|InterOil Corporation
        




        Annual Information Form
        
        For the Year Ended December 31, 2011
        March 16, 2012 | 
|---------------------------------------------------------------------------------------------------------------------------------------------- | 



TABLE
OF CONTENTS








|TABLE OF CONTENTS                                                                              | 1 
|---------------------------------------------------------------------------------------------- | --
|PRELIMINARY NOTES                                                                              | 2 
|GENERAL                                                                                        | 2 
|NON-GAAP MEASURES AND RECONCILIATION                                                           | 2 
|LEGAL NOTICE – FORWARD-LOOKING STATEMENTS                                                      | 2 
|ABBREVIATIONS AND EQUIVALENCIES                                                                | 4 
|CONVERSION                                                                                     | 5 
|GLOSSARY OF TERMS                                                                              | 5 
|CORPORATE STRUCTURE                                                                            | 9 
|GENERAL DEVELOPMENT OF THE BUSINESS                                                            | 10
|BUSINESS STRATEGY                                                                              | 17
|DESCRIPTION OF OUR BUSINESS                                                                    | 18
|UPSTREAM - EXPLORATION AND PRODUCTION                                                          | 18
|MIDSTREAM - REFINING                                                                           | 23
|MIDSTREAM - LIQUEFACTION                                                                       | 25
|DOWNSTREAM - WHOLESALE AND RETAIL DISTRIBUTION                                                 | 26
|RESOURCES                                                                                      | 28
|THE ENVIRONMENT AND COMMUNITY RELATIONS                                                        | 29
|RISK FACTORS                                                                                   | 31
|DIVIDENDS                                                                                      | 41
|DESCRIPTION OF CAPITAL STRUCTURE                                                               | 41
|MARKET FOR OUR SECURITIES                                                                      | 43
|DIRECTORS AND EXECUTIVE OFFICERS                                                               | 44
|AUDIT COMMITTEE                                                                                | 47
|LEGAL PROCEEDINGS AND REGULATORY ACTIONS                                                       | 48
|INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS                                    | 48
|MATERIAL CONTRACTS                                                                             | 48
|TRANSFER AGENT AND REGISTRAR                                                                   | 51
|INTERESTS OF EXPERTS                                                                           | 51
|ADDITIONAL INFORMATION                                                                         | 51
|Schedule A – Report of Management and Directors on
    Oil and Gas Disclosure                  | 52
|Schedule B – Report on Resources Data by Independent
    Qualified Reserves Evaluator          | 53
|Schedule C – InterOil Corporation Charter of the Audit
    Committee of the Board of Directors | 55



Annual Information Form   INTEROIL CORPORATION     1







PRELIMINARY
NOTES








GENERAL








This Annual Information Form (“AIF”)
has been prepared by InterOil Corporation for the year ended December 31, 2011. It should be read in conjunction with our audited
consolidated financial statements and notes for the year ended December 31, 2011 and Management’s Discussion and Analysis
for the year ended December 31, 2011 (“2011 MD&A”), copies of which may be obtained online from SEDAR at www.sedar.com.



In this AIF, references to “we”,
“us”, “our”, “the Company”, “the Corporation” and “InterOil” refer
to InterOil Corporation or InterOil Corporation and its subsidiaries as the context requires.



All dollar amounts are stated in United
States dollars unless otherwise specified.



Information presented in this AIF is as
of December 31, 2011 unless otherwise specified.



Certain information, not being within
our knowledge, has been furnished by our directors and executive officers. Such information includes information as to common
shares in the Company beneficially owned, controlled or directed, directly or indirectly by them, their places of residence and
principal occupations, both present and historical, interests in material transactions and potential conflicts of interest.



NON-GAAP
MEASURES AND RECONCILIATION








Gross Margin is a non-GAAP measure derived
from ‘sales and operating revenues’ less ‘cost of sales and operating expenses’.



Earnings before interest, taxes, depreciation
and amortization (“EBITDA”) represents our net income/(loss) plus total interest expense (excluding amortization of
debt issuance costs), income tax expense, depreciation and amortization expense. We use EBITDA to analyze operating performance.
EBITDA does not have a standardized meaning prescribed by International Financial Reporting Standards and, therefore, may not
be comparable with the calculation of similar measures for other companies. The items excluded from EBITDA are significant in
assessing our operating results. Therefore, EBITDA should not be considered in isolation or as an alternative to net earnings,
operating profit, net cash provided from operating activities and other measures of financial performance prepared in accordance
with International Financial Reporting Standards. Further, EBITDA is not a measure of cash flow under International Financial
Reporting Standards and should not be considered as such.



For reconciliation of these non-GAAP measures
to measures under GAAP, refer to the heading “Non-GAAP Measures and Reconciliation” in our 2011 MD&A.



