F-10

As Filed with the Securities and Exchange Commission on February 27, 2009

Registration No. 333-[•]

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM F-10

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

INTEROIL CORPORATION

(Exact name of Registrant as Specified in its charter)

Yukon Territory, Canada	1311	None
(Province or Other Jurisdiction	(Primary Standard Industrial Classification	(I.R.S. Employer Identification Number (if
of Incorporation or Organization)	Code Number (if applicable))	applicable))

Level 1
60-92 Cook Street
Cairns, Queensland 4870, Australia
Telephone Number: +61 (7) 4046-4600
(Address and telephone number of Registrant’s principal executive offices)

CT Corporation System
111 Eighth Avenue
New York, New York 10011
Telephone Number: (212) 894-8940
(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)

Copies to:

Mark Laurie	William B. Nelson	Y. Beth Riley
InterOil Corporation	Haynes and Boone, L.L.P.	Bennett Jones LLP
25025 I-45 North, Suite 420	1221 McKinney Street, Suite 2100	4500 Bankers Hall East
The Woodlands, Texas 77380	Houston, Texas 77010	Calgary, Alberta T2P 4K7
(281) 292-1800	(713) 547-2000	(403) 298-3100
	(713) 236-5699 (fax)

Approximate date of commencement of proposed sale of the securities to the public:
From time to time after effectiveness of this Registration Statement.

Yukon Territory

(Principal jurisdiction regulating this offering (if applicable))

It is proposed that this filing shall become effective (check appropriate box):

A. o	Upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada)
B. þ	At some future date (check the appropriate box below):
1. o	pursuant to Rule 467(b) on at (designate a time not sooner than 7 calendar days after filing)
2. o	pursuant to Rule 467(b) at (designate a time 7 calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on.
3. o	pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.
4. þ	After the filing of the next amendment to this form (if preliminary material is being filed).

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf short form prospectus offering procedures, check the following box. þ

CALCULATION OF REGISTRATION FEE

						Proposed Maximum
Title of Each Class of Securities to	Amount to be		Offering Price Per			Aggregate Offering		Amount of
be Registered(1)	Registered(1)		Share			Price		Registration Fee
Common Shares, no par value		652,931	$	17.125	(2)	$	11,181,443		$442.13

(1)	Pursuant to Rule 416 under the Securities Act of 1933, this Registration Statement also covers such additional number of shares of common stock as may be issuable upon a stock split, stock dividend or similar transaction.
(2)	Computed pursuant to Rule 457 (c) of the Securities Act of 1933, as amended, based on the average of the high and low sale prices on February 23, 2009, as reported by the NYSE Alternext US.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registration Statement shall become effective as provided in Rule 467 under the Securities Act of 1933, or such date as the Commission, acting pursuant to Section 8(a) of the Securities Act, may determine.

PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

Preliminary Short Form Base Shelf Prospectus

No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.

A copy of this preliminary short form prospectus has been filed with the securities regulatory authorities in the Province of Ontario but has not yet become final for the purpose of the sale of securities. Information contained in this preliminary short form prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the short form prospectus is obtained from the securities regulatory authorities.

The information in this prospectus is not complete and may be changed. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective.

This short form base shelf prospectus has been filed under legislation in the Province of Ontario that permits certain information about these securities to be determined after this short form base shelf prospectus has become final and that permits the omission from this short form base shelf prospectus of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the omitted information within a specified period of time after agreeing to purchase any of these securities. All shelf information omitted from this short form base shelf prospectus will be contained in one or more shelf prospectus supplements that will be delivered to purchasers together with the short form base shelf prospectus.

This short form base shelf prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.

Information has been incorporated by reference in this short form base shelf prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of the InterOil Corporation at Level 1, 60-92 Cook Street, Cairns, Queensland 4870 Australia, Telephone: +61 7 4046 4600, and are also available electronically at www.sedar.com.

Preliminary Short Form Base Shelf Prospectus

Secondary Offering INTEROIL CORPORATION February 27, 2009

652,931 Common Shares

InterOil Corporation (“InterOil” or the “ Company”) issued 652,931 Common Shares (the “Registrable Shares”) in a private placement on February 27, 2009 pursuant to the terms of a Share Purchase and Sale and Settlement Agreement (the “Settlement Agreement”) dated February 27, 2009, among the Company, Merrill Lynch Pierce, Fenner & Smith, Incorporated, (“Merrill Lynch”), Merrill Lynch PNG LNG Corp. (“MLPLC”), InterOil LNG Holdings, Inc., PNG LNG Inc., Liquid Niugini Gas Ltd, Liquid Niugini Gas Australia PTY, Ltd and Pacific LNG Operations Ltd. (the “Private Placement”). The Company issued all of the Registrable Shares to MLPLC. See “Selling Securityholder.”

This short form base shelf prospectus may be used by MLPLC and its permitted transferees and assignees, as a selling securityholder (each, a “Selling Securityholder”), in connection with resales, from time to time, during the period that this short form base shelf prospectus, including any amendments thereto, remains valid, of the Registrable Shares. See “Selling Securityholder.”

- 2 -

This short form base shelf prospectus is being filed pursuant to InterOil’s obligation to register the resale of the Registrable Securities pursuant to the terms of the Registration Rights Agreement dated as of February 27, 2009, among the Company and MLPLC (the “Registration Rights Agreement”). See “Registration Rights” and “Plan of Distribution.”

The Selling Securityholder may sell all or any portion of the Registrable Securities in one or more transactions through brokerage transactions, in private, negotiated transactions, or through any other means described in the section entitled “Plan of Distribution.” The sales may be made at market prices prevailing at the time of sale, at negotiated prices or at fixed prices.

InterOil will not receive any of the proceeds from the resale of the Registrable Securities by the Selling Securityholder. Pursuant to the Registration Rights Agreement, InterOil is responsible for registration expenses relating to this short form base shelf prospectus, the shelf registration statement filed with the United States Securities and Exchange Commission (the “SEC”) and the prospectus supplements (if any) filed in connection with this short form base shelf prospectus, and the Selling Securityholder is responsible for all underwriting expenses, discounts, selling commissions and transfer taxes applicable to the sale of the Registrable Securities and all fees and disbursements of counsel for the Selling Securityholder. See “Plan of Distribution.”

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SHORT FORM BASE SHELF PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

Investing in the Registrable Securities involves risks. See “Risk Factors.”

The Common Shares are listed and posted for trading under the symbol “IOC” on the NYSE Alternext US (successor to the American Stock Exchange). On February 26, 2009, the closing price of the Common Shares was U.S.$18.54 per share on the NYSE Alternext US. Effective at the close of markets on January 27, 2009, the Common Shares were delisted from the Toronto Stock Exchange.

No underwriter has been involved in the preparation of, or has performed a review of, the contents of this short form base shelf prospectus.

In this short form base shelf prospectus and in any prospectus supplement, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in U.S. dollars.

InterOil’s corporate office is located at Level 1, 60-92 Cook Street, Cairns, Queensland 4870, Australia, and its registered office is located at 300 — 204 Black Street, Whitehorse, Yukon Y1A 2M9 Canada.

InterOil is permitted under the multi-jurisdictional disclosure system adopted by the United States to prepare this short form base shelf prospectus in accordance with Canadian disclosure requirements, which are different from those of the United States. InterOil prepares its financial statements in accordance with Canadian generally accepted accounting principles, and they are subject to Canadian auditing and auditor independence standards. They may not be comparable to financial statements of United States companies prepared in conformity with accounting principles generally accepted in the United States of America.

Owning the Registrable Securities may subject you to tax consequences both in the United States and Canada. This short form base shelf prospectus, or any applicable prospectus supplement, may not describe these tax consequences fully. You should read the tax discussion in any applicable prospectus supplement. See “Certain Income Tax Considerations.”

The Selling Securityholder is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or reside outside of Canada. Although the Selling Securityholder has appointed an agent for service of process in Canada, the names and addresses of which are identified under “Selling Securityholder,” it may not be possible for investors to enforce judgments obtained in Canada against the Selling Securityholder.

Your ability to enforce civil liabilities under the United States federal securities laws may be affected adversely because InterOil is incorporated under the laws of the Yukon Territory, Canada, most of InterOil’s officers and directors and some of the experts named in this short form base shelf prospectus are not resident in the United States and most of InterOil’s assets, the assets of InterOil’s directors and officers and of these experts are located outside the United States.

- 3 -

TABLE OF CONTENTS

	Page
DEFINITIONS AND OTHER MATTERS		4
CAUTIONARY NOTE TO UNITED STATES INVESTORS		5
FORWARD-LOOKING STATEMENTS		5
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES		7
DOCUMENTS INCORPORATED BY REFERENCE		7
INTEROIL CORPORATION		9
REGISTRATION RIGHTS		10
SELLING SECURITYHOLDER		11
DESCRIPTION OF THE COMMON SHARES		12
MARKET FOR SECURITIES		12
PRIOR SALES		12
USE OF PROCEEDS		13
CONSOLIDATED CAPITALIZATION		13
PLAN OF DISTRIBUTION		14
RISK FACTORS		17
CERTAIN INCOME TAX CONSIDERATIONS		18
LEGAL MATTERS		18
EXPERTS		19
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT		19
AVAILABLE INFORMATION		19
AUDITORS, TRANSFER AGENT AND REGISTRAR		19
PURCHASERS’ STATUTORY RIGHTS		19
AUDITOR’S CONSENT		20
CERTIFICATE OF THE COMPANY		21
CONSENT OF PRICEWATERHOUSECOOPERS
EX-4.12
EX-23.1

DEFINITIONS AND OTHER MATTERS

In this short form base shelf prospectus and in any prospectus supplement, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in U.S. dollars. Unless otherwise indicated, all financial information included and incorporated by reference in this short form base shelf prospectus or included in any prospectus supplement is determined using Canadian GAAP. “U.S. GAAP” means generally accepted accounting principles in the United States. For a discussion of the principal differences between InterOil’s financial information as calculated under Canadian GAAP and under U.S. GAAP, you should refer to the notes of InterOil’s consolidated annual and interim financial statements incorporated by reference into this short form base shelf prospectus, including relevant U.S. GAAP reconciliations. Unless the context otherwise requires, all references in this short form base shelf prospectus and any prospectus supplement to “InterOil”, the “Company”, “we”, “us” and “our” mean InterOil Corporation and its subsidiaries, partnership interests and joint venture investments.

As used herein, “PNG” means the Independent State of Papua New Guinea.

- 4 -

CAUTIONARY NOTE TO UNITED STATES INVESTORS

This short form base shelf prospectus has been, and any prospectus supplement will be, prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of United States securities laws.

Unless otherwise indicated, all reserve and resource estimates included in this short form base shelf prospectus and any prospectus supplement have been, and will be, prepared in accordance with National Instrument 51-101 — Standards of Disclosure for Oil and Gas Activities
(“NI 51-101”). NI 51-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning oil and gas activities. As at the date of this short form base shelf prospectus, InterOil does not have any reserves or resources as such terms are defined in NI 51-101.

Canadian standards, including NI 51-101, differ significantly from the requirements of the SEC, and any reserve and resource information incorporated by reference into this short form base shelf prospectus and any prospectus supplement may not be comparable to similar information disclosed by U.S. companies. In particular, the term “resource” does not equate to the term “reserves.” Under U.S. standards, oil and gas deposits may not be classified as “proved reserves” unless the determination has been made that the oil and gas is reasonably certain to be economically and legally produced and sold under economic conditions prevailing at the time the reserve determination is made. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “probable reserves”, “possible reserves” or “resources” or other descriptions of the amount of oil and gas deposits that do not constitute “proved reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of a “resource” will ever be upgraded to a higher category. Investors are cautioned not to assume that all or any part of a “resource” exists or is economically or legally recoverable. The Canadian standards for identification of “proved reserves” are also not the same as those of the SEC, and proved reserves that may be reported in the future by InterOil in compliance with Canadian standards may not qualify as “proved reserves” under SEC standards.

