Blue Energy : June 2021 Quarterly Activities & Cash Flow Report

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

30 July 2021

QUARTERLY ACTIVITIES REPORT

to 30 June 2021

Blue Energy Limited (ASX: BLU, 'Blue Energy', 'Blue' or 'the Company') is pleased to report on activities during the quarter ended 30 June 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

Blue's supply agreements are a continued focus

• Blue Energy has long-term gas supply agreements in place (400 PJ to date) to book-end an independent gas pipeline from the Bowen Basin.
• Blue is seeking additional long-term gas supply agreements for 3,000 PJ of Contingent Resource for both the northern and southern gas markets.
• The Company has signed an MOU with Stanmore to supply hydrogen from Blue's ATP814 permit for Stanmore's coal mine operations.

Important industry developments are shaping future business opportunities

• The State and Federal Government's Bowen Pipeline Study has commenced, with a consortium made up of KPMG, GHD and NSAI contracted to deliver the study. Blue's input was sought and given.
• The Federal Budget has committed funds (grant money) for drilling initiatives in the North Bowen and Galilee Basins.
• Activity by operators in the Northern Territory is re-commencing.
• The Federal Government is moving forward with its National Gas Infrastructure Plan - its vision for new-build east coast gas pipeline infrastructure. Blue has provided input to ensure the government recognises the benefits of developing the North Bowen Basin.

DETAILS OF SIGNIFICANT QUARTERLY ACHIEVEMENTS AND MILESTONES

Blue's Energy's priority - additional gas supply agreements

Blue continues to seek additional gas supply agreements with high-quality domestic gas users. Additional long-term supply deals are required in order to economically underpin the construction of the Moranbah to Wallumbilla interconnect gas pipeline. Whilst Blue has already secured significant long-term supply agreements (refer to ASX announcements of 19 March 2021 and 20 December 2020), additional volumes are required to give a margin of security for the economic threshold of the pipeline.

Blue signs MoU with Stanmore to supply hydrogen

During the reporting period, Blue executed a non-binding Memorandum of Understanding (MOU) with Stanmore Resources Limited (ASX: SMR, 'Stanmore') to supply hydrogen from the Company's future pilot gas production activities in its ATP814 tenement located in the Bowen

1

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Basin. Blue Energy and Stanmore have previously executed a non-binding MOU for the commercialisation of mine gas from Stanmore's proposed underground operation adjacent to ATP814.

Bowen Pipeline study, co-funded by State and Federal Governments, commenced

During the latter part of the quarter, the Queensland Minister for Resources, the Hon Scott Stewart, announced the award of the tender for the Bowen Gas Pipeline Feasibility Study in Central Queensland. This future pipeline would link the large gas resources centred around Moranbah to an existing interconnect pipeline to Wallumbilla. Minister Stewart announced that the successful tenderer was a consortium consisting of GHD (engineering surface facilities), KPMG (economic modelling) and Netherland, Sewell and Associates (NSAI) (subsurface resource categorisation and estimation). Blue was invited to provide input to the consortium, and the Company has given initial input to the group on the specifics of Blue's gas resources in ATP814 and our plans to develop this resource for the domestic market.

Federal Budget contains grant funds for drilling initiatives in Bowen and Galilee Basins

The Federal Budget of 11 May 2021 announced measures committing 2021 Budget funds of $15.6 million specifically for gas appraisal projects by Operators in the North Bowen and Galilee Basins.

The grant monies will be directed at field trials that improve the geological understanding of the region, address any technical drilling challenges, and better determine gas deliverability rates.

This initiative, together with the release of the interim National Gas Infrastructure Plan, which identifies the key geologic basins for development of new gas supply for east coast gas customers, further confirms the importance of quickly bringing new gas supply from these basins to market.

Federal Government National Gas Infrastructure Plan

The Federal Government has sought submissions for input to the final version of the National Gas Infrastructure Plan, which is due for release later this year. Blue has actively participated in the process to ensure the benefits afforded by a developed North Bowen Basin (i.e., more gas supply to the domestic market) are recognised and acted upon by government, with appropriate gas pipeline infrastructure for the North Bowen Basin, prioritised and potentially financially supported by Government.

ACTIVITY IN PROVEN BASINS

Bowen Basin, Queensland

ATP814 (Blue Energy 100% and Operator)

Blue has engaged with the consortium undertaking the Bowen Pipeline feasibility study, announced last year by the Queensland Government, which committed $5 million in budget funds for the study. The Queensland Government's commitment has been matched with Federal Government funding, and the two respective resource departments are working together closely to oversee the project.