LEGAL
NOTICE – FORWARD-LOOKING STATEMENTS








This AIF contains “forward-looking
statements” as defined in U.S. federal and Canadian 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. We have based these forward-looking statements
on our current expectations and projections about future events. All statements, other than statements of historical fact, included
in or incorporated by reference in this AIF are forward-looking statements. Forward-looking statements include, without limitation,
our business strategies and plans; plans for our exploration (including drilling plans) and other business activities and results
therefrom; characteristics of our properties; entering into definitive agreements with our joint venture partners; the construction
of proposed liquefaction facilities and condensate stripping facilities in Papua New Guinea; the development of such liquefaction
and condensate stripping facilities; the timing and cost of such development; the commercialization and monetization of any resources;
whether sufficient resources will be established; the likelihood of successful exploration for gas and gas condensate or other
hydrocarbons; re-commissioning of our CRU; cash flows from operations; sources of capital and its sufficiency; operating costs;
contingent liabilities; environmental matters; and plans and objectives for future operations; the timing, maturity and amount
of future capital and other expenditures.



Annual Information Form   INTEROIL CORPORATION     2







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





| | · | our
                                                                                                               ability to finance
                                                                                                               the development
                                                                                                               of liquefaction
                                                                                                               and condensate
                                                                                                               stripping facilities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               ability to negotiate
                                                                                                               definitive agreements
                                                                                                               following conditional
                                                                                                               agreements or heads
                                                                                                               of agreement relating
                                                                                                               to the development
                                                                                                               of liquefaction
                                                                                                               and condensate
                                                                                                               stripping facilities,
                                                                                                               or to otherwise
                                                                                                               negotiate and secure
                                                                                                               arrangements with
                                                                                                               other entities
                                                                                                               for such development
                                                                                                               and the associated
                                                                                                               financing thereof.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               uncertainty associated
                                                                                                               with the availability,
                                                                                                               terms and deployment
                                                                                                               of capital;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               ability to construct
                                                                                                               and commission
                                                                                                               our liquefaction
                                                                                                               and condensate
                                                                                                               stripping facilities
                                                                                                               together with the
                                                                                                               construction of
                                                                                                               the common facilities
                                                                                                               and pipelines,
                                                                                                               on time and within
                                                                                                               budget;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               ability to obtain
                                                                                                               and maintain necessary
                                                                                                               permits, concessions,
                                                                                                               licenses and approvals
                                                                                                               from relevant PNG
                                                                                                               government authorities
                                                                                                               to develop our
                                                                                                               gas and condensate
                                                                                                               resources and to
                                                                                                               develop liquefaction
                                                                                                               and condensate
                                                                                                               stripping facilities
                                                                                                               within reasonable
                                                                                                               time periods and
                                                                                                               upon reasonable
                                                                                                               terms.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







| | · | the
                                                                                                               inherent uncertainty
                                                                                                               of oil and gas
                                                                                                               exploration activities;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               availability of
                                                                                                               crude feedstock
                                                                                                               at economic rates;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               uncertainty associated
                                                                                                               with the regulated
                                                                                                               prices at which
                                                                                                               our products may
                                                                                                               be sold;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | difficulties
                                                                                                               with the recruitment
                                                                                                               and retention of
                                                                                                               qualified personnel;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | losses
                                                                                                               from our hedging
                                                                                                               activities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | fluctuations
                                                                                                               in currency exchange
                                                                                                               rates;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | political,
                                                                                                               legal and economic
                                                                                                               risks in Papua
                                                                                                               New Guinea;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | landowner
                                                                                                               claims and disruption;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | compliance
                                                                                                               with and changes
                                                                                                               in Papua New Guinean
                                                                                                               laws and regulations,
                                                                                                               including environmental
                                                                                                               laws;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               inability of our
                                                                                                               refinery to operate
                                                                                                               at full capacity;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               impact of competition;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               adverse effects
                                                                                                               from importation
                                                                                                               of competing products
                                                                                                               contrary to our
                                                                                                               legal rights;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               margins for our
                                                                                                               products and adverse
                                                                                                               effects on the
                                                                                                               value of our refinery;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | inherent
                                                                                                               limitations in
                                                                                                               all control systems,
                                                                                                               and misstatements
                                                                                                               due to errors that
                                                                                                               may occur and not
                                                                                                               be detected;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | exposure
                                                                                                               to certain uninsured
                                                                                                               risks stemming
                                                                                                               from our operations;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | contractual
                                                                                                               defaults.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | interest
                                                                                                               rate risk;
| | - | ----------------------------------------------------------------------------------------------------------------------------------







| | · | weather
                                                                                                               conditions and
                                                                                                               unforeseen operating
                                                                                                               hazards;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Annual Information Form   INTEROIL CORPORATION     3









| | · | general
                                                                                                               economic conditions,
                                                                                                               including any further
                                                                                                               economic downturn,
                                                                                                               the availability
                                                                                                               of credit the European
                                                                                                               sovereign debt
                                                                                                               credit crisis and
                                                                                                               the downgrading
                                                                                                               of United States
                                                                                                               government debt;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               impact of our current
                                                                                                               debt on our ability
                                                                                                               to obtain further
                                                                                                               financing;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | risk
                                                                                                               of legal action
                                                                                                               against us; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | law
                                                                                                               enforcement difficulties.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------





