Press Releases

Brisbane, July 27, 2010 (ABN Newswire) - Carbon Energy Limited (ASX:CNX) (CEL) is an emerging energy Company intent on producing syngas for cleaner energy and chemical feedstock from Underground Coal Gasification (UCG). It aims to do this by pursuing the following key areas of focus:

- Continuous improvement of UCG technology and the development of complementary technologies that will ensure CNX will develop a superior technical capability in the UCG Syngas industry.

- Expand its coal resource inventory by exploration within its current tenements or through identification of suitable joint venture opportunities and acquisitions, leveraged off CEL's ability to successfully undertake UCG Syngas production in Australia and globally.

- Identify and develop commercial opportunities using Syngas derived from Carbon Energy's superior UCG technology for the production of power, synthetic natural gas, chemicals and gas to liquids (GTL) either in the Company's own right or by way of strategic partnerships.

Progress in each of these key areas is as follows:

1. CONTINUOUS IMPROVEMENT OF UCG TECHNOLOGY (BLOODWOOD CREEK)

Further developments on the Bloodwood Creek site are continuing as follows:

As per the company's announcement dated 28th April commissioning of the 5 MW project will be completed in September, in line with the availability of the gas from Panel 2

- The drilling program for Panel 2 & 3 commenced in late May, the work is progressing as planned. Some of the key features of the progress achieved to the end of June being as follows:

Drilling of vertical injection wells for panels 2&3 completed and seam position confirmed.

First 70 meters of both the product and injection wells for panel 2 have been drilled cased and grouted

- All major items of equipment have been procured and Panel 2 ignition and gas gathering items installed

- The ignition well installation design has been improved.

- Panel 1 has continued to operate at a reduced output capacity whilst considering the panel remediation protocol.

- Close coordination with the Queensland Government's working parties associated with the Government's UCG Policy continues.

20MW Power Station Development

The proposed 20MW power station is now configured as a steam turbine following initial review of engineering advice and discussions with prospective commercial partners. Proposals for a FEED (Front End Engineering Design) Study have been received and are being reviewed with selection of our preferred engineering partner to occur in the near future.

2. EXPAND COAL RESOURCE

- Chile

Carbon Energy and Antofagasta (LON:ANTO) are working closely together on site selection at Mulpun, Chile for the development of the Company's first international UCG project.

Phase 1: activities, which include a work plan and budget for the trial and associated activities such as site selection and seismic evaluation, are progressing well. Further work will be undertaken in Chile by Carbon Energy`s Technical and Project Team in late July. Design parameters for the initial trial will be finalised following completion of the site assessment, with the commencement of the trial likely in the first quarter of 2011.

- Galilee Basin (QLD)

Discussions are ongoing with Liberty Resources (ASX:LBY) in order to formalise a joint venture agreement that will earn Carbon Energy an 80% interest in Liberty's granted EPC's in the Galilee Basin by Carbon Energy funding the early stages of underground development through to a trial project.

Other opportunities

Carbon Energy continues in discussions to identify other potential coal resources suitable for UCG both in Australia and Internationally.

Tenement Status at end June 2010
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Tenement    Status     Sub-blocks as at   Sub-blocks as at  Area
                         March 2010         June 2010       Sq km
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MLA 50253  Application    1342 ha            1342 ha          15
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MDL 374     Granted       2687 ha            2687 ha          32
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867         Granted       191                 191            670
------------------------------------------------------------------
869         Granted        64                  64            213
------------------------------------------------------------------
868         Granted       177                 177            605
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1132        Granted        23                  23             78
------------------------------------------------------------------
1109        Granted        65                  65            224
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1741      Application      35                  35            119
Kogan West
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                                              TOTAL        1,956
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3. IDENTIFY AND DEVELOP COMMERCIAL OPPORTUNITIES

Commercial negotiations are continuing with a short-list of partners to develop Carbon Energy's planned 20-25MW power project in Queensland, the selection of a preferred partner is targeted now for late 2010. An assessment of market opportunities for Carbon Energy's proposed 300 MW power project at the Company's 'Blue Gum Energy Park' will be made in due course.

Discussions are continuing with resource owners in North America and Europe regarding Carbon Energy earning an equity position in coal resources suitable for UCG by providing access to the Company's leading UCG technology.

Corporate

BOARD CHANGES

- Louis Rozman, a Director of Pacific Road Capital, was appointed to the Board at the start of the Quarter.

SUBSTANTIAL SHAREHOLDERS

- Pacific Road announced in May 2010 that it had completed its acquisition of a 10% interest in the Company from CSIRO. Pacific Road Capital has introduced one of their significant international investment fund shareholders in the Pacific Road Resources Fund to take a direct interest of 4.9% in CNX and Pacific Road Resources Fund holding the balance of 5.1%. The transaction was completed at A$0.60per share, with Pacific Road Capital holding an option over CSIRO's remaining 4.8% interest in CNX at a price of A$0.93 per share.

- Incitec Pivot Limited (ASX:IPL) (PINK:ICPVY) has notified their holding in the CNX as 11.3%

- Lujeta Pty Ltd notified their holding in CNX as 5%.

ISSUED CAPITAL & CASH FUNDS

- The total issued capital at the end of the Quarter was 609,497,650 fully paid ordinary shares quoted on the Australian Stock Exchange. During the quarter 15,000,000 New Shares were issued to Constellation Energy Pty Ltd in consideration for the supply of drilling services by Constellation for the Bloodwood Creek Trial.

- A total of 49,921,000 unlisted options with exercise prices between 20c and A$1.60 are on issue (with expiry dates ranging between 31 October 2010 and 22 March 2015, with the vast majority subject to meeting annual performance measures). 2,139,000 options lapsed during the Quarter.

- The Company retains cash reserves of A$19.07 million as at 30 June 2010.

LISTED INVESTMENTS

- Carbon Energy held 29 million shares in ASX listed uranium company, Energia Minerals Limited (ASX:EMX) as at 30 June 2010

For the complete Carbon Energy June 2010 Quarterly Report, please refer to the following link:

http://www.abnnewswire.net/media/en/docs/63396-ASX-CNX-222333.pdf

Contact

Andrew Dash Managing Director Carbon Energy Tel: +61-7-3337-9944