FORWARD-LOOKING STATEMENTS

Certain statements contained in, or incorporated by reference into, this short form base shelf prospectus are forward-looking statements as defined in the Canadian and U.S. federal securities laws. Such statements are generally identifiable by the terminology used, such as “may,” “plans,” “believes,” “expects,” “anticipates,” “intends,” “estimates,” “forecasts,” “budgets,” “targets” or other similar wording suggesting future outcomes or statements regarding an outlook. InterOil has based these forward-looking statements on its current expectations and projections about future events. All statements, other than statements of historical fact, included in or incorporated by reference in this short form base shelf prospectus are forward-looking statements. Forward-looking statements include, without limitation, statements regarding InterOil’s plans for its exploration activities and other business segments and results therefrom, expanding its business segments, operating costs, business strategy, contingent liabilities, environmental matters, and plans and objectives for future operations, the timing, maturity and amount of future capital and other expenditures.

Many risks and uncertainties may impact the matters addressed in these forward-looking statements, including but not limited to:

• the inherent uncertainty of oil and gas exploration activities;

• the uncertain outcome of InterOil’s negotiations with the PNG government to adjust and finalize the price at which InterOil’s refined products may be sold;

• the margins for InterOil’s refined products;

• the availability of crude feedstock at economic rates;

• the uncertainty in InterOil’s ability to attract capital;

• interest rate risk;

• general economic conditions and illiquidity in the credit markets;

• the recruitment and retention of qualified personnel;

- 5 -

• the availability and cost of drilling rigs, oilfield equipment, and other oilfield exploration services;

• InterOil’s ability to finance the development of its LNG facility;

• InterOil’s ability to timely construct and commission its LNG facility;

• political, legal and economic risks in PNG;

• InterOil’s ability to renew its petroleum licenses;

• landowner claims;

• the uncertainty in being successful in pending lawsuits and other proceedings;

• compliance with and changes in foreign governmental laws and regulations, including environmental laws;

• the inability of InterOil’s refinery to operate at full capacity;

• difficulties in marketing InterOil’s refinery output;

• exposure to certain uninsured risks stemming from InterOil’s refining operations;

• weather conditions and unforeseen operating hazards;

• losses from InterOil’s hedging activities;

• the impact of competition;

• the impact of legislation regulating emissions of greenhouse gases on current and potential markets for InterOil’s products;

• fluctuations in currency exchange rates;

• material weakness in InterOil’s internal controls; and

• inherent limitations in all control systems, and misstatements due to error that may occur and not be detected.

The forward-looking statements included in this short form base shelf prospectus are made only as of the date of this short form base shelf prospectus. Except as required by applicable Canadian securities law, InterOil does not undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events might or might not occur. InterOil cannot assure you that projected results or events will be achieved.

Given the risks and uncertainties of InterOil’s business, including those set forth and incorporated by reference in this short form base shelf prospectus, in any prospectus supplement and under the heading “Risk Factors” in the annual information form of InterOil dated March 28, 2008 for the year ended December 31, 2007, and management’s discussion and analysis for the year ended December 31, 2007, actual results may differ materially from those expressed or implied by forward-looking statements. In addition, InterOil bases forward-looking statements on assumptions about future events, which may prove to not be accurate. In light of these risks, uncertainties and assumptions, prospective investors should not place undue reliance on forward-looking statements and should be aware that the forward-looking statements described in this short form base shelf prospectus (and in any prospectus supplement) and the documents incorporated by reference in this short form base shelf prospectus (and in any prospectus supplement) may not occur.

- 6 -

ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES

InterOil is a corporation continued under the laws of the Yukon Territory, Canada, and substantially all of InterOil’s assets are located in PNG. Most of InterOil’s directors and officers are not residents of the United States of America. As a result, it may be difficult for United States investors to effect service of process within the United States on InterOil or InterOil’s directors or officers or to enforce in the United States upon judgments of courts of the United States predicated upon civil liability under United States federal securities laws against InterOil or InterOil’s directors or officers.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents have been filed with the securities commission or similar regulatory authority in the Province of Ontario and are specifically incorporated by reference in, and form an integral part of, this short form base shelf prospectus:

(a)	the management information circular dated May 12, 2008 relating to InterOil’s annual and special meeting of shareholders held on June 23, 2008;
(b)	the annual information form dated March 28, 2008 for the year ended December 31, 2007;
(c)	management’s discussion and analysis dated March 28, 2008 for the year ended December 31, 2007;
(d)	the audited consolidated balance sheets as at December 31, 2007, 2006 and 2005, and the consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the three years ended December 31, 2007, together with the auditors’ report thereon dated March 28, 2008;
(e)	material change report dated November 10, 2008;
(f)	comparative interim consolidated financial statements (unaudited) for the three and nine month periods ended September 30, 2008 and 2007, together with the notes thereto;
(g)	management’s discussion and analysis dated November 10, 2008 for the three and nine month periods ended September 30, 2008;
(h)	the material change report dated May 13, 2008;
(i)	the material change report dated May 6, 2008;
(j)	the material change report dated May 2, 2008; and
(k)	the material change reports dated May 2, 2008.

Any material change reports (excluding confidential reports), comparative interim financial statements, comparative annual financial statements and auditors’ reports thereon, management’s discussion and analysis of financial condition and results of operations, information circulars, filed in the Province of Ontario after the date of this short form base shelf prospectus and during the 25 month period that this short form base shelf prospectus, including any amendments hereto, remains in effect shall be deemed to be incorporated by reference in this short form base shelf prospectus.

Upon a new annual information form and related audited annual financial statements and management’s discussion and analysis being filed by InterOil with, and where required, accepted by, the securities commission in the Province of Ontario during the term of this short form base shelf prospectus, the previous annual information form, the previous audited annual financial statements and related management’s discussion and analysis, all unaudited interim financial statements and related management’s discussion and analysis, material change reports and business acquisition reports filed prior to the commencement of InterOil’s financial year in which the new annual information form and related audited annual financial statements and management’s discussion and analysis are filed shall be deemed no longer to be incorporated into this short form base shelf prospectus for purposes of future offers and sales of Registrable Securities under this short form base shelf prospectus. Upon new interim financial statements and related management’s discussion and analysis being filed by us with

- 7 -

the securities commission in the Province of Ontario during the term of this short form base shelf prospectus, all interim financial statements and related management’s discussion and analysis filed prior to the new interim consolidated financial statements and related management’s discussion and analysis shall be deemed no longer to be incorporated into this short form base shelf prospectus for purposes of future offers and sales of Registrable Securities under this short form base shelf prospectus. Upon a new information circular relating to an annual meeting of holders of InterOil common shares (the “Common Shares”) being filed by InterOil with the securities commission in the Province of Ontario during the term of this short form base shelf prospectus, the information circular for the preceding annual meeting of holders of Common Shares shall be deemed no longer to be incorporated into this short form base shelf prospectus for purposes of future offers and sales of Registrable Securities under this short form base shelf prospectus.

All shelf information permitted under applicable laws to be omitted from this short form base shelf prospectus will be contained in one or more prospectus supplements that will be delivered to prospective purchasers together with this short form base shelf prospectus. A prospectus supplement containing the specific terms of any offering of Registrable Securities offered thereunder and other information relating to such Registrable Securities will be delivered to prospective purchasers of such Registrable Securities together with this short form base shelf prospectus and will be deemed to be incorporated by reference into this short form base shelf prospectus as of the date of the prospectus supplement and only for the purposes of the offering of the Registrable Securities to which the prospectus supplement pertains.

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this short form base shelf prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is, or is deemed to be, incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this short form base shelf prospectus.

To the extent that any document or information incorporated by reference into this short form base shelf prospectus is included in a report that is filed with or furnished to the SEC on Form 40-F or 6-K (or any respective successor form), such document or information shall also be deemed to be incorporated by reference as an exhibit to the registration statement on Form F-10 of which this short form base shelf prospectus forms a part. In addition, InterOil has and will incorporate by reference into this short form base shelf prospectus from documents that it files with or furnishes to the SEC pursuant to Section 13(a) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). InterOil’s U.S. filings are electronically available from the SEC’s Electronic Document Gathering and Retrieval System, which is commonly known by the acronym EDGAR and may be accessed at www.sec.gov.

You should rely only on the information contained or incorporated in this short form base shelf prospectus or any applicable prospectus supplement and on the other information included in the registration statement of which this short form base shelf prospectus forms a part. InterOil has not authorized anyone to provide you with different or additional information. InterOil is not making an offer of the Registrable Securities in any jurisdiction where the offer is not permitted by law. You should not assume that the information contained in or incorporated by reference in this short form base shelf prospectus or any applicable prospectus supplement is accurate as of any date other than the date on the front of the applicable prospectus supplement.

Information has been incorporated by reference in this base shelf prospectus from documents filed with the securities commission or similar regulatory authority in the Province of Ontario, Canada and the SEC. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of InterOil at Level 1, 60-92 Cook Street, Cairns, Queensland 4870 Australia, Telephone: +61 7 4046 4600 and are also available electronically at www.sedar.com.

- 8 -

INTEROIL CORPORATION

InterOil is developing a vertically-integrated energy company whose focus is PNG and the surrounding region. InterOil’s assets consist of upstream petroleum exploration licenses, an oil refinery and retail and commercial distribution facilities, all of which are located in PNG.

InterOil’s operations are organized into four major business segments:

•	Upstream	Exploration and Production — Explores and appraises potential oil and natural gas structures in Papua New Guinea with a view to commercializing significant discoveries.
•	Midstream	Refining — Produces refined petroleum products at Napa Napa in Port Moresby, Papua New Guinea for the domestic market and for export.
		Liquefaction — Developing an onshore liquefied natural gas processing facility in Papua New Guinea.
•	Downstream	Wholesale and Retail Distribution — Markets and distributes refined petroleum products domestically in Papua New Guinea on a wholesale and retail basis.
•	Corporate	Corporate — Provides support to the other business segments by engaging in business development and improvement activities and providing general and administrative services and management, undertakes financing and treasury activities, and is responsible for government and investor relations.

Upstream

InterOil’s upstream business currently has four exploration licenses in PNG, three of which are operated by InterOil and cover approximately 8.7 million acres. InterOil has funded much of its exploration efforts to date through indirect participation interest agreements, pursuant to which investors make an up front payment to InterOil and are entitled to an indirect interest in a specified number of exploration wells.

On November 23, 2006, InterOil completed the Elk-1 well, a natural gas discovery. On May 1, 2008, InterOil announced that the Elk-4 well, which has been drilled into the Antelope structure, is a natural gas and condensate discovery. InterOil continues to evaluate the size and structure of the Elk and Antelope fields by drilling additional development wells. InterOil’s ability to commercialise these will depend on the results of these development wells. In addition, there is no market for natural gas in PNG, so InterOil’s ability to sell production from its discoveries will depend upon the development of a liquefied natural gas facility in PNG. This project will require substantial amounts of financing and will take years to complete. As discussed below, InterOil is evaluating the construction of a liquefied natural gas facility near its refinery in PNG. No assurances can be given that InterOil will be able to successfully construct such a facility, or as to the timing of such construction.

As of the date of this base prospectus, InterOil does not have any production of oil or gas and does not have any reserves or resources as defined under Canadian NI 51-101 or under definitions established by the SEC.

Midstream — Refining

InterOil’s midstream refinery is centrally located across the harbour from Port Moresby, the capital city of PNG. InterOil’s refinery, which was designed to comply with The World Bank’s environmental standards, processes “light sweet” crude, which is low in sulphur content and does not require product processing beyond distillation, reforming and blending. InterOil’s refinery has a nameplate operating capacity of 32,500 barrels per day. During nine months ended September 2008, average daily production was 22 thousand barrels per operating day, which is below the refinery’s nameplate capacity. All of InterOil’s gasoline and middle distillates are sold in PNG, with naphtha and low sulphur waxy residue products available for export

Under InterOil’s 30 year agreement with the Government of PNG, the government has undertaken to ensure that all domestic distributors purchase their refined petroleum product needs from InterOil’s refinery, or any refinery which is later constructed in PNG, at an import parity price. In general, the import parity price is the price that would be paid in PNG for a refined

- 9 -

product that is being imported. For each refined product produced and sold locally in PNG, the import parity price is currently calculated by adding the costs that would typically be incurred to import such product to the average posted price for such product in Singapore.

InterOil is currently reviewing this import parity pricing template with the Government of PNG. The primary reason for this review is to replace a now defunct pricing reference and establish a pricing mechanism that will correlate more closely with the daily movements in the price of refined products in Singapore and therefore the price of crude.