Forward-looking statements and information
are based on our current beliefs as well as assumptions made by, and information currently available to, us concerning anticipated
financial conditions and performance, business prospects, strategies, regulatory developments, the ability to attract joint venture
partners, future hydrocarbon commodity prices, the ability to secure adequate capital funding, the ability to obtain equipment
in a timely manner to carry out development activities, the ability to market products successfully to current and new customers,
the effects from increasing competition, the ability to obtain financing on acceptable terms, and the ability to develop reserves
and production through development and exploration activities. Although we consider these assumptions to be reasonable based on
information currently available to us, they may prove to be incorrect.



Although we believe that the assumptions
underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot
assure you that the forward-looking statements will eventuate. In light of the significant uncertainties inherent in our forward-looking
statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives
and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially
from such forward-looking statements are more fully described under the heading “Risk Factors” in this AIF.



Furthermore, the forward-looking information
contained in this AIF is made as of the date hereof and, except as required by applicable law, we will not update publicly or
to revise any of this forward-looking information. The forward-looking information contained in this AIF is expressly qualified
by this cautionary statement.



ABBREVIATIONS
AND EQUIVALENCIES








Abbreviations



|Crude Oil and Natural Gas Liquids |                                                                  | Natural Gas
|--------------------------------- | ---------------------------------------------------------------- | -----------
|bbl                               | one barrel equalling 34.972 Imperial gallons or 42 U.S. gallons  |            
|bblspd                            | barrels per day                                                  |            
|boe(1)                            | barrels of oil equivalent                                        |            
|boepd                             | barrels of oil equivalent per day                                |            
|bpsd                              | barrels per stream day                                           |            
|mboe                              | thousand barrels of oil equivalent                               |            
|mbbl                              | thousand barrels                                                 |            
|mmbbls                            | million barrels                                                  |            
|mmboe                             | million barrels of oil equivalent                                |            
|WTI                               | West Texas Intermediate crude oil delivered at Cushing, Oklahoma |            
|bscf                              | billion standard cubic feet                                      |            








Note:



| | (1) | All calculations converting natural
                                                                 gas to crude oil equivalent have been made using a ratio of six
                                                                 mcf of natural gas to one barrel of crude equivalent. Boe's may
                                                                 be misleading, particularly if used in isolation. A boe conversion
                                                                 ratio of six mcf of natural gas to one barrel of crude oil equivalent
                                                                 is based on an energy equivalency conversion method primarily
                                                                 applicable at the burner tip and does not represent a value equivalency
                                                                 at the wellhead.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Annual Information Form   INTEROIL CORPORATION     4







CONVERSION








The following table sets forth certain
standard conversions between Standard Imperial Units and the International System of Units (metric units).





|To Convert From |  | To           |  | Multiply By
|--------------- |  | ------------ |  | -----------
|mcf             |  | cubic metres |  | 28.317     
|cubic metres    |  | cubic feet   |  | 35.315     
|bbls            |  | cubic metres |  | 0.159      
|cubic metres    |  | bbls         |  | 6.289      
|feet            |  | metres       |  | 0.305      
|metres          |  | feet         |  | 3.281      
|miles           |  | kilometers   |  | 1.609      
|kilometers      |  | miles        |  | 0.621      
|acres           |  | hectares     |  | 0.405      
|hectares        |  | acres        |  | 2.471      



GLOSSARY
OF TERMS








“2011 MD&A”means
the Management’s Discussion and Analysis for the year ended December 31, 2011.



“AIF”means this Annual
Information Form for the year ended December 31, 2011.



“API” means the American
Petroleum Institute.



“Barrel, Bbl” (petroleum)Unit volume measurement used for petroleum and its products.



“BNP Paribas” means
BNP Paribas Capital (Singapore) Limited.



“Board” means the board
of directors of InterOil.



“BP” means BP Singapore
Pte Limited.



“BSP” means Bank of
South Pacific Limited.



“CDU” means crude distillation
unit.



“CGR” means condensate
to gas ratio.



“COGE Handbook” refers
to the Canadian Oil and Gas Evaluation Handbook.



“Condensate” A component
of natural gas which is a liquid at surface conditions.



