserves and resources.

Joint Federal and State Government Bowen Basin Concept Study outcomes: The joint Federal/State Government Bowen Basin Concept Study (BBCS) was released 6 January 2022. The BBCS dovetails with the Federal Government's National Gas Infrastructure Plan (NGIP, released 30 November 2021) and stated plans for a post-COVID 'gas-ledrecovery', both of which highlighted the need for more new gas supply to the East Coast gas market.

The NGIP identified several East Coast sedimentary basins from which new gas supply could potentially be sourced. The BBCS release has confirmed that the North Bowen Basin is the prime candidate for new gas supply. Data from existing CSG drilling and production, together with coal mine gas drainage data and both engineering and reserve certifier expertise, was used to prepare the report. The study identified four potential pipeline routes for gas to be brought from Moranbah to the East Coast market. It further contended that the North Bowen Basin gas resources are economically recoverable using reasonable assumptions on cost, revenue, well design and coal geology. The NGIP also introduced an Expression of Interest process (EOI) that encourages parties to apply for Federal Government funding for pre-FID studies of potential pipeline projects.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Blue's North Bowen Program (ATP 814): The planned 2022 drilling program in ATP 814 has been formulated in conjunction with reserve certifier NSAI to provide a reserve build component (converting Contingent Reserves to 2P reserves) and a productivity test to refine the development plan for the supply of gas into Blue's offtake agreements in Wallumbilla (to Origin Energy and EnergyAustralia). As announced to the market (20 January 2022), Blue has sought quotes for the third-party services required to execute the 2022 drilling/testing program in ATP 814, with quotes to be reviewed and awarded by end-February. In parallel, Blue has finalised work on and is ready to lodge the upgrade of Environmental Authorities (EAs) required as part of the award of Production Licences PL 1034, 1038 and 1045 in ATP 814.

ACTIVITY IN PROVEN BASINS

Bowen Basin, Queensland: ATP 814 (Blue Energy 100% and Operator)

Blue is ready to lodge the requisite environmental survey work completed over the past 6 months for the upgrade to the EAs for the three Production Licence (PL) applications in ATP 814 (see Figure 1). The upgraded EAs are required as part of the approval process and grant of the PLs and covers the initial development program for the PL areas.

The object of the drilling campaign is to be a reserve build (conversion of 3C to 2P) and productivity test of the asset. In preparation, Blue has gone to the market seeking quotes for contract drilling, directional drilling, cementing, wireline survey, and completion services; surface testing package supply; and general drilling and completion equipment. The quotes will be reviewed and awarded by end-February. The 2022 drilling program has been formulated in conjunction with NSAI to provide a reserve build component (converting Contingent Reserves to 2P reserves) and a productivity test to refine the development plan for the supply of gas into Blue's offtake agreements in Wallumbilla to Origin Energy and EnergyAustralia. These agreements amount to a yearly supply of up to 400 PJ of gas over 10 years.

Figure 1: ATP 814, Bowen Basin, incl. granted Potential Commercial Areas and existing PL applications

Note: Figure shows the NQGP gas pipeline to Townsville, the major Gladstone- Townsville high-voltage electricity transmission line ('275Kv transmission line'), and three of the four pipeline route options for Bowen gas to enter the southern market ('Proposed gas pipeline').

Source: Blue Energy Ltd.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

The agreements also underpin the viability of the North Bowen Basin Gas pipeline which, as indicated by the NGIP, is a key piece of gas infrastructure to position the North Bowen Basin as the East Coast's new gas supply source. A complementary study, the Bowen Basin Concept Study (BBCS), was jointly funded by the Federal Department of Resources and the Queensland Department of Resources and released in January 2022 (after the end of the quarter). The BBCS, independently authored jointly by KMPG, NSAI and GHD, found that gas in the Bowen Basin could be considered economically recoverable using reasonable assumptions on cost, revenue, well design and coal geology. The study further indicated that the Moranbah area could establish a plateau gas flow rate in the order of 200 terrajoules per day. The study identified four feasible pipeline routes (see Figure 2), specifically favouring two particular routes that would provide the most attractive economic return.

Blue has contended for many years that development of the North Bowen Basin's estimated 15,000 PJ total gas resource is critical for delivering gas to East Coast users in the near term. The North Bowen Basin is one of the few East Coast gas basins that has the scale of resource and is sufficiently de-risked (i.e., already discovered and on production) to make a rapid and long-term difference to the supply of new gas into the East Coast domestic gas market.

Figure 2: Proposed route options for Bowen Basin Pipeline

Source: KPMG, GHD, NSAI 2021, 'Bowen Basin Concept Study: Final Report', p. 14, https://www.resources.qld.gov.au/__data/assets/pdf_file/0008/1592855/bowen-basin-study-final-report.pdf.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Blue has been working on a well design and configuration concepts for the 2022 drilling campaign; the results are depicted in Figures 3-4. Surface locations are currently being scouted.

Figure 3: Schematic block diagram of well design concept for ATP 814P program

Source: Blue Energy Ltd.

Figure 4: Plan view of notional development concept well patterns

Source: Blue Energy Ltd.

As already announced to the market, ATP 814 currently has 2P reserves of 71 PJ+ and 3P reserves of 298 PJ+ (as independently certified by NSAI) allocated to it. There is also significant upside within the constituent blocks comprising the permit with a combined 3,248 PJ+ of Contingent Resources in all the area held by the Company's ATP814 granted Potential Commercial Area (PCAs) and PL applications, as estimated by NSAI. There is also additional upside in the Prospective Resources category in the

ATP 814 permit of approximately 2,000 PJ of gas in place.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Surat Basin, Queensland: ATP 854 (Blue Energy 100% and Operator)

On 25 January 2022, Blue announced an approximate 300% upgrade of the recoverable gas resources in ATP 854 from NSAI. The upgrade is in net recoverable gas resource across the 1C, 2C and 3C Contingent Resource categories, and represents an increase in the permit's total Contingent Resource base from 101 PJ to 398 PJ of 3C. Both 1C and 2C Contingent Resource categories also increased over 300%.

Table 1: Change in Contingent Resource estimates following NSAI review

Permit

1C (PJ)

1P (PJ)

2C (PJ)

2P (PJ)

3C (PJ)

3P (PJ)

new

old

new

old

new

old

new

old

new

old

new

old

ATP854P

Surat Basin

90

22

-

-

194

47

-

-

398

101

-

-

Qld

% Change

+309%

+313%

+294%

Source: Blue Energy Ltd.

ATP 854 is located near the heart of the CSG-LNG gas supply precinct. Gas pipeline infrastructure (PPL 30 and PL 118), linking Wallumbilla to Gladstone, runs through the permit. The ATP 854 gas resources thus have clear near-term potential for economic development using this infrastructure (see Figure 5). ATP 854 is now a substantial gas resource which can augment Blue's Bowen Basin gas supply agreements with Origin Energy and EnergyAustralia, both in timing and volume. As previously reported, Blue has lodged PCAs over the permit, which now contain 398 PJ+ of Contingent Resources (in the latest review and estimation by NSAI). Blue continues to work with the Queensland Government to secure grant of these PCAs. Work was conducted and completed late in the quarter on a plug and abandonment program of several legacy wells in the permit, drilled previously by Blue. The work was completed safely and under budget.

Figure 5: Location of ATP 854 in relation to existing pipeline infrastructure and major gas fields

Source: Blue Energy Ltd.

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