Midstream— Liquefaction

InterOil is also in the early stages of developing a liquefied natural gas facility which InterOil anticipates locating next to its refinery. InterOil is targeting this facility to produce up to 9 million tons of liquefied natural gas per year. To complete this complex project InterOil will need to develop extensive infrastructure. These facilities will require substantial amounts of financing and take years to complete.

Downstream

InterOil’s wholesale and retail distribution business is the largest and most comprehensive asset distribution base in PNG. It encompasses bulk storage, aviation refueling, and the wholesaling and retailing of refined petroleum products which, at the end of quarter ended September 2008, we supplied approximately 76% of PNG’s refined petroleum product needs. InterOil’s retail and wholesale distribution business distributes diesel, jet fuel, gasoline, kerosene, avgas, power fuel and fuel oil as well as Shell and BP branded commercial and industrial lubricants, such as engine and hydraulic oils. In general, all of the refined products sold pursuant to InterOil’s wholesale and retail distribution business are purchased from its refining and marketing business segment, with the exception of lubricants, fuel oil and avgas.

REGISTRATION RIGHTS

Pursuant to the terms of the Settlement Agreement, InterOil entered into the Registration Rights Agreement with MLPLC. The following summary of selected provisions of the Registration Rights Agreement is not complete and is subject to, and is qualified in its entirety by reference to, the provisions of that agreement. Copies of the Registration Rights Agreement are available from InterOil upon request and available on SEDAR at www.sedar.com.

Pursuant to these agreements, InterOil has filed this short form base shelf prospectus with the Ontario Securities Commission under National Instrument 44-102 — Shelf Distributions and a registration statement, of which this short form base shelf prospectus forms a part, with the SEC under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”). InterOil is registering the number of Registrable Securities covered by this short form base shelf prospectus pursuant to the terms of the Registration Rights Agreement and under the U.S. Securities Act to permit the Selling Securityholder to resell the Registrable Securities from time to time after the effective date of the registration statement of which this short form base shelf prospectus forms a part.

Under the Registration Rights Agreement, InterOil will keep the registration statement effective at all times with respect to the Registrable Securities. This obligation is subject to InterOil’s right to suspend use of the registration statement with respect to the Registrable Securities, as described below. Notwithstanding the foregoing, InterOil is not required to file or maintain the effectiveness of this short form base shelf prospectus following such time as (i) all holders of the Registrable Securities have completed the resales of all their Registrable Securities or (ii) the Registrable Securities are freely tradeable by the Selling Securityholder without restriction under Rule 144 of the U.S. Securities Act (or similar provision then in effect).

When the Selling Securityholder elects to sell the Registrable Securities pursuant to the registration statement, the Selling Securityholder will be required to: (i) provide InterOil with any additional information requested by the Ontario Securities Commission and the SEC, if any; (ii) deliver a copy of this short form base shelf prospectus to purchasers of such Registrable Securities; and (iii) be subject to the provisions of the Registration Rights Agreement.

Under the Registration Rights Agreement, InterOil will: (i) provide the Selling Securityholder with copies of this short form base shelf prospectus and any amendment or supplement thereto and any documents incorporated by reference herein and therein; (ii) notify the Selling Securityholder immediately of the happening of any event as a result of which this short form base shelf prospectus (including any supplements thereto) includes any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and to promptly update and/or correct such prospectus; (iii) notify the Selling Securityholder of

- 10 -

the issuance by the Ontario Securities Commission or the SEC suspending the effectiveness of this short form base shelf prospectus; (iv) notify the Selling Securityholder when the registration statement has become effective; (v) list the Registrable Securities on the NYSE Alternext US; and (vi) take other actions as are required to permit unrestricted resales of the Registrable Securities in accordance with the terms and conditions of the Registration Rights Agreement.

Under the Registration Rights Agreement, (i) InterOil will pay all expenses in connection with the registration and (ii) the Selling Securityholder is responsible for all underwriting discounts, selling commissions and transfer taxes applicable to the sale of the Registrable Securities and all fees and disbursements of counsel for the Selling Securityholder.

SELLING SECURITYHOLDER

InterOil is registering the Registrable Securities on behalf of the Selling Securityholder named in the table below. InterOil issued the Registrable Securities in a private placement on February 27, 2009, pursuant to the terms of the Settlement Agreement to MLPLC. Pursuant to the Settlement Agreement, InterOil issued the Registrable Shares to MLPLC, an affiliate of Merrill Lynch, and Pacific LNG Operations Ltd. (“Pacific LNG”) made certain cash and stock payments to MLPLC in exchange for MLPLC's interest in PNG LNG, Inc., the joint venture established by affiliates of InterOil, Merrill Lynch and Pacific LNG, to construct a proposed LNG plant on a site adjacent to InterOil's refinery in Papua New Guinea. Following the execution of the Settlement Agreement, affiliates of InterOil and Pacific LNG are the sole shareholders of PNG LNG, Inc. and Merril Lynch does not not retain any ownership in PNG LNG, Inc. or the LNG project. In addition, pursuant to the Settlement Agreement, each of InterOil and its affiliates and Merrill Lynch and its affiliates released each other in respect of pending disputes in respect of PNG LNG, Inc.

This short form base shelf prospectus may be used by the Selling Securityholder in connection with resales of the Registrable Securities, from time to time, during the 25 month period that this short form base shelf prospectus, including any amendments thereto, remains valid. The Selling Securityholder is not under any obligation to sell all or a portion of the Registrable Securities, nor is the Selling Securityholder obligated to sell any of the Registrable Securities immediately after the date of this short form base shelf prospectus.

The information in the table below is as of February 26, 2009, and is based upon information provided by the Selling Securityholder. This table lists the Selling Securityholder, the number of Registrable Securities being offered for sale by the Selling Securityholder pursuant to this short form base shelf prospectus, and the number of Registrable Securities owned, controlled or directed beneficially by the Selling Securityholder prior to this offering and after this offering, assuming the sale of all Registrable Securities pursuant to this short form base shelf prospectus. To prevent dilution to the Selling Securityholder the following numbers may change because of adjustments to reflect stock splits, stock dividends or similar events involving the Registrable Securities. As a result, the Selling Securityholder may acquire more Registrable Securities than are currently listed in the following table.

To InterOil’s knowledge, except as set forth in the footnotes to the table below, the Selling Securityholder has sole voting and investment power with respect to the Registrable Securities and has not within the past three years had any position, office or other material relationship with InterOil (including any of its affiliates).

					Number of Common Shares
	Number of Common				Owned, Controlled or
	Shares Owned,				Directed Beneficially, After
	Controlled or Directed		Number of		Completion of the Offering
	Beneficially, Prior to the		Registrable		(% of Outstanding Common
Name of Selling Securityholder	Offering(1)		Securities		Shares)(2)
Merrill Lynch PNG LNG Corp.(3)(4)		652,931		652,931		0 (0%)
Total

Notes:
1.	The total amount of Common Shares owned, controlled or directed beneficially by MLPLC prior to the offering includes the Registrable Securities owned by MLPLC.
2.	InterOil does not know when or in what amounts the Selling Securityholder may offer for sale the Registrable Securities pursuant to this offering. The Selling Securityholder may choose not to sell any of the Registrable Securities offered by this base shelf prospectus. Because the Selling Securityholder may offer all or some of the Registrable Securities pursuant to this offering, and because there are currently no agreements, arrangements or undertakings with respect to the sale of any of the Registrable Securities, InterOil cannot estimate the number of Common Shares that the Selling Securityholder will hold after completion of the offering. For purposes of this table, InterOil has assumed that the Selling Securityholder will have sold all of the Registrable Securities covered by this short

- 11 -

	form base shelf prospectus upon the completion of the offering.
3.	MLPLC has sole voting and investment power with respect to all of these Registrable Securities. The Common Shares listed in the table are owned both of record and beneficially by MLPLC.
4.	MLPLC has had an interest in PNG LNG Inc., a joint venture entity formed by InterOil to develop an onshore liquified natural gas processing facility in Papau New Guinea, since July 30, 2007. In addition, from time to time during the past three years, affiliates of MLPLC have been engaged by InterOil as investment advisors.

MLPLC is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or reside outside of Canada. Although MLPLC has appointed an agent for service of process in Canada it may not be possible for investors to enforce judgments in Canada against MLPLC. The name and address of the agent for service of process for MLPLC is McMillan LLP, Brookfield Place, Bay Wellington Tower, Suite 4040, 181 Bay Street, Toronto, Ontario, M5J 2T3.

DESCRIPTION OF THE COMMON SHARES

InterOil’s authorized capital consists of an unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series, with 1,035,554 Series A Preferred Shares authorized. As of February 26, 2009, 35,923,692 Common Shares and nil Series A Preferred Shares were issued and outstanding. Each Series A Preferred Share is convertible into one Common Share, subject to certain adjustments.

Holders of Common Shares are entitled to one vote for each Common Share held at any meeting of the shareholders of InterOil and to receive, out of all profits or surplus available for dividends, any dividends declared by InterOil on the Common Shares, and to receive any of the remaining property of InterOil in the event of liquidation, dissolution or winding up of InterOil, whether voluntary or involuntary.

MARKET FOR SECURITIES

The Common Shares are listed and posted for trading on the NYSE Alternext US under the symbol “IOC.” The Common Shares were delisted from the Toronto Stock Exchange effective after the close of markets on January 27, 2008. The following table sets forth the high and low sale prices and the trading volumes for the Common Shares on a monthly basis as reported by the NYSE Alternext US for the twelve-month period before the date of this short form base shelf prospectus:

	Price Range				Volume (Number of
	High (U.S.$)		Low (U.S.$)		Common Shares)
2009
February 1 through February 26	$	21.00	$	16.06		4,584,700
January	$	22.45	$	13.53		10,898,200
2008
December	$	14.24	$	10.20		5,705,900
November	$	15.50	$	8.90		7,817,200
October	$	27.18	$	9.10		15,702,600
September	$	31.85	$	21.72		19,069,000
August	$	32.04	$	24.54		14,388,600
July	$	30.74	$	24.56		20,483,400
June	$	41.62	$	24.10		25,851,300
May	$	30.22	$	20.95		27,588,500
April	$	20.73	$	15.98		12,834,900
March	$	23.50	$	16.06		12,778,300

PRIOR SALES

During the twelve month period preceding the date of this short form base shelf prospectus:

• 652,931 Common Shares were issued to MLPLC on February 27, 2009, pursuant to the Settlement Agreement.

- 12 -

• 58,000 Common Shares were issued from time to time upon the exercise of options;

• Clarion Finanz A.G. converted its $60 million share of the Company’s $130 million credit facility into 2,728,477 Common Shares on May 9, 2008 at a deemed price of $22.65;

• $95 million principal amount of 8% Subordinated Convertible Debentures due 2013 (the “Debentures”) were issued by the Company on a private placement basis on May 9, 2008 to an affiliate of MLPLC, and (i) is convertible into an aggregate of 3,800,000 Common Shares assuming the conversion of all of the Debentures at the current conversion price of $25.00 per Common Share and (ii) provides for the payment of interest thereon in Common Shares in lieu of cash at the election of the Company or the holders thereof, based on the daily volume weighted average price of Common Shares on the NYSE Alternext US as reported by Bloomberg Financial L.P. for the ten consecutive trading days immediately before the applicable interest payment date for the Debentures. 259,105 Common Shares were issued to the Debenture holders on December 16, 2008, for Debenture holders who elected to receive the first interest payment up to the period November 9, 2008 in shares. 641,000 Common Shares were issued to Debenture holders who elected to convert their Debentures into Common Shares in 2008 in accordance with the provisions of the Debentures.

• 9,347 Common Shares were issued on May 20, 2008 and 5,630 Common Shares were issued on August 8, 2008 as payment of dividends on the Series A Preferred Shares for the quarters ended March 31, 2008 and June 30, 2008, respectively.

• 317,700 Common Shares were issued on July 10, 2008 and 200,077 Common Shares were issued on August 22, 2008 upon conversion of all of the then issued Series A Preferred Shares at the election of the holder of the Series A Preferred Shares.

• 450,000 Common Shares were issued on August 15, 2008 to Indirect Participation Interest Holders who exercised their rights to convert to Common Shares under the Indirect Participation Interest Agreement.

• 228,000 Common Shares were issued on June 5, 2008 as payment of a finder’s fee in connection with the private placement of the Debentures.

USE OF PROCEEDS

InterOil will not receive any proceeds from the sale of the Registrable Securities by the Selling Securityholder. All of the net proceeds from sales of the Registrable Securities will be retained by the Selling Securityholder.