“Convertible notes”means
the 2.75% convertible senior notes of InterOil due November 15, 2015.



“Crack spread” The
simultaneous purchase or sale of crude against the sale or purchase of refined petroleum products. These spread differentials
which represent refining margins are normally quoted in dollars per barrel by converting the product prices into dollars per barrel
and subtracting the crude price.



“CRU”means catalytic
reformer unit.



“Crude oil” A mixture
consisting mainly of pentanes and heavier hydrocarbons that exists in the liquid phase in reservoirs and remains liquid at atmospheric
pressure and temperature. Crude oil may contain small amounts of sulfur and other non-hydrocarbons but does not include liquids
obtained from the processing of natural gas.



“CSP Joint Venture” or
“CSP JV” means the Joint Venture Operating Agreement (“JVOA”) entered into for the proposed condensate
stripping facilities with Mitsui or the joint venture formed to develop and operate the proposed condensate stripping facilities
as the context requires.



Annual Information Form   INTEROIL CORPORATION     5







“CS Project” means
the proposed condensate stripping facilities, including gathering and condensate pipeline, condensate storage and associated facilities
being progressed in joint venture with Mitsui.



“DST” refers to a drill
stem test and is a procedure for isolating and testing the surrounding geological formation through the drill pipe.



“EBITDA” EBITDA represents
net income/(loss) plus total interest expense (excluding amortization of debt issuance costs), income tax expense, depreciation
and amortization expense. EBITDA is a non-GAAP measure used to analyze operating performance. See “Non-GAAP Measures
and Reconciliation”.



“EPC Contractor”means
an engineering, procurement and construction contractor.



“EWC” means Energy
World Corporation Limited, a company organized under the laws of Australia.



“Farm out” A contractual
agreement with an owner who holds a working interest in an oil and gas lease to assign all or part of that interest to another
party in exchange for the other party’s fulfillment of contractually specified conditions. Farm out agreements often stipulate
that a party must drill a well to a certain depth, at a specified location, within a certain time frame; furthermore, typically,
the well must be completed as a commercial producer to earn an assignment of the working interest. The assignor of the interest
usually reserves a specified overriding royalty interest, with the option to convert the overriding royalty interest to a specified
working interest upon payout of drilling and production expenses.



“FEED” means front
end engineering and design.



“Feedstock” means raw
material used in a refinery or other processing plant.



“FID”means final investment
decision. Such a decision is ordinarily the point at which a decision is made to proceed with a project and it becomes unconditional.
However, in some instances the decision may be qualified by certain conditions, including being subject to necessary approvals
by the State.



“FLEX LNG” means FLEX
LNG Limited, a British Virgin Islands Company listed on the Oslo Stock Exchange.



“GAAP” means Canadian
generally accepted accounting principles.



“Gas” means a mixture
of lighter hydrocarbons that exist either in the gaseous phase or in solution in crude oil in reservoirs but are gaseous at atmospheric
conditions. Natural gas may contain sulfur or other non-hydrocarbon compounds.



“GLJ”means GLJ Petroleum
Consultants Limited, an independent qualified reserves evaluator.



"GLJ 2010 Report" means
the report dated March 7, 2011 with an effective date of December 31, 2010 setting forth certain information regarding contingent
resources of InterOil’s interests in the Elk and Antelope fields in PNG.



"GLJ 2011 Report" means
the report dated February 28, 2012 with an effective date of December 31, 2011 setting forth certain information regarding contingent
resources of InterOil’s interests in the Elk and Antelope fields in PNG.



“Gross reserves” refers
to InterOil's working interest reserves before the deduction of royalties and before including any royalty interests.



“Gross wells” refers
to the total number of wells in which we have an interest.



“ICCC” means Papua
New Guinea’s competition authority, the Independent Consumer and Competition Commission.



“IFRS” means International
Financial Reporting Standards as issued by the International Accounting Standards Board.



“IPI Agreement” means
the Amended and Restated Indirect Participation Agreement dated February 25, 2005, as amended (see “Material Contracts”).



Annual Information Form   INTEROIL CORPORATION     6







“IPI holders” means
investors holding IPWIs in certain exploration wells required to be drilled pursuant to the IPI Agreement.



“IPF” refers to InterOil
power fuel, InterOil’s marketing name for low sulfur waxy residue or LSWR.



“IPP”means import
parity price. For each refined product produced and sold locally in Papua New Guinea, IPP is calculated under agreement with the
State by adding the costs that would typically be incurred to import such product to an average posted price for such product
in Singapore as reported by Platts. The costs added to the reported Platts price include freight costs, insurance costs, landing
charges, losses incurred in the transportation of refined products, demurrage and taxes.



“IPWI”means indirect
participation working interest.



