EDEN INNOVATIONS LTD — Capital/Financing Update 2007

May 16, 2007

Australian Securities Exchange Announcement Thursday, 17^th May 2007

SOUTH WALES COAL BED METHANE (CBM) DRILLING COMMENCES

HIGHLIGHTS

• A programme of up to six wells at the South Wales Project has commenced.
• Excellent CBM targets in gassy coal seams of the South Wales Coal Basin from 350m to 900m depth.
• $\bullet$ 430 km² licence areas effectively unexplored for CBM.
• Established pipeline infrastructure already in place within and adjacent to project areas enables potential easy access to markets.
• Strong natural gas price and strong market fundamentals.
• Large population gives large market with both short-term major local customers and long-term opportunities.

DETAILS

The Directors of Eden Energy Ltd ("Eden", ASX Code EDE) are pleased to announce the spudding of Port Talbot 1 in UK Petroleum Exploration and Development Licence 100 ("PEDL100") in South Wales. This is the first well in a programme of up to six wells in PEDL100, which is located between the cities of Cardiff and Swansea; approximately 220km from London (see Figure 1).

Eden is earning a 50% interest in Coal Bed Methane in the licence, which is held by Coastal Oil and Gas, a wholly owned subsidiary of UK Onshore Gas Group.

Drilling Programme Objectives

This drilling programme is the first undertaken by Eden and the initial step in evaluating a potentially very significant gas project in the UK as was foreshadowed in Eden's IPO prospectus in May 2006.

The virgin CBM exploration programme being undertaken is intended to quantify the critical parameters of gas content and seam permeability needed to assess regional CBM attributes. This data will to enable the planning of initial pilot CBM projects. Port Talbot 1 is the first well in a programme of at least three wells in PEDL100.

Website: www.edenenergy.com.au

The Port Talbot 1 well is being drilled at the eastern end of the licence area adjacent to Associated British Ports Port Talbot facility. The planned total depth of the well is 650m, with significant coal seams expected between 350m and 640m within the Westphalian Coal Measures of the South Wales Coal Basin.

The total drilling programme is proposed to comprise three to six wells, totalling up to approximately $3500m$ . The programme of drilling, gas content analysis and in situ permeability testwork is expected to run from May 2007 until October 2007, with preliminary results available within that period but final reporting not anticipated until towards the end of 2007.

Drilling is being undertaken by a veteran Irish drilling contractor, Priority Drilling, with programme supervision by highly experienced Australian and US consultants.

CBM BACKGROUND

Coal Bed Methane is a clean-burning, low carbon, energy source well suited as fuel for the production of electricity, residential, industrial and commercial heating, and as a vehicle fuel. CBM is naturally occurring methane (CH₄) with small amounts of other hydrocarbon and non-hydrocarbon gases contained in coal seams and formed as a by-product of the coal forming processes as well as due to microbiological activity.

CBM has made an enormous impact on gas supply worldwide over the last decade. In the USA, where its impact is probably greatest, it now contributes some 10% or more of total gas production. More locally in Australia, its impact in Queensland is also significant, where it is both replacing gas supply from dwindling conventional sandstone reservoirs, and fuelling new electric power generation plants.

CBM projects require five key parameters for success:

• 1. sufficient areal extent of the coal seams:
• 1. sufficient thickness of coal present:
• 1. abundant methane (and/or other hydrocarbon gases such as ethane) contained in the coals:
• 1. adequate permeability within the coals to permit the economic extraction of the gas; and,
• 1. favourable project economics.

UK Gas Market and CBM

The United Kingdom is an attractive market for CBM projects. The region hosts favourable geology with a number of prospective coal basins, of which South Wales is possibly the most attractive. It has well developed infrastructure including gas pipelines already in place and the value of the methane is considerably higher than in countries such as USA or Australia.

Energy supply security is a major strategic issue in the UK and Europe. The UK only has limited storage capacity for natural gas (only about two weeks worth of demand is stored at any one time) with most gas coming via Europe and potentially subject to international political issues which can affect both supply and price. Domestic gas projects are thus an attractive option in the UK.

Furthermore, natural gas prices are typically higher in the UK than compared with Australia or the USA. This reflects the storage and supply constraints as well as the winter weather. Recent years have seen natural gas prices in the UK three to eight times greater than in Australia: the multiple is currently lower, but prices significantly better than Australian prices are predicted to be the longer-term norm.