CONSOLIDATED CAPITALIZATION

The following table sets forth the consolidated capitalization of InterOil as at September 30, 2008, both before and after giving effect to the private placement of the Registrable Shares.

			Outstanding as at			Outstanding as at
			September 30, 2008			September 30, 2008
			Before Giving Effect to			After Giving Effect to the
			the Private Placement			Private Placement
Designation	Authorized		(unaudited)			(unaudited)
Common Shares(1)		Unlimited	$	370,305,150		$	381,555,150
				(35,623,587 shares	)		(36,276,518 shares	)
Series A Preferred Shares		1,035,554		$nil			$nil
				(nil shares	)		(nil shares	)
Bank debt(2)		unlimited	$	67,000,000		$	67,000,000
8.00% Subordinated Convertible Debentures(3)	$	125,000,000	$	80,000,000		$	80,000,000

- 13 -

Notes:
1.	InterOil is authorized to issue an unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series, of which 1,035,554 Series A Preferred Shares are authorized. As of September 30, 2008, 35,623,587 Common Shares were issued and outstanding and nil Series A Preferred Shares were outstanding. In addition, as of September 30, 2008, 1,294,000 Common Shares have been reserved for issuance on exercise of a like number of outstanding options to purchase Common Shares issued under InterOil’s incentive option plans. In addition, as of September 30, 2008, 337,252 warrants to acquire Common Shares were issued and outstanding. The warrants expire on August 27, 2009. Warrant capital as of September 30, 2008 was $2,119,034. InterOil has entered into an agreement with Petroleum Independent & Exploration Corporation (“PIE”) under which PIE can exchange 5,000 shares of SPI InterOil LDC for 5,000 Common Shares. In addition, InterOil has granted the parties to the indirect participation interest agreements (“IPI Agreements”) the right to convert, at any time or from time to time during the conversion right period, all or any portion of such parties’ indirect participation interest (“IPI”) percentage interest into fully paid and non-assessable Common Shares. The conversion right period terminates 90 days after completion and testing of the eighth exploration well drilled by InterOil or its subsidiaries, beginning with the first exploration well drilled after February 25, 2005. As of September 30, 2008, four exploration wells remain to be drilled under this program. The number of Common Shares issuable on any exercise of the parties’ conversion right will equal the quotient of (x) the product of (A) the IPI percentage being converted and (B) $500,000,000 and (y) $37.50. As of September 30, 2008, the total IPI percentage interest was 21.425%, however, with the waiver by two other investors who had an interest totaling 5.225% in the IPI Agreements, the potential issuance on conversion decreased to 2,160,000 Common Shares as at September 30, 2008. Immediately following any such conversion, the parties’ IPI percentage interest will be reduced to reflect such conversion and any other prior conversions by the parties. A party to the IPI Agreements may not exercise the conversion right if it has forfeited its right as provided in the IPI Agreements or has elected to have its IPI percentage become a direct participation interest under the relevant joint venture operating agreement, for which it would receive a registered legal interest in a petroleum development license.
2.	On June 12, 2001, InterOil entered into a loan agreement with the Overseas Private Investment Corporation to secure a project financing facility of $85,000,000. Repayments amounting to $22,500,000 were made prior to September 30, 2008 bringing the outstanding balance under the facility, as at September 30, 2008, to $62,500,000. This facility is still outstanding after private placements and related events.
3.	On May 13, 2008, InterOil completed the issue of $95,000,000 Debentures with a maturity of five years. The Debenture holders have the right to convert their Debentures into Common Shares at any time at a conversion price of $25.00 per share. InterOil has the right to require the Debenture holders to convert if the daily volume weighted average price of the Common Shares is at or above $32.50 for at least 15 consecutive trading days. Accrued interest on these Debentures is to be paid semi-annually in arrears, in May and November of each year, commencing November 2008. During the quarter ended September 30, 2008, Debenture holders converted $15,000,000 of these Debentures into Common Shares of InterOil resulting in the issue of 600,000 shares. Subsequent to the quarter ended September 30, 2008, Debenture holders converted $1,025,000 of these Debentures into Common Shares of InterOil resulting in the issue of 41,000 shares. On December 16, 2008, 259,105 Common Shares were issued to Debenture holders in respect of the first interest payment for the six month period ended November 9, 2008.

PLAN OF DISTRIBUTION

The Selling Securityholder is entitled to the benefits of the Registration Rights Agreement, pursuant to which InterOil agreed to file this short form base shelf prospectus as a base shelf prospectus with the Ontario Securities Commission under the Canadian shelf prospectus system and a registration statement including this short form base shelf prospectus. Pursuant to the Registration Rights Agreement, InterOil has agreed, at its expense, with respect to the Registrable Securities:

• to file with the SEC a registration statement on such form as it deems appropriate covering resales by holders of such Registrable Securities;

• file with the Ontario Securities Commission a prospectus covering resales by holders of such Registrable Securities;

• to use its best efforts to cause such registration statement to become effective as promptly as is practicable, but in no event later than 60 days after February 27, 2009; and

• to use its best efforts to keep the registration statement effective until the earlier of: (i) the date on which all holders of such Registrable Securities have completed the resale of all of their Registrable Securities; or (ii) all such Registrable Securities may be sold by the holders thereof under Rule 144 (or similar provisions then in effect).

All shelf information omitted from this base shelf prospectus will be contained in a shelf prospectus supplement that will be delivered to the purchasers together with this base shelf prospectus. Each shelf prospectus supplement will be incorporated by reference into this base shelf prospectus as of the date of the shelf prospectus supplement and only for the purposes of the distribution to which the shelf prospectus supplement pertains.

The Selling Securityholder may, from time to time, sell any or all of the Registrable Securities on any stock exchange, market or trading facility on which the Registrable Securities are traded or in private transactions. These sales may be at market

- 14 -

prices prevailing at the time of sale, fixed or negotiated prices. The Selling Securityholder may use any one or more of the following methods when selling Registrable Securities:

• ordinary brokerage transactions and transactions in which the broker dealer solicits purchasers;

• block trades in which the broker dealer will attempt to sell Registrable Securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

• purchases by a broker dealer as principal and resale by the broker dealer for its account;

• an exchange distribution in accordance with the rules of the applicable exchange;

• privately negotiated transactions;

• short sales effected after the date of this short form base shelf prospectus;

• close out short positions and return borrowed shares in connection with such short sales;

• broker dealers may agree with the Selling Securityholder to sell a specified number of such Registrable Securities at a stipulated price per share;

• through the writing of options, whether such options are listed on an options exchange or otherwise;

• pledges of Registrable Securities as security for any loan or obligation, including pledges of brokers or dealers;

• firm commitment or best efforts underwriting;

• a combination of any such methods of sale; and

• any other method permitted pursuant to applicable law.

The Selling Securityholder may also sell Registrable Securities under Rule 144 or Rule 904 under the U.S. Securities Act, if available, rather than under this short form base shelf prospectus. The Selling Securityholder may also rely on exemptions provided under National Instrument 45-102 — Resale of Securities — for sales of the Registrable Securities in Canada, rather than under this short form base shelf prospectus.

Broker dealers engaged by the Selling Securityholder may arrange for other broker dealers to participate in sales. Broker dealers may receive commissions or discounts from the Selling Securityholder (or, if any broker dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. No Selling Securityholder expects these commissions and discounts to exceed what is customary in the types of transactions involved. The Selling Securityholder may from time to time pledge or grant a security interest in some or all of the Registrable Securities owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell Registrable Securities from time to time under this short form base shelf prospectus, or under an amendment or supplement to this short form base shelf prospectus amending the Selling Securityholder list to include the pledgee, transferee or other successors in interest as Selling Securityholders under this short form base shelf prospectus.

The Selling Securityholder and any underwriters, brokers, dealers, agents or others that participate with the Selling Securityholder in the distribution of the Registrable Securities offered by this base shelf prospectus may also be deemed to be “underwriters” within the meaning of the Securities Act (Ontario). To the extent the Selling Securityholder may be deemed to be an underwriter, the Selling Securityholder may be subject to certain statutory obligations and liabilities as an underwriter under the Securities Act (Ontario).

In the event the Selling Securityholder enters into any arrangement with a broker dealer for the sale of Registrable Securities through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this short form base shelf prospectus will be filed, if required, disclosing (a) the name of the Selling Securityholder and of the participating broker dealer(s), (b) the number of Registrable Securities involved, (c) the price at which such Registrable Securities were or are to be sold, (d) the commissions paid or discounts or concessions allowed to such broker dealers, where applicable and (e) other facts material to the transaction.

-15-

The Selling Securityholder also may transfer the Registrable Securities in other circumstances, in which case the transferees will be the selling beneficial owners for purposes of this short form base shelf prospectus. The Selling Securityholder and any broker dealers or agents that are involved in selling the Registrable Securities may be deemed to be “underwriters” within the meaning of the U.S. Securities Act in connection with such sales. In such event, any commissions received by such broker dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the U.S. Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the Selling Securityholder. The Selling Securityholder has represented and warranted to the Company that it acquired the Registrable Securities in the ordinary course of its business and, at the time of its purchase of such securities the Selling Securityholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities. The Selling Securityholder has further agreed to comply with applicable securities legislation in the jurisdiction in which the Registrable Securities are sold including the obligation to deliver a copy of this short form base shelf prospectus to the purchaser of Registrable Securities if the Registrable Securities are sold in Canada under this short form base shelf prospectus. If the Selling Securityholder uses this short form base shelf prospectus for any sale of the Registrable Securities, it will be subject to the prospectus delivery requirements of the U.S. Securities Act and Canadian securities legislation. The Selling Securityholder will be responsible to comply with the applicable provisions of the U.S. Securities Act and the U.S. Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to the Selling Securityholder in connection with resales of its shares under the Shelf Registration Statement. InterOil will not receive any proceeds from the sale of the Registrable Securities. Pursuant to the Registration Rights Agreement, InterOil is responsible for registration expenses relating to this short form base shelf prospectus, the shelf registration statement filed with the SEC and the prospectus supplements (if any) filed in connection with this short form base shelf prospectus, and the Selling Securityholder is responsible for all underwriting expenses, discounts, selling commissions and transfer taxes applicable to the sale of the Registrable Securities and all fees and disbursements of counsel for the Selling Securityholder.

The Common Shares are listed and posted for trading under the symbol “IOC” on the NYSE Alternext US. On February 26, 2009, the closing price of the Common Shares was U.S.$18.54 per share on the NYSE Alternext US. Effective at the close of markets on January 27, 2009, the Common Shares were delisted from the Toronto Stock Exchange.

-16-

RISK FACTORS

Investing in InterOil’s securities involves risks. You should carefully consider and evaluate all of the information contained in this short form base shelf prospectus (and in the documents incorporated herein by reference) and a prospectus supplement relating to a specific offering of securities before you decide to purchase any Registrable Securities. In particular, you should carefully consider and evaluate the many significant risks and uncertainties described herein and in the documents incorporated by reference herein, including specifically the annual information form dated March 28, 2008 for the year ended December 31, 2007, and management’s discussion and analysis dated March 28, 2008 for the year ended December 31, 2007. Any of the risks and uncertainties set forth therein could materially and adversely affect InterOil’s business, results of operations and financial condition, which in turn could materially and adversely affect the trading price of InterOil’s securities. As a result, you could lose all or part of your investment.

The “Risk Factors” in the annual information form dated March 28, 2008 included the risk of InterOil being unable to generate sufficient cash flow to pay off or refinance its $130 million credit facility with near-term maturities that could have a material adverse effect on InterOil’s financial condition. This indebtedness has now been refinanced and replaced with equity and $95 million of Debentures with the effect that this risk factor is no longer applicable. InterOil will continue to update its Risk Factors from time to time as developments in its business warrant and as required by applicable securities laws and regulations.

In addition, there are certain risks related to an investment in InterOil’s Common Shares:

The price of InterOil’s Common Shares has been volatile.