“LNG”means liquefied
natural gas. Natural gas may be converted to a liquid state by pressure and severe cooling for transportation purposes, and then
returned to a gaseous state to be used as fuel. LNG, which is predominantly artificially liquefied methane, is not to be confused
with NGLs, natural gas liquids, which are heavier fractions that occur naturally as liquids.



“LNGL” means Liquid
Niugini Gas Limited, a wholly owned subsidiary of PNG LNG formed in Papua New Guinea to contract with the State and pursue the
LNG Project, including construction of the proposed liquefaction facilities.



“LNG Project” means
the development by us of liquefaction facilities in the Gulf Province of Papua New Guinea described as our Midstream Liquefaction
business segment and being undertaken as a joint venture with Pac LNG and with other potential partners, including the State.



“LNG Project Agreement”means the LNG Project Agreement between the State and LNGL dated December 23, 2009.



“LPG” refers to liquefied
petroleum gas, typically ethane, propane, butane and isobutane. Usually produced at refineries or natural gas processing plants,
including plants that fractionate raw natural gas plant liquids. LPG can also occur naturally as a condensate.



“LSWR” means low sulfur
waxy residue.



“Mark-to-market” refers
to the accounting standards of assigning a value to a position held in a financial instrument based on the current fair market
price for the instrument or similar instruments.



“Mitsui” refers to
Mitsui & Co., Ltd., a company organized under the laws of Japan and/or certain of its wholly-owned subsidiaries (as the context
requires).



“Naphtha”That portion
of the distillate obtained from the refinement of petroleum which is an intermediate between the lighter gasoline and the heavier
benzene. It is a feedstock destined either for the petrochemical industry or for gasoline production by reforming or isomerisation
within a refinery.



“Natural gas” means
a naturally occurring mixture of hydrocarbon and non-hydrocarbon gases found in porous geological formations beneath the earth's
surface, often in association with petroleum. The principal constituent is methane.



“NGL” means natural gas
liquids, consisting of any one or more of propane, butane and condensate.



“Net wells” refers
to the aggregate of the numbers obtained by multiplying each gross well by our percentage working interest in that well.



“NI 51-101” refers
to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities adopted by the Canadian Securities Administrators.



“NI 52-110” refers
to National Instrument 52-110 - Audit Committees adopted by the Canadian Securities Administrators.



“OPIC”meansOverseas
Private Investment Corporation, an agency of the United States Government.



Annual Information Form   INTEROIL CORPORATION     7







“Pac LNG” means Pacific
LNG Operations Ltd., a company incorporated in the Bahamas and affiliated with Clarion Finanz A.G. This company is our joint venture
partner in the LNG Project (holding equal voting shares in PNG LNG), holds a 2.5% direct interest in the Elk and Antelope fields,
is an IPI holder and a shareholder in PNGDV.



“PDL”meansPetroleum
Development License. The right granted by the State to develop a field for commercial production.



“Petromin” means Petromin
PNG Holdings Limited, a company incorporated in Papua New Guinea by the State.



“PGK”means the Kina,
currency of Papua New Guinea.



“PNGDV”meansPNG
Drilling Ventures Limited,an entity with which we entered into an indirect participation agreement in May 2003, as amended.
(See “Description of our Business – Upstream - Exploration and Production – Participation Agreements”,
“Material Contracts – Drilling Participation Agreement dated July 21, 2003”).



"PNG LNG" means PNG LNG,
Inc., a joint venture company established in 2007 to hold the interests of certain joint venturers in the venture to construct
the proposed liquefaction facilities. Shareholders are InterOil LNG Holdings Inc., a wholly-owned subsidiary of InterOil, and
Pac LNG. (See “Material Contracts – LNG Project Shareholders Agreement dated July 30, 2007)



“PPL” means Petroleum
Prospecting License. The tenement given by the State to explore for oil and gas.



“PRL”means Petroleum
Retention License. The tenement given by the State to allow the license holder to evaluate the commercial and technical options
for the potential development of an oil and/or gas field.



“Prospective Resources”are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations
by application of future development projects. Prospective resources have both an associated chance of discovery and a chance
of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable
estimates assuming their discovery and development and may be sub classified based on project maturity.



“Shut-in” refers to
wells that are capable of producing oil or natural gas which are not producing due to lack of available transportation facilities,
available markets or other reasons.



“State” or “PNG”means the Independent State of Papua New Guinea.



“Sweet/sour crude”
Sweetness describes the degree of a given crude's sulfur content. Sour crudes are high in sulfur, sweet crudes are low.



“Working interest”
means the percentage of undivided interest held by InterOil in an oil and natural gas property.



“YBCA” means the Business
Corporations Act (Yukon Territory).