Blue continues to pursue long-term gas marketing opportunities for the Company's gas resources in ATP814. To date, Blue has secured offtake agreements for up to 400 PJ of gas supply at Wallumbilla (the southern gas market) and 112 PJ of gas supply in Townsville (the northern market). The critical element is securing sufficient long-term gas supply to the south so that a

2

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

"right sized" Bowen Basin pipeline between Moranbah and the Wallumbilla interconnect is economically underpinned.

Work continues on the steps required for the preparation and lodgement of the upgraded Environmental Authorities needed for Production Licence Applications PL 1034, 1036 and 1045. It is expected that the applications for these Environmental Authorities will be lodged in the coming months.

Development of the North Bowen Basin's estimated 15,000 PJ total gas resource is critical to delivery of near-term gas to east coast gas users. The North Bowen Basin is one of the few east coast gas basins that has the scale of resource (estimated to be 15,000 PJ) and is sufficiently de- risked (i.e., it is 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 1: ATP814, Bowen Basin, Queensland. Figure shows: (1) granted PCAs together with existing PL applications, (2) the NQGP gas pipeline to Townsville, and (3) the major high-voltage electricity transmission line between Gladstone and Townsville.

As already announced to the market, ATP814 currently has 2P reserves of 71 PJ+ and 3P reserves of 298 PJ+ (as independently estimated 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 Production Licence Applications, as estimated by NSAI. There is also additional upside in the Prospective Resources category in the ATP814 permit of approximately 2,000 PJ of gas in place.

3

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Surat Basin, Queensland

ATP854 (Blue Energy 100% and Operator)

As previously reported, Blue has lodged PCAs over the Permit, which contains 103 PJ+ of Contingent Resources, as defined by previous drilling activities and as estimated by NSAI. The Company continues to work with the Queensland Government to secure grant of these PCAs.

Figure 2: Pipeline routes impacting ATP854, ATP813 and ATP814

ACTIVITY IN EMERGING BASINS

Greater McArthur Basin (Northern Territory)

(various permits and equity levels, Blue Energy Operator: see Figure 3)

Blue continues to engage with the Aboriginal Land Councils, Traditional Owners, pastoral landowners, government departments, and other community stakeholders on the outstanding application areas as part of the process to establish a community licence, which is required under the new Northern Territory Government exploration activity approval process. Blue is currently negotiating land access agreements (under the new NT petroleum regulations) with the pastoralists in EP 200, 205 and 207, where the Company intends to acquire new 2D seismic data in the coming dry season.

As reported previously, the Company requested and was granted a 12-month suspension of its work programs for its existing granted permits (EP 200, 205 and 207) in the Northern Territory. The lengthy delays experienced due to the impact of COVID-19 on matters such as remote community access have severely impeded the work of the specific regulatory bodies (Aboriginal Area Protection Authority cultural heritage certification for our proposed 2D seismic program) for the approval processes needed prior to on-ground activity.

4

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Figure 3: Blue Energy's acreage portfolio highlighting the large Greater McArthur Basin position in the NT

Galilee Basin (Queensland)

ATP813 (Blue Energy 100% and Operator)

The Company continues to follow the progress of its neighbour, Galilee Energy Limited, which has been conducting long-term production testing activities in the Betts Creek Coal Measures in the adjacent ATP2019. Information gained on water rates, well design, critical desorption and reservoir pressures from this adjacent area will be vital in assessing the path forward for Blue Energy's 838 PJ+ of Contingent Gas Resources in ATP813, which are contained within the Betts Creek Coal Measures (as assessed by NSAI). As previously reported, a further 1,956 PJ++ of Prospective Resource (gas in place) has been identified in the permit by NSAI. The Company's PCA applications over the ATP813 permit remain with the Queensland Department of Resources for grant.

CORPORATE

Cash position

Cash on hand (at 30 June 2021) was A$1.95 million.

The Company has nil debt.

Blue Energy's accompanying Appendix 5B (Quarterly Cashflow Report) includes an amount in Item 6.1 which constitutes Non-executive Directors' fees for the quarter. The aggregate amount of payments to related parties and their associates for the June quarter (shown in Items 6.1 &

6.2 of the attached Quarterly Cashflow Report) relates to cash fees paid to all Directors (including the salaries paid to the Executive Chairman and Managing Director).

5