See following note for new interim strategy for EPG, (Plan B)...

See following note for new interim strategy for EPG, (Plan B) Not all bad but will give them cash flow to wait until they can raise more serious $$ for further drilling etc.

See below answers

Dear Sirs

I have a list of questions that if possible I would like answered at the AGM on the 21st November 2008. Hence why I have submitted the list in advance of the meeting.

Questions are numbered
_____________________________________________________________________
It appears that greater short term greater gas sales will allow European Gas to develop faster given the current problems in the capital markets.

1. What are the limitations on the sale of gas to Total Gas and Power, ie why can you not sell them all you can produce?

ANS 1)The can double sales from Avion today ie they have the production on tap. However due to the low Wobbe Index factor (Calorific Value) they can only inject so much ie dilute the other gas in the local gas main. Also it appears that the gas main they inject into is regional only at the moment limiting the output.

2. Can this contract be changed in 2010 to supply all you can produce on a take or pay contract or

ANS 2)No not really unless EPG condition the gas ie increase the Wobbe Index factor (Calorific Value) which can be expensive.

3. Can you not have a secondary contract for the surplus production now?

ANS 3)No but EPG can generate electricity from this gas using standard generators. Since CMM is treated as a energie de recuperation they get a premium price for the electricity produced. 70-75 Euros per MWh. (See feasibility re 25MW power station below)

4. Or is this resource constrained production ie you cannot produce any more.

ANS 4)Yes they can double this and more

Detail of gas sales for the latest quarter are summarised in the following table.

M3 MWh GJ €/MWh €/GJ
3,228,160 34,488 124,160 25.72 7.15

5. You made a comment in the last quarter report “Gas sales for the quarter were reduced compared to the June quarter 2008 gas sales 59,190 MWh (213,080 GJ)) due to the typical seasonal variations of the summer months where less gas can be injected into the national grid”.

5. Please Explain why this is so when the amount of gas you produce is insignificant in the scheme of things?

ANS 5)Again it is significant due to the regional pipeline structure this limits the input which is weather dependent Ie its hot less gas used

Sales and production YTD

Sales M3 GJ Cumulative GJ MWh PerGj Euro Euro
Q12008 400,000.00 400,000.00 111,238.00 5.78€ 2,312,000.00€
Q22008 210,000.00 610,000.00 59,190.00 6.38€ 1,339,800.00€
Q32008 3,228,160.00 124,160.00 734,160.00 34,418.00 7.15€ 887,744.00€
Q42008
734,160.00 204,846.00 6.18€ 4,539,544.00

6. Does this mean that you are proposing to produce 781,819.00 GJ to match your average production for calendar year 2008 ? Or is there another problem ?

ANS 6)Gas sales are approx 1 Million Euro Per Month through to April ie 5 Million in the bin then reducing.

Divion &Desiree Site

These sites appear to be shut in at present due to the ongoing dispute described below.

At the Désirée sites the gas is compressed to between 300 and 350 kPag for supply of gas under a sales agreement to local industry

On June 28, 2002, Gazonor entered into a contract with Société Artésienne de Vinyle (“SAV”) for the supply of mine gas to SAV. On April 12, 2007, Gazonor gave notice to SAV of its intent to terminate supply following expiration of the three-month notice period required under the contract, in the event of failure by the parties to agree upon a new rate applicable to the future supply of mine gas.

On July 10, 2007, in light of SAV’s refusal to pay outstanding supply invoices, Gazonor summoned SAV before the Commercial Chamber of the Béthume District Court, demanding payment of €410,288 in unpaid invoices and €100,000 in damages.

7. What other options are there to resell this gas to another party or to generate electricity in the short term?

ANS 7)They will generate electricity in stage 2

8. What % of potential production do Divion & Desire sites make up of the whole.

Ans 8)Small

9. Have you thought of producing bulk CNG for sale from these sites?

Ans 9)Yes they have looked at this but Electricity provides a better revenue stream

10. Comment
This is not expensive from a capital perspective to introduce after all and could bridge the gap between production and actually connection to pipelines from Lorraine as well!. This may be able to Create revenue ASAP.

Lorraine

11. What are the Flow rates Lorraine and what are the challenges?

Ans 11)Little or no testing has taken place as this is still flooded due to the sump pump not being placed drilled deep enough. Need workover rig to fix this problem.

12. Are there any issues with the flow rates and can they be increased

Ans 12)None as no meaningful testing taken place.

13. Upgrade of Lorraine reserves to P3 –P1 – When

Ans 13)Mid 2009 maybe if they have the $$

This is where EPG really have a problem, First time they used Cofor who stuffed the Folcherville & Deibling Wells in 2007, and now they used SMP of Chateau Renard & Target (Directional Drilling) who also seem to have made a mess and not completed the well to a level where testing can take place.

Tony McClures explanation is that there is no one with the expertise in Europe like Mitchell Drilling or AJ Lucas in Australia who know how to do this properly. It also appears that the cost is approx x 4 compared to drilling in Australia.

IE EPG seems to be paying the Europeans to learn how to do this stuff.

Comment:- now they have run out of $$ to do anymore drilling.

What are the dates of the tenement relinquishments by 50%

Ans )Rolling but 47% Lorraine gone already (admittedly this was allowed for in the original application)

Gardanne

14. Has Drilling Started yet ?
15. If not when do you expect it to start

Ans 14-15)They have run out of $$ to do anymore drilling.

Capital Raising

In realising that the current stock price is not as currently favourable as it should be and that EPG requires more money to complete its current drilling programme

16. When do you expect the next capital raising

Ans 16)None in the near future due to the market situation

17. European Float what is the proposed schedule

Ans 17)Ready to do but market not any good

18. If so where Paris or London?

NA

19. Have you received any takeover offers in recent times?

Ans 19)They are looking at farm outs on their current acreage to develop this further, however due to so far failed drilling effort EPG will pay for their mistakes. Ie it is still very speculative.

General

20. Why is European Gas not a member of the methane to markets program ?

Did not ask

21. When does European Gas expect obtain CER’s from its methane mitigation from CMM?

Ans 21)Will do by generating Electricity

22. Or gain a pricing advantage via the gaz de recuperation?

Ans 22)Will do by generating Electricity