Annual Information Form   INTEROIL CORPORATION     8







CORPORATE
STRUCTURE








Name, Address and Incorporation



InterOil Corporation is a Yukon Territory
corporation, continued under the YBCA on August 24, 2007. In November 2007, InterOil amended its articles to authorize 1,035,554
Series A Preferred Shares, none of which are outstanding.



|Our registered office
        in Canada is located at:
        
        Suite 300,204 Black Street
        Whitehorse, Yukon
        Y1A 2M9 | Our corporate office
        in Australia is located at:
        
        Level 3, Cairns Square,
        42 – 52 Abbott Street, Cairns,

Queensland 4870 | Our corporate office
        in Papua New Guinea is located
        at:
        
        Level 2, Ravalien Haus,

Harbour
        City Port Moresby NCD,
|-------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                             |                                                                                                                                                           |                                                                                                                                                         
|Our office in Singapore is located
        at:                                                                                               | Our corporate office in the United
        States is located at:                                                                                          |                                                                                                                                                         
|                                                                                                                                             |                                                                                                                                                           |                                                                                                                                                         
|28-01 Suntec Tower One
        7 Temasek Boulevard,
        Singapore 038987                                                                 | 25025 I-45 North
        Suite 420,
        The Woodlands, Texas 77380                                                                                    |                                                                                                                                                         



Copies of the Company’s current
articles and by-laws are available on SEDAR at www.sedar.com.



Inter-corporate Relationships



Inter-corporate relationships with and among
all of our subsidiaries as at the date of this AIF are set out in the diagram below.







Annual Information Form   INTEROIL CORPORATION     9







GENERAL
DEVELOPMENT OF THE BUSINESS








Three Year History



We are developing a vertically
integrated energy company operating in Papua New Guinea and the surrounding Southwest Pacific region. The following is a summary
of significant events in the development of our businesses and corporate activities over the past three years.



Upstream – Exploration
and Production



Our Upstream business segment has focused
primarily on the development program for the Elk and Antelope fields in Papua New Guinea. The Elk and Antelope fields are onshore
gas fields with significant contingent resources, and are held within the retention license granted to us by the State, PRL 15.
The development and production of hydrocarbons from these fields will require a PDL to cover the wells, infield pipelines and
gas processing and condensate stripping plant. The commercialization of the hydrocarbons will require the construction of pipelines,
a gas liquefaction facility and marine export facilities in order to process and transport the produced hydrocarbons to market.
We have commenced the construction of certain infrastructure such as roads, wharves, warehouses and camps to support the proposed
appraisal and development drilling in the Elk and Antelope gas fields.



We also undertook exploration activities
in our three exploration licenses, PPL 236, PPL 237 and PPL 238 in the year ended December 2011. These exploration activities
involved a regional airborne geophysical survey, various seismic surveys across a number of prospects and preparation for drilling
of our next appraisal well, Triceratops 2, which was spudded in mid-January 2012.



Elk and Antelope Gas Fields Appraisal



During 2009 and 2010, we continued efforts
to appraise and develop the Elk and Antelope fields. In this period we completed drilling and logging activities on the Antelope
2 well which was plugged and suspended for future work over as a producer. The well was spudded on July 27, 2009. The well satisfied
the well commitment for the PPL 237 license required for that year.



In September 2009, a 100 kilometer two
dimensional seismic program to appraise the Antelope field was commenced and recording of seismic data was completed. The data
was processed with results available in January 2010 and subsequently interpreted.



A high rate flow test was performed in
late November to early December 2009 to confirm deliverability. This flow test recorded a flow rate of 705 mmscfd which rate yields
11,200 bbls of condensate per day. Subsequent to this flow test, DST 2 was performed. This DST confirmed gas and condensate with
a stabilized CGR of over 20 bbl/mmscf. The well was then drilled to 2,365 metres and DST 3 was carried out over the interval 2,320
metres to 2,365 metres. The result of DST 3 along with the data acquired during the logging operations helped us to establish
the hydrocarbon water contact in the reservoir at approximately 2,224 metres.



On February 9, 2010, we acquired a second
larger drilling rig for approximately $4.5 million with additional costs incurred for the inspection, packaging and transportation
of the rig. This rig was acquired for the purpose of drilling further appraisal wells in the Elk and Antelope fields.



On November 30, 2010, we were granted
PRL 15, covering blocks including and surrounding the Elk and Antelope fields, unifying them into a single license separate from
our exploration acreage and specifying minimum work commitment activities over the next five years.



Participation Interests



During the third quarter of 2009, Pac
LNG acquired a 2.5% direct working interest in gas and condensate in the Elk and Antelope fields for $25.0 million, pursuant to
an option granted to it in 2007. As part of the transaction, Pac LNG was required to pay us its 2.5% share of certain historical
exploration costs and transfer to us 2.5% of its ultimate economic interest in PNG LNG, the joint venture company with which we
are pursuing the LNG Project with Pac LNG. Subsequent to the grant of PRL15 over the Elk and Antelope fields, an application for
the transfer of a 2.5% interest in that license to Pac LNG was submitted to the PNG Department of Petroleum and Energy, and was
approved in December 2011.