The market price of the Common Shares has been, and is likely to continue to be, volatile and subject to wide fluctuations. From February 1, 2008 through February 26, 2009, the highest sales price of the Common Shares on the NYSE Alternext US has been U.S. $41.62 and the lowest sales price of the Common Shares on such exchange has been U.S. $8.90. The fluctuation in the market prices of the Common Shares is caused by a number of factors, some of which are outside InterOil’s control, including the following:

• quarterly variations in InterOil’s results of operations;

• future public announcements concerning InterOil’s business and operations;

• changes in stock market analyst recommendations or earnings estimates regarding the Common Shares;

• strategic actions, such as acquisitions by InterOil or its competitors;

• new laws or regulations or new interpretations of existing laws or regulations applicable to InterOil’s business;

• significant sales of the Common Shares;

• the acquisition or loss of major customers or suppliers;

• additions or departures of key personnel;

• changes in market valuations for refining, exploration and production companies or companies participating in the retail distribution of refined oil products; and

• changes in accounting standards, policies, guidance, interpretations or principles.

A decline in the market price of the Common Shares could cause you to lose some or all of your investment.

Capital Markets

As a result of the weakened global economic situation, InterOil, along with all other oil and gas entities, may have restricted access to capital, bank debt and equity, and is likely to face increased borrowing costs. Although InterOil’s business and asset base have not declined, the lending capacity of all financial institutions has diminished and risk premiums have increased. As future capital expenditures will be financed out of funds generated from operations, borrowings and possible future equity or

-17-

asset sales, InterOil’s ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the energy industry and InterOil’s assets and securities in particular.

To the extent that external sources of capital become limited or unavailable or available on onerous terms, InterOil’s ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition and results of operations may be materially and adversely affected as a result.

Based on current funds available and expected funds generated from operations, InterOil believes it has sufficient funds available to fund the conduct of its business operations in the normal course, other than in respect of the development of its exploration assets and the LNG project, both of which would require significant capital. However, if funds generated from operations are lower than expected or capital costs for these projects exceed current estimates, or if InterOil incurs major unanticipated expenses related to development or maintenance of its existing properties, it may be required to seek additional capital to maintain its capital expenditures at planned levels. In addition, additional capital will be required in order to fund additional exploration and development of the Elk/Antelope field and would be required to develop the LNG project. Failure to obtain any financing necessary for InterOil’s capital expenditure plans may result in delays in these activities..

Third Party Risk

In the normal course of our business, InterOil has entered into contractual arrangements with third parties which subject InterOil to the risk that such parties may default on their obligations. InterOil may be exposed to third party credit risk through its contractual arrangements with its current or future joint venture partners, lenders, customers and other parties. In the event such entities fail to meet their contractual obligations to InterOil, such failures could have a material adverse effect on InterOil and its cash flow from operations.

Future issuances of the Common Shares may adversely affect the price of the Common Shares.

The future issuance of a substantial number of the Common Shares into the public market, or the perception that such issuances could occur, could adversely affect the prevailing market price of the Common Shares.

A decline in the price of the Common Shares could make it more difficult to raise funds through future offerings of Common Shares or securities convertible into Common Shares.

InterOil believes that substantially all of its outstanding Common Shares and the Common Shares issued in the future upon the exercise of outstanding options, warrants and the conversion of the Debentures will be tradeable under the United States federal securities laws following this offering, subject to certain limitations. These limitations include vesting provisions in option and warrant agreements, and volume and manner-of-sale restrictions under Rule 144.

InterOil does not intend to pay, and has restrictions upon its ability to pay, dividends on the Common Shares.

InterOil has not paid cash dividends in the past and does not intend to pay dividends on the Common Shares in the foreseeable future. InterOil currently intends to retain any earnings for the future operation and development of its business. InterOil’s ability to make dividend payments in the future will be dependent on the future performance and liquidity of the Company. In addition, the Debentures contain certain restrictions on InterOil’s ability to pay dividends on the Common Shares.

CERTAIN INCOME TAX CONSIDERATIONS

Owning the Registrable Securities may subject you to tax considerations, both in the United States and in Canada. This prospectus does not describe Canadian or United States federal tax consequences of the acquisition, ownership or disposition of the Registrable Securities. You should consult your own tax advisor with respect to your particular circumstances.

LEGAL MATTERS

Unless otherwise specified in the prospectus supplement relating to any offering of Registrable Securities, certain legal matters relating to the offering of the Registrable Securities will be passed upon for InterOil by Bennett Jones LLP with respect to Canadian law and by Haynes and Boone, LLP with respect to United States law. In addition, certain legal matters in connection with an offering by or through any underwriters, dealers or agents will be passed upon by counsel designated by them at such time with respect to Canadian and United States law.

-18-

The partners and associates of each of Bennett Jones LLP and Haynes and Boones, LLP, as a group, beneficially own, directly or indirectly, less than 1% of InterOil’s outstanding securities as at the date hereof.

EXPERTS

InterOil’s audited consolidated financial statements as at December 31, 2007 and for each of the three years ended December 31, 2005, 2006 and 2007, together with the notes thereto, incorporated by reference into this short form base shelf prospectus have been audited by PricewaterhouseCoopers, chartered accountants, as indicated in their report dated March 28, 2008 also incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing. PricewaterhouseCoopers was first appointed as InterOil’s auditor on June 6, 2005. For information regarding PricewaterhouseCoopers, see “Experts” in the annual information form dated March 28, 2008 for the year ended December 31, 2007.

DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

The following documents have been filed with the SEC as part of the Registration Statement of which the prospectus forms a part: (i) the documents referred to under the heading “Documents Incorporated by Reference”; (ii) US GAAP reconciliation for the six months ended June 30, 2008 and 2007; and (iii) the consent of PricewaterhouseCoopers.

AVAILABLE INFORMATION

Copies of the documents incorporated herein by reference may be obtained on request without charge from InterOil’s Corporate Secretary (telephone: +61 7 4046 4600), or by accessing the documents available through SEDAR which can be accessed as www.sedar.com, for Canadian filings, and the EDGAR system, which can be accessed at www.sec.gov, for U.S. filings.

InterOil is subject to the informational requirements of the U.S. Exchange Act, and in accordance therewith file reports and other information with the SEC. Such reports and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of InterOil are PricewaterhouseCoopers, Melbourne, Australia.

The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc. of Canada at its principal transfer office in Toronto, Ontario.

PURCHASERS’ STATUTORY RIGHTS

Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment thereto. The securities legislation further provides a purchaser with remedies for rescission or damages if the base shelf prospectus and any amendment thereto contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of these rights or consult with a legal advisor.

-19-

AUDITOR’S CONSENT

We have read the short form base shelf prospectus of InterOil Corporation (the “Corporation”) dated February 27, 2009 relating to the offer and sale of 652,931 Common Shares of the Corporation. We have complied with Canadian generally accepted standards for an auditors’ involvement with offering documents.

We consent to the incorporation by reference in the above-mentioned prospectus of our report to the shareholders of the Corporation on the audited consolidated balance sheets of the Corporation as at December 31, 2007, 2006 and 2005 and the consolidated statements of operations, shareholders’ equity, comprehensive income and cash flows for each of the years then ended. Our report is dated March 28, 2008.

This consent has been issued solely to comply with the requirements of Canadian generally accepted auditing standards and is neither required nor intended to satisfy the requirements of Canadian securities legislation or the Securities Act of 1933, as amended.

Melbourne, Australia
February 27, 2009 (signed) “PricewaterhouseCoopers”

-20-

CERTIFICATE OF THE COMPANY

February 27, 2009

This short form base shelf prospectus, together with the documents incorporated in this short form base shelf prospectus by reference, will, as of the date of the last supplement to this short form base shelf prospectus relating to the securities offered by this short form base shelf prospectus and the supplement(s), constitute full, true and plain disclosure of all material facts relating to the securities offered by this short form base shelf prospectus and the supplement(s) as required by the securities legislation in the province of Ontario.

(Signed) “Phil E. Mulacek”	(Signed) “Collin F. Visaggio”
Chief Executive Officer	Chief Financial Officer

On behalf of the Board of Directors

(Signed) “Christian Vinson”	(Signed) “Gaylen Byker”
Director	Director

-21-

PART II

INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

INDEMNIFICATION

     Sections 5.1 to 5.4 of the Bylaws of the Company provides, with regard to indemnity and insurance under the Business Corporations Act of the Yukon Territory, Canada (the “Act”), in part as follows:

“5.1 Indemnification of Directors and Officers against actions by Third Parties. Except in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation’s request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, or a person who undertakes or has undertaken any liability on behalf of the Corporation or any such body corporate, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of that Corporation or body corporate, if:

     a) He acted honestly and in good faith with a view to the best interests of the Corporation; and

     b) In the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

5.2 Indemnification of Directors and Officers against actions by the Corporation. The Corporation shall, with the approval of the Supreme Court of the Yukon Territory, indemnify a person referred to in paragraph 5.1 in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, to which he is made a party by reason of being or having been a director or an officer of the Corporation or body corporate, against all costs, charges and expenses reasonably incurred by him in connection with the action if he fulfills the conditions set out in subparagraphs 5.1(a) and (b).

5.3 Right of Indemnity not Exclusive. The provisions for indemnification contained in the Bylaws shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to an action in his official capacity and as to an action in any other capacity while holding such office. This section shall also apply to a person who has ceased to be a director or officer, and shall enure to the benefit of the heirs and legal representatives of such person.

5.4 Insurance. Subject to the limitations contained in the Act, the Corporation may purchase and maintain such insurance for the benefit of its directors and officers as the Board may from time to time determine.”

     The provisions of sections 5.1 and 5.2 of the Company’s by-laws are in accordance with sections 126 (1) and (2) of the Act, which deal with Indemnification of Directors and Officers against actions by Third Parties and Indemnification of Directors and Officers against actions by the Corporation, respectively.

     The provisions of section 5.4 of the Company’s by-laws are subject to the provisions of section 126(4) of the Act which provides that the insured must have acted honestly and in good faith with a view to the best interests of the Company.”

     Insofar as indemnification for liabilities arising from the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

-22-

EXHIBIT INDEX

EXHIBIT
NUMBER	DESCRIPTION
4.1	The management information circular dated May 12, 2008 relating to our annual general meeting of shareholders to be held on June 23, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on May 27, 2008 (file no. 001-32179)).
4.2	The annual information form of InterOil, dated March 28, 2008, for the year ended December 31, 2007 (incorporated by reference to the Registrant’s Annual Report on Form 40-F filed with the Commission on March 28, 2008 (file no. 001-32179)).
4.3	Management’s discussion and analysis of InterOil dated March 28, 2008 for the year ended December 31, 2007 (incorporated by reference to the Registrant’s Annual Report on Form 40-F filed with the Commission on March 28, 2008 (file no. 001-32179)).
4.4	The audited consolidated balance sheets as at December 31, 2007, 2006 and 2005, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the years in the three year period ended December 31, 2007, together with the auditors’ report thereon dated March 28, 2008 (incorporated by reference to the Registrant’s Annual Report on Form 40-F filed with the Commission on March 28, 2008 (file no. 001-32179)).
4.5	Material change report of InterOil dated October 30, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on November 10, 2008 (file no. 001-32179)).
4.6	The comparative interim consolidated financial statements (unaudited) of InterOil for the nine month periods ended September 30, 2008 and 2007 together with the notes thereto (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on November 12, 2008 (file no. 001-32179)).
4.7	Management’s discussion and analysis of InterOil dated November 10, 2008 for the nine month period ended September 30, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on November 12, 2008 (file no. 001-32179)).
4.8	Material change report of InterOil dated May 12, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on May 13, 2008 (file no. 001-32179)).
4.9	Material change report of InterOil dated May 6, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on May 6, 2008 (file no. 001-32179)).
4.10	Material change report of InterOil dated May 2, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on May 2, 2008 (file no. 001-32179)).
4.11	Material change report of InterOil dated May 1, 2008 (incorporated by reference to the Registrant’s Current Report on Form 6-K filed with the Commission on May 1, 2008 (file no. 001-32179)).
4.12	US GAAP reconciliation for the comparative interim consolidated financial statements (unaudited) of InterOil for the six months ended June 30, 2008 and 2007.*
23.1	Consent of PricewaterhouseCoopers*
24.1	Power of Attorney (included on the signature page of this Registration Statement)†

*	Filed herewith
†	Filed previously

-23-

PART III

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

ITEM 1. UNDERTAKING.

The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to this Form F-10 or to transactions in said securities.

ITEM 2. CONSENT TO SERVICE OF PROCESS.

The Company has filed with the Commission on February 27, 2009, concurrently with the filing of its Registration Statement on Form F-10, a written irrevocable consent and power of attorney on Form F-X.