Advantages of the South Wales CBM Project

The South Wales Coalfields are in the heart of a populous, well-developed region of the UK. Natural Gas is a well-established fuel in the UK, which is now a net importer of hydrocarbons. The planned major high-pressure gas pipeline from the LNG terminal at Milford Haven in West Wales runs just to the north of the licence area. There is already an extensive gas pipeline infrastructure within the licence area; part of the current gas reticulation network and a legacy of coal mine gas drainage projects from the past which supplied local towns with domestic gas.

Of significant short-term commercial benefit is the fact that both old mine workings (with Abandoned Mine Methane potential) and unworked coal seams occur (with virgin CBM potential) immediately under and/or adjacent to several large industrial plants (including a major steel works, a Rockwool insulation manufacturer and a paper mill) and a major industrial estate that are all potential customers for any gas or electricity produced.

Geologically the South Wales region is very attractive for CBM, with available data pointing to large quantities of gassy coal seams at depths suitable for CBM project development.

South Wales Coal Basin Geology

The South Wales coalfield extends over an area of about $1900 \text{km}^2$ with an east-west axis approximately 90km in length and typically about 30km from north to south. Coal outcropping in the valleys has been worked since Roman times. From 1850 onwards, coal mining expanded rapidly to meet the rising demand of industry for steaming coal. Production peaked in 1913, when 56.8 million tons of saleable coal was produced, but by the late 1980s most mines had been closed because of excess depth to the seams, unsuitable quality or thickness, excess structural complications or for political reasons. There are very significant amounts of coal remaining in PEDL100, more than sufficient to underpin a number of CBM projects, despite the lengthy coal mining history.

The coalfield represents the eroded remnants of a late Carboniferous basin that developed along the northern margin of the Variscan orogenic belt. Sediments of Westphalian (late Carboniferous, 306-311 Ma) age and of varying lithology and thickness are preserved within a synclinal basin. The Upper Coal Measures consist largely of massive sandstones, which overlie the productive Middle and Lower Coal Measures. The latter units have undergone considerable tectonic deformation and are locally affected by thrusts and thrust-related folding. However, the gross stratigraphy and structure of the coalfield are well known from widespread past mining activity.

There are over 130 individual seams of coal recognised in the coalfields with the Main Productive Measures forming a 250m to 300m thick zone containing an aggregated 20-30m thickness (coal seams $> 0.3$ m, maximum seam thickness is 9m). Faulting commonly leads to repetition of groups of seams, whilst elsewhere coal has been removed by faulting and washouts. Coal rank varies from relatively low to anthracite with considerable variation across the coalfields. Coal is present from outcrop (both folded and faulted seams) and extends to depths of greater than 900m below surface.

The coals of PEDL100 range from Bituminous in the south through to Anthracite in the north. The main target for exploration will be the Bituminous coals. Many economic CBM developments have occurred around the world in Bituminous coals.

South Wales Coals - Gas Contents - Historically high gas contents

Coalmines in South Wales have historically been very gassy mines, with a long record of explosions attesting to the high methane content of the coals. Gas problems lead to many mine closures in the district. Modern gas content determinations from South Wales are very limited. Studies on mine drainage and from drill holes predict that CBM from virgin wells on PEDL100 is likely to consist of about 95% to 98% methane and 0.1 % to 0.4% ethane, with probably around 1% nitrogen and less than 1% carbon dioxide. Available methane content data of samples from the productive seams lie in the range $6.8-15.3$ m³/t. Estimated pressures are in the range 0.8-1.0 MPa over this range of methane contents. In general, South Wales coals are thought to be undersaturated with gas.

South Wales Coals - Permeability - Only limited data available

Permeability of the seams is quite variable but tends towards lower values, reflecting the overall compressive stress regime of the coalfield. As with the gas content data, available permeability data is very limited. Enhanced permeabilities are expected in zones of increased tectonic deformation and in those seams that have been destressed by underworking. The coal seams are interbedded within low permeability sand and siltstone lithologies, which are ideal for CBM extraction with low water production.

Only very limited assessment of CBM potential has been conducted to date, since underground mining avoided high gas areas.

Possible Uses for Methane from South Wales

Eden Energy Ltd is a diversified clean energy company. Eden owns and is marketing Hythane ®, a low-emission hydrogen-methane fuel blend. Three possible uses for methane produced from South Wales CBM projects are:

• 1. Sale as Natural Gas (if purity and energy content appropriate);
• 1. Electricity generation;
• 1. Conversion to Hythane® for use as low-emission, high-efficiency fuel.

Togeton Tregumen

Gregory H Solomon Executive Chairman

For further information, please refer to the Eden Energy Ltd website: www.edenenergy.com.au or contact

Greg Solomon Executive Chairman +61 8 9282 5889

Kevin Skinner Field PR +61 8 8234 9555

Figure 1: South Wales Project Location