Annual Information Form   INTEROIL CORPORATION     10







On December 15, 2009, we completed an
exchange of certain indirect participation interests held by a number of IPI holders under the IPI Agreement. Pursuant to this
exchange, we acquired each such IPI holder’s relevant pro rata right, title and interest in, to and under the IPI Agreement
and in any future discoveries. The participation interests acquired totaled 4.8364% working interest of the Elk and Antelope fields,
and their respective interests in four exploration wells still to be drilled under the IPI Agreement. In exchange for these interests,
we issued 1,344,710 common shares to the participating investors, having an aggregate value of $62.9 million when issued.



On July 19, 2010 and December 16, 2010,
we completed additional exchanges of certain indirect participation interests for a combined total of 1.45% of IPI interests,
also held under the IPI Agreement. In exchange for these interests, we issued 754,788 common shares to those investors having
an aggregate value of $50.7 million when issued.



As a result of these transactions, our
current interest in our exploration licenses is 75.6114%, assuming that all remaining IPI investors exercise their working interest
rights in such licenses but not taking into account the interests that the State is able to exercise under relevant legislation.



At the end of 2011, we agreed with Petromin
that the Investment Agreement we entered into in 2008 was no longer valid or intended to operate and should terminate. The agreement
provided for Petromin to take a direct interest in the Elk and Antelope fields and fund 20.5% of the costs of their development,
if certain conditions were met. Petromin remains the State’s nominee to acquire this interest under relevant Papua New Guinean’s
legislation, once a PDL is granted. We have proposed to Petromin that cash contributions made by Petromin under the Agreement
to fund development, amounting to approximately $15.4 million, be held and credited against the State’s obligation to refund
its portion of such costs upon grant of the PDL. (SeeMaterial Contracts – Investment Agreement dated October
30, 2008”).



Condensate Stripping Project



In the first quarter of 2010, the pre-FEED
phase for the development of condensate stripping facilities was completed, and on April 15, 2010 we entered into a preliminary
works joint venture and a preliminary works financing agreement with Mitsui to commence FEED work.



On August 4, 2010, we entered into a definitive
Joint Venture Operating Agreement ("CSP JV") (see “Material Contracts”) for the CS Project with Mitsui,
which agreement replaced the preliminary agreement entered into in April 2010. The capital cost for the condensate stripping facility
was then estimated at $550.0 million, with approximately $32.0 million of this to be expended for FEED. Under the CSP JV, Mitsui
is responsible for arranging or providing financing for the capital costs of the CS Project in the event that a positive FID is
made in respect of the CS Project. An option deed was also executed with Mitsui under which Mitsui was granted an option to acquire
up to 5% of the Elk and Antelope fields, and in our proposed liquefaction facilities. Mitsui paid $6.3 million in exchange for
this option, with such amount to be refunded in the event that positive FID is not reached by the agreed upon date and the option
is not exercised. An adjustment is to be made against the final acquisition price in the event the option is exercised.



During 2011, the FEED work was carried
out. The FEED phase generated deliverables to technically and commercially define the project and prepare it for execution (detailed
engineering, procurement, construction, fabrication, commissioning, and hand-over to operations) and proposals were solicited
from potential EPC contractors. We are continuing the planning and preparation efforts for execution of the CS Project, which
efforts include detailed project execution plan, execution schedule and risk assessment work.



At the end of 2011, agreement was reached
with Mitsui to extend the target date for FID on the CSP Project until March 31, 2012.



Exploration Activity



In December 2009, we agreed on terms to
divest our 15% non-operated interest in PPL 244 to an unrelated third party, an offshore block in the Gulf of Papua, in exchange
for $2.1 million. The divestment was made to allow us to focus our efforts on our core assets, being the Elk and Antelope fields
and exploration within PPL’s 236, 237 and 238. This divestment was approved by the State and finalized in October 2010.



Annual Information Form   INTEROIL CORPORATION     11







Between the third quarter of 2009 and
the first quarter of 2011, we completed the acquisition, processing and interpretation of 100 kilometres of seismic data from
the Antelope structure and also completed two phases of two dimensional seismic data acquisition and processing over the former
Bwata gas field, now understood to be and renamed as the Triceratops gas field (PPL 237), and the Wolverine prospect (PPL 238).
The second phase of this program focused on further delineation of the Triceratops field and the Wolverine structure. At the end
of 2010, the initial preparatory work on a seismic program for PPL 236 was advanced.