-24-

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on this Registration Statement on Form F-10 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cairns, State of Queensland, Australia, on the 27th day of February, 2009.

INTEROIL CORPORATION
By:	/S/ PHIL E. MULACEK
	Phil E. Mulacek
	Chairman of the Board and Chief Executive Officer

POWER OF ATTORNEY

     NOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Phil E. Mulacek and Collin Visaggio as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign, execute and file with the Securities and Exchange Commission and any state securities regulatory board or commission any documents relating to the proposed issuance and registration of the securities offered pursuant to this Registration Statement on Form F-10 under the Securities Act of 1933, as amended, including any amendment or amendments relating thereto (and, in addition, any post effective amendments), with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done.

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated, on the 27th day of February, 2009.

/s/ PHIL E. MULACEK	Chairman of the Board and Chief Executive Officer
Phil E. Mulacek	(Principal Executive Officer)
/s/ COLLIN VISAGGIO	Chief Financial Officer
Collin Visaggio	(Principal Financial Officer and Principal Accounting Officer)
/s/ CHRISTIAN M. VINSON	Director; Executive Vice President
Christian M. Vinson	Corporate Development & Government Affairs
/s/ ROGER F. LEWIS	Director
Roger F. Lewis
/s/ ROGER N. GRUNDY	Director
Roger N. Grundy
/s/ GAYLEN J. BYKER	Director
Gaylen J. Byker
/s/ EDWARD N. SPEAL	Director
Edward N. Speal

-25-

AUTHORIZED REPRESENTATIVE

Pursuant to the requirements of Section 6(1) of the Securities Act of 1933, as amended, the Authorized Representative has signed this Registration Statement on Form F-10 solely in its capacity as the duly authorized representative of InterOil Corporation in the United States, on February 27, 2009.

By:	/S/ PHIL E. MULACEK
	Phil E. Mulacek
	Chairman of the Board and
	Chief Executive Officer

-26-

EX-4.12

Exhibit 4.12

InterOil Corporation
U.S. GAAP reconciliation

Reconciliation to accounting principles generally accepted in the United States

The un-audited consolidated financial statements of the Company for the six month periods ended June 30, 2008 and 2007, and the audited consolidated financial statements for the year ended December 31, 2007 have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”) which, in most respects, conforms to generally accepted accounting principles in the United States (“U.S. GAAP”). The reconciliations and other information presented in this Exhibit are solely in relation to the consolidated financial statements. The significant differences between Canadian GAAP and U.S. GAAP as they relate to the Company are presented throughout this Exhibit. Additionally, where there is no significant conflict with Canadian GAAP requirements some of the additional U.S. GAAP disclosure requirements have been incorporated throughout the Canadian GAAP financial statements.

Reconciliation to accounting principles generally accepted in the United States (cont’d)

Consolidated Balance Sheets	As at
	June 30, 2008						December 31, 2007						June 30, 2007
	$ (Un-audited)						$						$ (Un-audited)
	Canadian GAAP			US GAAP			Canadian GAAP			US GAAP			Canadian GAAP			US GAAP
Assets
Current assets:
Cash and cash equivalents (5)		28,811,249			25,491,803			43,861,762			40,152,026			22,406,039			22,406,039
Cash restricted (5)		26,016,420			25,925,851			22,002,302			21,916,736			20,055,745			20,055,745
Trade receivables		127,615,875			127,615,875			63,145,444			63,145,444			57,535,357			57,535,357
Other assets (5)		225,009			197,191			146,992			120,460			373,110			373,110
Inventories		74,880,778			74,880,778			82,589,242			82,589,242			116,046,492			116,046,492
Prepaid expenses (5)		5,423,470			5,337,963			5,102,540			5,076,006			521,773			521,773
Total current assets		262,972,801			259,449,461			216,848,282			212,999,914			216,938,516			216,938,516
Cash restricted		361,881			361,881			382,058			382,058			1,215,798			1,215,798
Deferred financing costs (4), (6)		—			1,522,136			—			1,395,066			—			1,606,209
Investment in LNG Project (5)		—			5,311,078			—			5,848,612			—			—
Plant and equipment (1), (5)		228,201,543			215,048,359			232,852,222			219,117,006			238,661,407			227,432,110
Oil and gas properties (2)		102,072,439			101,659,133			84,865,127			84,865,127			61,848,939			61,848,939
Future income tax benefit		2,819,591			2,819,591			2,867,312			2,867,312			1,583,767			1,583,767
Total assets		596,428,255			586,171,639			537,815,001			527,475,095			520,248,427			510,625,339
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities (6), (5)		67,160,639			66,626,058			60,427,607			59,682,621			109,002,771			109,055,065
Commodity derivative contracts		11,847,200			11,847,200			1,960,300			1,960,289			46,800			46,789
Working capital facility — crude feedstock		74,058,565			74,058,565			66,501,372			66,501,372			29,522,326			29,522,326
Current portion of secured loan		9,000,000			9,000,000			136,776,760			136,810,093			142,616,909			142,700,242
Current portion of indirect participation interest — PNGDV		540,002			540,002			1,080,004			1,080,004			1,518,229			1,518,229
Total current liabilities		162,606,406			162,071,825			266,746,043			266,034,379			282,707,035			282,842,651
Accrued financing costs		—			—			—			—			362,500			362,500
Secured loan (6)		56,753,361			58,000,000			61,141,389			62,500,000			56,529,417			58,000,000
8% subordinated debenture liability (4)		76,516,300			80,851,022			—			—			—			—
Preference share liability (3)		7,797,312			—			7,797,312			—			—			—
Deferred gain on contributions to LNG project (5)		12,203,867			—			9,096,537			—			—			—
Indirect participation interest (2)		87,877,831			106,477,912			96,086,369			115,926,369			96,086,369			115,926,369
Indirect participation interest — PNGDV		844,490			844,490			844,490			844,490			406,265			406,265
Total liabilities		404,599,567			408,245,249			441,712,140			445,305,238			436,091,586			457,537,785
Non-controlling interest (8)		6,151			6,294			4,292			4,388			5,764,521			5,422,208
Preference shares (3)		—			14,250,000			—			14,250,000			—			—
Shareholders’ equity:
Share capital		324,855,607			324,855,607			259,324,133			259,324,133			235,327,636			235,327,636
Preference shares (3)		6,842,688			—			6,842,688			—			—			—
8% subordinated debentures (4)		13,036,434			—			—			—			—
Contributed surplus (4)		12,512,478			21,313,373			10,337,548			10,337,548			7,159,462			7,159,462
Warrants		2,119,034			2,119,034			2,119,034			2,119,034			2,119,034			2,119,034
Accumulated Other Comprehensive Income		7,800,935			7,800,935			6,025,019			6,025,019			1,731,116			1,731,116
Conversion options (2)		19,840,000			—			19,840,000			—			19,840,000			—
Accumulated deficit		(195,184,639	)		(192,418,853	)		(208,389,853	)		(209,890,265	)		(187,784,928	)		(198,671,902	)
Total shareholders’ equity		191,822,537			163,670,096			96,098,569			67,915,469			78,392,320			47,665,346
Total liabilities and shareholders’ equity		596,428,255			586,171,639			537,815,001			527,475,095			520,248,427			510,625,339

2

Reconciliation to accounting principles generally accepted in the United States (cont’d)

Consolidated statements of operations

The following table presents the consolidated statements of operations under U.S. GAAP compared to Canadian GAAP:

	Six month period ended						Year ended						Six month period ended
	June 30, 2008						December 31, 2007						June 30, 2007
	$ (Un-audited)						$ (restated) (1)						$ (Un-audited)
	Canadian GAAP			U.S. GAAP			Canadian GAAP			U.S. GAAP			Canadian GAAP			U.S. GAAP
Revenue
Sales and operating revenues		435,029,765			435,029,765			625,526,068			625,526,068			265,238,868			265,238,868
Interest income		756,279			—			2,180,285			—			1,233,327			—
Other income		1,641,404			—			2,666,890			—			963,574			—
		437,427,448			435,029,765			630,373,243			625,526,068			267,435,769			265,238,868
Expenses
Cost of sales and operating expenses (excluding depreciation shown below)		383,197,441			383,197,441			573,609,441			573,609,441			241,877,559			241,877,559
Administrative and general expenses (5)		27,094,351			25,477,632			39,270,348			38,153,126			12,738,105			12,738,105
Legal and professional fees (5)		5,956,524			4,194,958			6,532,646			4,471,684			2,014,451			2,014,451
Exploration costs, excluding exploration impairment		(154,077	)		(154,077	)		13,305,437			13,305,437			7,839,550			7,839,550
Exploration impairment		11,279			11,279			1,242,606			1,242,606			20,251			20,251
Short term borrowing costs		3,493,733			3,493,733			13,212,112			13,212,112			4,227,074			4,227,074
Long term borrowing costs (3), (4)		8,485,202			8,017,436			9,536,162			9,061,915			6,180,195			6,180,195
Depreciation and amortization (1), (5)		6,924,442			6,656,021			13,024,258			12,529,892			7,078,887			6,841,388
Gain on LNG shareholder agreement		—			—			(6,553,080	)		(6,553,080	)		(6,553,080	)		(6,553,080	)
Gain on equity accounted investment (5)		—			283,798			—			(5,561,684	)		—			—
Gain on sale of oil and gas properties (2)		(10,245,533	)		(11,072,146	)		—			—			—			—
Foreign exchange loss/(gain) (5)		(4,784,214	)		(4,725,292	)		(5,078,338	)		(5,099,651	)		(228,428	)		(228,428	)
Non-controlling interest (8)		1,859			1,907			(22,333	)		(22,236	)		5,331			5,379
Interest income (5)		—			(724,133	)		—			(2,146,183	)		—			(1,233,327	)
Other income		—			(1,641,404	)		—			(2,666,890	)		—			(963,574	)
		419,981,007			413,017,153			658,079,259			643,536,489			275,199,895			272,765,543
Loss before income taxes		17,446,441			22,012,612			(27,706,016	)		(18,010,421	)		(7,764,126	)		(7,526,675	)
Income tax expense (5), (7)		(4,241,227	)		(4,168,249	)		(1,206,892	)		(1,194,227	)		(543,857	)		(543,857	)
Net loss		13,205,214			17,844,363			(28,912,908	)		(19,204,648	)		(8,307,983	)		(8,070,532	)

(1) Comparative results for the year ended December 31, 2007 have been adjusted to rectify for misclassification of the following items in the U.S. GAAP Consolidated statement of operations as per the December 31, 2007 consolidated financial statements:

December 31, 2007 (as per U.S. GAAP reconciliation)	Original		Restated		Adjustments
Expenses
Legal and professional fees		6,038,280		4,471,684		1,566,596
Short term borrowing costs		11,151,150		13,212,112		(2,060,962	)
Long term borrowing costs		9,536,162		9,061,915		474,247
Depreciation and amortization		12,550,011		12,529,892		20,119
Net impact to the U.S. GAAP Statement of Operations						—

3

Reconciliation to accounting principles generally accepted in the United States (cont’d)

Reconciliation of Canadian GAAP net income/(loss) to U.S. GAAP net income/(loss)

	Six Month						Six Month
	period ended			Year ended			period ended
	June 30,			December 31,			June 30,
	2008			2007			2007
	$ (Un-audited)			$			$ (Un-audited)
Net profit/(loss) as shown in the Canadian GAAP financial statements		13,205,214			(28,912,908	)		(8,307,983	)
Description of items having the effect of increasing reported income
Decrease in depreciation and amortization due to difference in date of commencement of operations of refinery (1)		237,488			478,935			237,498
Decrease in non-controlling interest expense (8)		(47	)		(96	)		(47	)
Increase in reporting income due to reversal of proportionate consolidation of LNG Project and equity accounting the investment (5)		3,107,329			9,097,535			—
Decrease in long term borrowing costs relating to financing costs on preference shares expensed		—			390,000			—
Decrease in long term borrowing costs relating to dividends paid to preference share holders expensed under Canadian GAAP (3)		372,951			84,247			—
Decrease in long term borrowing costs relating to reduced accretion expense on increased 8% subordinated debentures liability (4)		94,815			—			—
Increase in gain on sale of oil and gas properties arising from conveyance accounting due to the initial IPI proceeds not being bifurcated under U.S. GAAP (2)		826,613			—			—
Description of items having the effect of decreasing reported income
Reduced gain on sale of minority interest under U.S. GAAP		—			(342,361	)		—
Net profit/(loss) according to US GAAP		17,844,363			(19,204,648	)		(8,070,532	)

