Far East Energy Announces Strategic Relationship and Total Funding of up to US$63 Million

HOUSTON - Far East Energy Corporation (OTC Bulletin Board: FEEC) announced the
formation of a strategic alliance with Arrow Energy International Pte Ltd.
(”Arrow”), the Singapore-based international arm of Arrow Energy Ltd., a
large Australian coalbed methane (”CBM”) producer. As part of the strategic
alliance, under a farm-out agreement, Arrow will pay Far East US $8 million
in cash, and Far East will assign to Arrow a 75.25% share of Far East’s
participating interest in the Qinnan Production Sharing Contract (”PSC”) to
develop CBM resources in the Shanxi province of China. The farm-out agreement
is subject to certain conditions precedent, including approval by appropriate
Chinese authorities. Arrow will become the operator under the Qinnan PSC and
fund all exploration costs during the exploration period, including Far
East’s remaining 24.75% participating interest, until Arrow has incurred up
to US $30.0 million of total spending on exploration. If the Chinese
authorities ultimately approve an Overall Development Plan (”ODP”) for
development of all, or a portion of, the block, Arrow will pay Far East a
bonus of US $8 million.

Initially, it is intended that a 2009 exploration program of US $6
million be submitted for approval by the relevant Chinese authorities. Far
East and Arrow believe this work program will aggressively accelerate the
parties’ understanding of the potential of the Qinnan Block.

Additionally, as part of the strategic alliance, Arrow will immediately
acquire an exchangeable note from Far East for US $10 million, which will
automatically be exchanged for Far East common stock at an exchange price of
US $0.475 per share upon the approval of the Qinnan farm-out agreement by the
Chinese authorities and the satisfaction of certain other conditions. Upon
exchange of the note, Arrow will own approximately 21.05 million shares of
Far East common stock (representing approximately 11.54% of then outstanding
shares) and will become the company’s largest shareholder. If the conditions
under the farm-out agreement are not satisfied by October 15, 2009 or a
mutually agreed later date, then the note will remain outstanding and mature
in March 2011. In addition, as part of the strategic alliance, Far East
issued warrants to Arrow to purchase up to 7.42 million shares of Far East
common stock at an exercise price of US $1.00 per share. The warrants are for
a term of 18 months and can be exercised at any time following the approval
of the Qinnan farm-out agreement.

“This transaction successfully culminates a strategy announced several
months ago targeted at consummating a strategic transaction that would bring
us the required capital to advance exploration of our significant holdings in
China, while at the same time securing additional technical resources,” said
Michael R. McElwrath, CEO of Far East Energy. “Arrow’s known expertise in
coalbed methane and its financial strength should enable aggressive
exploitation of the great potential of our 572,000 acre (2,300 square
kilometers) Qinnan Block. In turn, that will allow Far East to focus on
achieving production from our 484,000 acre (1,900 square kilometers) Shouyang
Block, which we continue to consider to be a significant potential prospect
for China’s CBM industry. Arrow’s financing of exploration costs in the
Qinnan Block is anticipated to facilitate more rapid exploration than we
could do alone. Perhaps more importantly, Arrow’s human and financial
resources in CBM exploration and development should enhance overall
development of China’s CBM resources, making them an important partner.”

McElwrath continued, “We are extremely pleased that, in a difficult
financial market, we have been able to secure funding while minimizing
stockholder dilution. If we receive Chinese approval of an ODP for Qinnan,
the potential value to Far East of the strategic alliance will be up to
approximately US $63.4 million including all fixed and contingent cash
payments to be made to Far East, Arrow’s funding of up to US $30 million of
exploration costs, and the optional exercise of Arrow’s warrants. We look
forward to working with Arrow to create an alliance that should become a
significant force in the development of coalbed methane resources.”

Arrow Energy Chief Executive Officer, Nick Davies, said, “I am very
pleased that we have been able to reach this agreement with FEEC. The Qinnan
block represents, in Arrow’s view, one of the best prospects for near-term
commercial CBM production in China, and we expect Qinnan to become a material
project within the Arrow portfolio. We look forward to working with FEEC and
our Chinese partners at CUCBM and PetroChina on this exciting project. This
is an important step in the strategic expansion of Arrow into international
markets.”

More information on these transactions can be obtained in a Form 8-K to
be filed by Far East with the Securities and Exchange Commission without cost
at the Internet website maintained by the Securities and Exchange Commission
at www.sec.gov.

Far East Energy Corporation

Based in Houston, Texas, with offices in Beijing, Kunming, and Taiyuan
City, China, Far East Energy Corporation is focused on CBM exploration and
development in China through its agreements with ConocoPhillips and China
United Coalbed Methane Company, Ltd.

Arrow Energy Ltd

Arrow Energy Ltd. is an emerging global leader in coal seam gas
development with an expanding business presence throughout eastern Australia,
China, India, Vietnam and Indonesia. Arrow has access to more than 80,000 km2
(approximately 20.35 million acres) of coal seam gas in Australia. Arrow
Energy International is a subsidiary of Arrow, owned 90% by Arrow and 10% by
Shell Exploration Company B.V., a subsidiary of Royal Dutch Shell PLC. Arrow
is listed on the Australia Stock Exchange (ASX code AOE).

Statements contained in this press release that state the intentions,
hopes, beliefs, anticipations, expectations or predictions of the future of
Far East Energy Corporation and its management are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. It is
important to note that any such forward-looking statements are not guarantees
of future performance and involve a number of risks and uncertainties. Actual
results could differ materially from those projected in such forward-looking
statements. Factors that could cause actual results to differ materially from
those projected in such forward-looking statements include: certain of the
proposed transactions with Arrow may not close on a timely basis or at all,
including due to a failure to satisfy closing conditions or otherwise; the
anticipated benefits to us of the transactions with Arrow may not be
realized; the final amounts received from Arrow may be different than
anticipated; the preliminary nature of well data, including permeability and
gas content, and commercial viability of the wells; risk and uncertainties
associated with exploration, development and production of oil and gas;
drilling and production risks; our lack of operating history; limited and
potentially inadequate cash resources; expropriation and other risks
associated with foreign operations; anticipated pipeline construction and
transportation of gas; matters affecting the oil and gas industry generally;
lack of availability of oil and gas field goods and services; environmental
risks; changes in laws or regulations affecting our operations, as well as
other risks described in our Annual Report on Form 10-K and subsequent
filings with the Securities and Exchange Commission.

Source: Far East Energy Corporation

David Nahmias of Far East Energy Corporation, +1-901-218-7770, dnahmias at fareastenergy.com