Statements of comprehensive income/(loss), net of tax

	Six Month						Six Month
	period ended			Year ended			period ended
	June 30,			December 31,			June 30,
	2008			2007			2007
	$			$			$
Net profit/(loss) in accordance with U.S. GAAP		17,844,363			(19,204,648	)		(8,070,532	)
Foreign currency translation reserve		5,262,965			4,532,150			238,247
Deferred hedge gain		(3,487,049	)		(1,389	)		(1,389	)
Total other comprehensive income		1,775,916			4,530,761			236,858
Comprehensive profit/(loss)		19,620,279			(14,673,887	)		(7,833,674	)

4

Reconciliation to accounting principles generally accepted in the United States (cont’d)

Consolidated Statements of Shareholders’ Equity

	Six month period ended						Year ended						Six month period ended
	June 30, 2008						December 31, 2007						June 30, 2007
	$ (Un-audited)						$						$ (Un-audited)
	Canadian GAAP			US GAAP			Canadian GAAP			US GAAP			Canadian GAAP			US GAAP
Share capital
At beginning of period		259,324,133			259,324,133			233,889,366			233,889,366			233,889,366			233,889,366
Issue of capital stock		65,531,474			65,531,474			25,434,767			25,434,767			1,438,270			1,438,270
At end of period		324,855,607			324,855,607			259,324,133			259,324,133			235,327,636			235,327,636
Preference Shares
At beginning of period		6,842,688			—			—			—			—			—
Issue of preference shares		—			—			6,842,688			—			—			—
At end of period		6,842,688			—			6,842,688			—			—			—
8% subordinated debentures
At beginning of period		—			—			—			—			—			—
Issue of debentures		13,036,434			—			—			—			—			—
At end of period		13,036,434			—			—			—			—			—
Contributed surplus
At beginning of period		10,337,548			10,337,548			4,377,426			4,377,426			4,377,426			4,377,426
Stock compensation		2,174,930			2,174,930			5,960,122			5,960,122			2,782,036			2,782,036
8% Debenture issue BCF (note 4)		—			8,800,895			—			—			—			—
At end of period		12,512,478			21,313,373			10,337,548			10,337,548			7,159,462			7,159,462
Warrants
At beginning of period		2,119,034			2,119,034			2,137,852			2,137,852			2,137,852			2,137,852
Movement for period		—			—			(18,818	)		(18,818	)		(18,818	)		(18,818	)
At end of period		2,119,034			2,119,034			2,119,034			2,119,034			2,119,034			2,119,034
Accumulated Other Comprehensive Income
At beginning of period		6,025,019			6,025,019			1,492,869			1,494,258			1,492,869			1,494,258
Deferred hedge gain recognised on transition		—			—			1,385			—			1,385			—
Deferred hedge (loss)/gain movement for period, net of tax		(3,487,049	)		(3,487,049	)		(1,385	)		(1,389	)		(1,385	)		(1,389	)
Foreign currency translation adjustment movement for period, net of tax		5,262,965			5,262,965			4,532,150			4,532,150			238,247			238,247
At end of period		7,800,935			7,800,935			6,025,019			6,025,019			1,731,116			1,731,116
Conversion options
At beginning of period		19,840,000			—			20,000,000			—			20,000,000			—
Movement for period		—			—			(160,000	)		—			(160,000	)		—
At end of period		19,840,000			—			19,840,000			—			19,840,000			—
Accumulated deficit
At beginning of period		(208,389,853	)		(209,890,265	)		(179,476,945	)		(190,601,370	)		(179,476,945	)		(190,601,370	)
Net profit/(loss) for period		13,205,214			17,844,363			(28,912,908	)		(19,204,648	)		(8,307,983	)		(8,070,532	)
Deduct:
Preference Share Dividends		—			(372,951	)		—			(84,247	)		—			—
At end of period		(195,184,639	)		(192,418,853	)		(208,389,853	)		(209,890,265	)		(187,784,928	)		(198,671,902	)
Shareholders’ equity at end of period		191,822,537			163,670,096			96,098,569			67,915,469			78,392,320			47,665,346

5

Reconciliation to accounting principles generally accepted in the United States (cont’d)

Reconciliation of Canadian GAAP Statement of cash flows to U.S. GAAP:

	Six Month period ended			Year ended			Six Month period ended
	June 30, 2008			December 31, 2007			June 30, 2007
	$			$ (restated) (1)			$
Cash flows provided by (used in):
Operating activities — Canadian GAAP (as per consolidated cash flows)(restated)(2)		(22,554,955	)		(31,619,907	)		(113,507	)
Reconciling items:
Reclass exploration costs expensed including exploration impairment as operating activity for US GAAP		142,798			(14,548,043	)		(7,859,801	)
Being LNG project related operating cash flows reversed for US GAAP cash flow statement		4,200,887			2,892,220			—
Operating activities — U.S. GAAP		(18,211,270	)		(43,275,730	)		(7,973,308	)
Investing activities — Canadian GAAP (as per consolidated cash flows) (restated)(2)		(27,913,289	)		(34,369,871	)		(11,169,025	)
Reconciling items:
Reclass exploration costs expensed including exploration impairment as operating activity for US GAAP		(142,798	)		14,548,043			7,859,801
Being reversal of LNG Project expenditure for US GAAP cash flows		(313,600	)		2,762,786			—
Being reversal of movement in restricted cash held relating to LNG Project for US GAAP cash flows		5,003			85,566			—
Investing activities — U.S. GAAP		(28,364,684	)		(16,973,476	)		(3,309,224	)
Financing activities — Canadian GAAP (as per consolidated cash flows)		35,417,731			78,170,105			2,007,136
Reconciling items:
Being reversal of PNG LNG cash calls from unrelated joint venture partners proportionately consolidated in Canadian GAAP cash flow statement		(3,502,000	)		(9,450,308	)		—
Financing activities — U.S. GAAP		31,915,731			68,719,797			2,007,136
(Decrease)/increase in cash and cash equivalents		(14,660,223	)		8,470,591			(9,275,396	)
Cash and cash equivalents, beginning of period (U.S. GAAP)		40,152,026			31,681,435			31,681,435
Cash and cash equivalents, end of period (U.S. GAAP)		25,491,803			40,152,026			22,406,039

Under Canadian GAAP, InterOil’s share in the LNG Joint venture project is proportionately consolidated and InterOil’s share of the JV cash flows will be taken up in InterOil consolidated cash flow statement. The cash flows would be classified between operating, investing and financing as per the nature of the transaction. Under U.S. GAAP, when an investment in an entity is accounted for by use of the equity method, an investor restricts its reporting in the cash flow statement to the cash flows between itself and the investee, for example, to dividends and advances. The above cash and cash equivalents is different to the Canadian cash and cash equivalents balance due to the proportionate take up of the cash balance under Canadian GAAP, but equity accounting of the LNG investment in U.S. GAAP (refer (8) below).

(1) Comparative results for the year ended December 31, 2007 have been adjusted to correctly reflect the reconciling items related to the LNG Project. For details of adjustments made to the Reconciliation of Canadian GAAP Statement of cash flows to U.S. GAAP as per the December 31, 2007 consolidated financial statements, refer to the following table:

6

Reconciliation to accounting principles generally accepted in the United States (cont’d)

(1) Year ended December 2007 US GAAP cash flows have been adjusted to correctly reflect the reconciling items related to the LNG project. For details of adjustments made to the reconciliation, refer to the following table:

	Operating activities			Investing activities			Financing activities			Total
	$			$			$			$
Cash flows provided by/(used in) — (as per original U.S. GAAP reconciliation)		(57,062,320	)		(12,637,194	)		78,170,105			8,470,591
Adjustments:
Transfer of reversal of PNG LNG cash call proportionately consolidated in cash flow statement reconciling item from Investing activities to Financing activities (at amount originally disclosed in reconciliation)		—			(65,072	)		65,072			—
Adjust reversal of PNG LNG cash call proportionately consolidated in cash flow statement reconciling item to correct amount		9,515,380			—			(9,515,380	)		—
Add reversal of movement in non-cash working capital relating to LNG Project (increase in accounts payable and accrued liabilities)		7,119,562			(7,119,562	)		—			—
Add reconciling item for reversal of expenditure on plant and equipment relating to LNG Project		(2,762,786	)		2,762,786			—			—
Add reconciling item for reversal of movement in restricted cash held relating to LNG Project		(85,566	)		85,566			—			—
Cash flows provided by/(used in) — (as per adjusted U.S. GAAP reconciliation)		(43,275,730	)		(16,973,476	)		68,719,797			8,470,591

(2) Three month and nine month period ended September 30, 2008, six month period ended June 30, 2008 and year ended December 31, 2007 Canadian GAAP cash flows have been adjusted to correctly reflect the classification of deferred gain in relation to the LNG project. For details of adjustments made to the previously published financial statements, refer to the following table:

	Three Month			Nine Month			Six Month
	period ended			period ended			period ended			Year ended
	September 30, 2008			September 30, 2008			June 30, 2008			December 31, 2007
	$ (restated)			$ (restated)			$ (restated)			$ (restated)
Cash flows provided by (used in):
Operating activities — Canadian GAAP (as per published financial statements)		2,637,711			(23,024,574	)		(25,662,285	)		(40,716,444	)
Restatement made:
Being restatement due to movement in Deferred gain in relation to the LNG Project wrongly classified in Investing activities as compared to Operating activities.		5,293,243			8,400,573			3,107,330			9,096,537
Operating activities — Canadian GAAP (restated)		7,930,954			(14,624,001	)		(22,554,955	)		(31,619,907	)
Investing activities — Canadian GAAP (as per published financial statements)		5,776,129			(19,029,830	)		(24,805,959	)		(25,273,334	)
Restatement made:
Being restatement due to movement in Deferred gain in relation to the LNG Project wrongly classified in Investing activities as compared to Operating activities.		(5,293,243	)		(8,400,573	)		(3,107,330	)		(9,096,537	)
Investing activities — Canadian GAAP (restated)		482,886			(27,430,403	)		(27,913,289	)		(34,369,871	)
Financing activities — Canadian GAAP (as per published financial statements)		9,741,009			45,158,740			35,417,731			78,170,105
Restatement made:
None		—			—			—			—
Financing activities — Canadian GAAP (restated)		9,741,009			45,158,740			35,417,731			78,170,105

Per share amounts

Basic per share amounts are computed by dividing net income available to shareholders by the weighted average number of shares outstanding for the reporting period. Diluted per share amounts reflects the potential dilution that could occur if options or contracts to issue shares were exercised or converted into shares. The method of calculating diluted per share amounts under US GAAP is similar to the Canadian GAAP for the periods noted below.

For the calculation of diluted per share amounts, the basic weighted average number of shares is increased by the dilutive effect of stock options determined using the treasury method. Preferred stock, warrants, conversion options and stock options totaling 8,772,029 common shares at prices ranging from $13.67 to $43.22 were outstanding as at June 30, 2008 and were included in the computation of the diluted earnings per share at 30 June 2008. However, the dilutive instruments outstanding at June 30, 2007 were not included in the computation of the diluted loss per share because they caused the loss per share to be anti-dilutive.

			Number of
	Number of		shares		Number of
	shares June 30,		December 31,		shares June 30,
Potential dilutive instruments outstanding	2008		2007		2007
Preferred stock		517,777		517,777		—
Employee stock options		1,352,000		1,200,500		1,313,750
IPI Indirect Participation interest — conversion options		2,760,000		3,306,667		3,306,667
8% Convertible debentures		3,800,000		—		—
Warrants		337,252		337,252		337,252
Others		5,000		5,000		5,000
Total stock options/shares outstanding		8,772,029		5,367,196		4,962,669

The reconciliation between the income available to the common shareholders and the income available to the dilutive holders, used in the calculation of the numerator in the EPS calculation is as follows:

7

Reconciliation to accounting principles generally accepted in the United States (cont’d)

	Six month		Year ended			Six month
	period ended		December 31,			period ended
	June 30, 2008		2007			June 30, 2007
	$		$			$
Income available to the common shareholders		17,844,363		(19,204,648	)		(8,070,532	)
Interest expense on debentures		1,055,556		—			—
Accretion expense on debentures		372,342		—			—
Non-controlling interest		1,907		—			—
Income available to dilutive holders		19,274,168		(19,204,648	)		(8,070,532	)

The reconciliation between the ‘Basic’ and ‘Basic & Diluted’ shares, used in the calculation of the denominator in the EPS calculation is as follows:

	Six month		Year ended		Six month
	period ended		December 31,		period ended
	June 30, 2008		2007		June 30, 2007
Basic		31,873,424		29,998,133		29,901,733
Employee options		132,122		—		—
Warrants		10,874		—		—
Preference shares		517,777		—		—
Debentures		1,106,593		—		—
Indirect Participation interest		3,135,458		—		—
Other		5,000		—		—
Basic and diluted		36,781,249		29,998,133		29,901,733

	Six month					Six month
	period ended		Year ended			period ended
	June 30,		December 31,			June 30,
Net income/(loss) per share in accordance with U.S. GAAP	2008		2007			2007
Basic		0.56		(0.64	)		(2.15	)
Diluted		0.52		(0.64	)		(2.15	)

(1)	Operations
	The Company determined that refinery operations commenced under U.S. GAAP at December 1, 2004, which is the date management assessed that construction of the refinery was substantially complete and ready for its intended use. The Company ceased capitalization of certain costs to the refinery project at this date and recognized one month’s results from sales, related costs of sales and operating expenses and administrative and general expenses in the statement of operations for the year ended December 31, 2004. As disclosed in note 3(q) in the consolidated financial statements, operations commenced on January 1, 2005 under Canadian GAAP. Therefore, the Company continued to capitalize December 2004’s results to the refinery project. Due to the difference in the cost basis of the refinery, the depreciation expense recorded under U.S. GAAP differs from that recorded under Canadian GAAP. The useful life for the refinery under U.S. GAAP is the same as that disclosed under Canadian GAAP.
(2)	Indirect participation interest
	As disclosed in note 18 in the unaudited consolidated financial statements, the Company entered into an indirect participation interest agreement in exchange for proceeds of $125,000,000. Under Canadian GAAP, this amount was apportioned between non financial liabilities and equity. Under U.S. GAAP, the Company has not bifurcated the amount as the Company has opted to utilize the scope exception under SFAS 133 Para 10(f) for ‘derivatives that serve as impediments to sales accounting’.
	As explained in note 18, on May 5, 2008, one of the investors who has a 4.1% interest in the eight well drilling program waived its right to convert its IPI percentage into 546,667 common shares. This waiver has resulted in conveyance being triggered on this portion of the IPI agreement for the quarter ended June 30, 2008. As the initial IPI proceeds were not bifurcated under U.S. GAAP, the total conveyance proceeds

8

Reconciliation to accounting principles generally accepted in the United States (cont’d)

	available for the conveyed interest is $9,448,458 (higher by $1,239,919 from the CGAAP balance), the amounts offset against oil and gas properties is $4,876,313 (higher by $413,306 from CGAAP balance), and the gain recognised in the statement of operations is $4,572,146 (higher by $826,613 from CGAAP balance).
(3)	Preference shares
	As disclosed in Note 21 in the unaudited consolidated financial statements, 517,777 preference shares were issued to an investor in November 2007 for $15,000,000.
	Under Canadian GAAP, the preference shares were assessed based on the rights attached to those shares and Management valued the equity and liability component of the instrument using the residual value basis.
	As the Preference share agreement has contractual redemption provisions under ‘Fundamental change’ section mainly relating to listing requirements, shareholding etc, under U.S. GAAP, the preference shares needs to be classified under temporary equity classification in accordance with ASR 268.
	In addition to the above, the 5% dividend paid for the six month period amounting to $372,950 has been included within long term borrowing costs within Canadian GAAP, but has been treated as a reduction to retained earnings under U.S. GAAP.
(4)	8% subordinated debentures
	As disclosed in Note 22 in the unaudited consolidated financial statements, on May 13, 2008, the Company completed the issue of $95,000,000 unsecured 8% subordinated convertible debentures with a maturity of five years. Under Canadian GAAP, these debentures were assessed based on the rights attached to the instrument and Management valued the equity and liability component of the instrument using the residual value basis.
	Under U.S. GAAP, Management assessed the debentures following the guidance under FAS 133 to decide whether the embedded conversion option needs to be bifurcated and disclosed separately. The embedded conversion option did not satisfy the condition of embedded derivatives that requires separation due to the scope exception under FAS 133 Para 11(a) as the option is indexed to the Company’s own stock and would have been classified in Shareholder’s equity if it had been separated.
	As FAS 133 bifurcation is not applicable, the provisions of EITF 00-27 requires that the instrument be assessed for any ‘Beneficial Conversion Features (‘BCF’)’ included in the instrument, which should be separated using the intrinsic value method as noted in EITF 98-5. Based on the guidance, the BCF has been valued at $8,821,320 which will be separate and classified separately under equity as Contributed Surplus. After separation, the liability component would be accreted over the life of the debentures, being 5 years till May 2013. If the conversion occurs prior to the stated redemption date, the entire unamortized value related to the converted portion would be immediately recognized in the Statement of operations as an ordinary interest expense.
	The accretion expense of the liability component for the period ending June 30, 2008 was $372,342 (accretion expense under US GAAP is less due to the higher liability component of the instrument).
	In addition to the above, deferred financial costs are offset against the respective liabilities under Canadian GAAP; however, the same is disclosed as a separate item on the face of the balance sheet under US GAAP. As at June 30, 2008, there was $193,998 of deferred finance costs which were not amortized in relation to the 8% convertible debentures.
(5)	Investment in LNG Project/Deferred gain on contributions to LNG Project
	As disclosed in Note 13 in the unaudited consolidated financial statements, a Shareholders Agreement was signed on July 30, 2007 which converted PNG LNG Inc. and its subsidiaries into a joint venture project from being a subsidiary of InterOil. Under Canadian GAAP, joint ventures are proportionately consolidated into the Company’s consolidated financials based on the shareholding in the joint venture.
	Applying the guidance under APB 18, a corporate joint venture has to be equity accounted under U.S. GAAP. InterOil has also followed the guidance under SAB Topic 5H wherein a gain on contributions to the joint venture is not recognised, however, a gain is recognised as a result of a change in economic interest.

9

Reconciliation to accounting principles generally accepted in the United States (cont’d)

InterOil will account for the joint venture using equity accounted method. In addition to the gain or loss recognised as part of the operations, InterOil will also recognise any difference between the Investment carried in its balance sheet and the underlying equity in net assets of the joint venture in the statement of operations and the investment balance will increase/decrease in line with this difference.

The adjustments to reflect the reversal of proportionately consolidated balances and take-up of equity accounted balances have been summarised below. Given below is the Midstream — liquefaction consolidated balance sheet and statement of operations under Canadian GAAP and U.S. GAAP. The statement of operations incorporates results for the six month period ended June 30, 2008. PNG LNG Inc. was a subsidiary of InterOil until the date of the Shareholder’s Agreement and has been proportionately consolidated subsequent to that date.

Midstream - liquefaction				GAAP
Consolidated Balance Sheet	Canadian GAAP			Adjustments			US GAAP
Cash and cash equivalents		3,319,546			(3,319,446	)		100
Cash restricted		90,569			(90,569	)		—
Other assets		27,818			(27,818	)		—
Prepaid expenses		4,008			(4,008	)		—
Current assets		3,441,941			(3,441,841	)		100
Investment in PNG LNG Inc.		—			5,311,078			5,311,078
Plant and equipment		2,402,822			(2,402,822	)		—
Total assets		5,844,763			(533,585	)		5,311,178
Accounts payable and accrued liabilities		534,585			(534,585	)		—
Intercompany payables		3,020,558			—			3,020,558
Current liabilities		3,555,143			(534,585	)		3,020,558
Deferred gain on contributions to LNG project		12,203,867			(12,203,867	)		—
Total non-current liabilities		12,203,867			(12,203,867	)		—
Share capital		1			—			1
Accumulated deficit		(9,914,248	)		12,204,867			2,290,619
Shareholders’ Equity		(9,914,247	)		12,204,867			2,290,620
Total liabilities and Shareholders’ equity		5,844,763			(533,585	)		5,311,178

Midstream - liquefaction				GAAP
Consolidated Statement of Operation	Canadian GAAP			Adjustments			US GAAP
Interest income		32,146			(32,146	)		—
Total revenues		32,146			(32,146	)		—
Office and Administrative expenses		1,788,800			(1,616,719	)		172,081
Depreciation		30,933			(30,933	)		—
Professional fees		1,722,641			(1,761,566	)		(38,925	)
Exchange (Gain) loss		(58,922	)		58,922			—
Gain on equity accounted investment		—			283,798			283,798
Income taxes		72,978			(72,978	)		—
Total expenses		3,556,430			(3,139,476	)		416,954
Net gain/(loss)		(3,524,284	)		3,107,330			(416,954	)

(6)	Deferred Financing costs
	Deferred financial costs are offset against the respective liabilities under Canadian GAAP; however, the same is disclosed as a separate item on the face of the balance sheet under US GAAP in accordance with guidance under APB 21.

10

Reconciliation to accounting principles generally accepted in the United States (cont’d)

(7)	Income tax effect of adjustments
	The income tax effect of U.S. GAAP adjustments was a reduction to the future tax asset of $1,604,676 (year ended December 31, 2007 — $3,403,154) for the six month period ended June 30, 2008 due to a decrease in the loss carry-forwards. A corresponding decrease in the valuation allowance was recorded.
(8)	Non controlling interest
	The non-controlling interest movements are the result of the U.S. GAAP adjustments relating to the midstream operations described in point 1 above.

Recent Accounting Pronouncements

Fair value measurements

In September 2006, the FASB issued FAS 157 which defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. The standard is effective for fiscal years beginning after November 15, 2007 and all interim periods within those fiscal years. The Company does not expect that the application of FAS 157 will have a material impact on the financial statements.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FAS 159 which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Company does not expect that the application of FAS 159 will have a material impact on the financial statements.

Business combinations

In December 2007, the FASB issued FAS 141 (revised 2007) to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This will have no impact unless the Company undertakes a business combination subsequent to adoption of this standard.

Non-controlling interests in consolidated financial statements

In December 2007, the FASB issued FAS 160. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. Previously, net income attributable to the noncontrolling interest generally was reported as an expense or other deduction in arriving at consolidated net income. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This will have no impact unless the Company undertakes a business combination involving a non-controlling interest subsequent to adoption of this standard.

Disclosures about derivative instruments and hedging activities

In March 2008, the FASB issued FAS 161. This statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and how derivative

11

Reconciliation to accounting principles generally accepted in the United States (cont’d)

instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. This disclosure better conveys the purpose of derivative use in terms of the risk that the entity is intending to manage. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format should provide a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features should provide information on the potential effect on an entity’s liquidity from using derivatives. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect that the application of FAS 161 will have a material impact on the financial statements.

Hierarchy of generally accepted accounting principles

In May 2008, the FASB issued FAS 162. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements by nongovernmental entities that are presented in accordance with the US GAAP. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The SEC approved the amendments on September 16, 2008. The Company does not expect that the application of FAS 161 will have a material impact on the financial statements.

Accounting for financial guarantee insurance contracts

In May 2008, the FASB issued FAS 163 which clarifies how FAS 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. The statement requires recognition of a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. The statement also required expanded disclosures about financial guarantee insurance contracts. This statement is effective for years beginning after December 15, 2008 and interim periods within those years, except for certain disclosure requirements which are effective for the first period (including interim periods) beginning after May 23, 2008. The Company does not expect that the application of FAS 163 will have any impact on the financial statements.

12

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form F-10 of InterOil Corporation of our report dated March 28, 2008, relating to the financial statements as of December 31, 2007, 2006 and 2005 and for each of the years in the three year period ended December 31, 2007 and the effectiveness of internal control over financial reporting as of December 31, 2007, which appears in the Annual Report to Shareholders, which is Exhibit 2 to the 2007 Form 40-F of InterOil Corporation, dated March 28, 2008.

We also consent to the reference to our firm under the heading “Auditors, Transfer Agent and Registrar” in the prospectus.

/s/ PricewaterhouseCoopers
PricewaterhouseCoopers

Melbourne, Australia
February 27, 2009