The PPL 237 phase three Bwata/Triceratops
field seismic data acquisition program, which included four lines for a total of 50 kilometres, was acquired during April to August
2011. This program increased our total seismic data acquisition over the Bwata/Triceratops field to 140 kilometers in eleven lines.
The objective of the program was to investigate the structure, seismic character and the aerial closure of the Triceratops gas
field.



After the interpretation of the new seismic
data, a review of the field was completed. Following that, the conclusion was reached that the Triceratops-1 well lies in the
same zone, the same pool and the same field as the Bwata -1 well which was drilled over 40 years ago. As a result, the field was
renamed the Triceratops field.



The PPL 236 phase 1 exploratory seismic
data acquisition program, which included 70 kilometers with six dip lines transecting the Whale, Tuna, Barracuda, Wahoo, Mako
and Shark prospects, was completed during the first quarter of 2011. Processing and interpretation of this first phase of seismic
data has been completed, and the Wahoo/Mako leads (PPL 236) and the Tuna lead (PPL 236 and PPL 238) have been selected for follow
up.



Subsequently the Kwalaha seismic data
acquisition program was activated consisting of 56 kilometres and seven dip lines. Work commenced on September 16, 2011 and was
completed on December 20, 2011. The objective of the survey was to further delineate the Wahoo and Mako prospects and identify
potential drilling locations. Processing and interpretation of the data is ongoing.



A third phase of seismic data acquisition,
which consists of two dip orientated lines totaling 21 kilometres in length over the Tuna prospect, commenced on December 22,
2011. Line preparation is currently in progress.



Wells in both PPL 236 and PPL 238 are
required to be drilled by March 2013 in order to meet our license commitments. Seismic data acquisition and interpretation programs
have been designed with a view to determining, amongst other things, the proposed location of these wells.



In 2011, we acquired an airborne magnetic,
gravity and gamma ray survey over PPL 236, PPL 237 and PPL 238. A total of five (5) acquisition blocks were acquired with a combined
a total of 1,428,876 line kilometres of airborne data. Data processing of this airborne data is currently undergoing final quality
control.



The preparation of the Triceratops 2 well
site was completed at the end of 2011 and the Triceratops 2 well was spudded on January 15, 2012. The Triceratops 2 well is an
appraisal well to test the presence of hydrocarbons and determine whether a potential reefal carbonate reservoir exists in the
Triceratops field.



Midstream – Refining
segment



Over the three year period ended December
2011, our refining business unit has continued to process regionally sourced low sulphur crudes through the CDU at a rate sufficient
to meet domestic PNG demand for middle distillate products (diesel & jet fuel) supplied from the refinery, with occasional
exports of ships bunkers. The Naphtha and LSWR that is consequentially produced has been exported into the regional market via
spot and term contracts, although small amounts of LSWR are sold domestically in PNG.



For operational reasons, the CRU has remained
out of service since March 2010. Prior to this shutdown, it had operated generally on a batch processing basis to meet domestic
PNG demand for gasoline. It is anticipated that the CRU will be re-commissioned and returned to service during 2012, upon the
successful conclusion of major maintenance and catalyst regeneration.



If, for operational reasons, we are unable
to satisfy demand from refinery production we import finished products. Due to the continued shutdown of the CRU, the majority
of gasoline we have sold during the period has been imported. During the fourth quarter of 2010, we undertook major turnaround
maintenance on the CDU. Other than imports resulting from this scheduled event, our imports of middle distillates have been minimal
and have not significantly affected our crude throughput.



Annual Information Form   INTEROIL CORPORATION     12







We continue to source our crude through
a supply agreement with BP. Under this Agreement, we negotiate directly with crude producers and sellers for the purchase of crude.
However, the purchases are completed under our arrangements with BP and the subsequent shipments employ BP’s shipping infrastructure.
There has been a natural decline in production of some of our preferred crude feedstock over the past three years and diversification
of our crude feedstocks has been an important part of our crude acquisition strategy. We have introduced four new feedstocks to
the refinery over the past three years, including our first West African crude. During 2011, we also concluded certain term purchase
agreements for some of our preferred crudes for the 2012 year.



Whilst regional hydro skimming margins
have suffered, particularly in 2011, our Import Parity Price ("IPP") for products sold domestically affords us some
protection from the low industry margins. Conversely, the IPP serves to restrict increases to our margin when margins are otherwise
subject to upwards pressure. The IPP price formula has remained unchanged throughout the three year period, however, the changes
agreed in late 2007 and early 2008 still remain to be formalized in our Project Agreement. (See “Material Contracts –
Refinery Project Agreement”, and see “Risk Factors – There is uncertainty associated with the regulated prices
of which our products are sold by our refinery”).



In 2010, our sales of middle distillates
increased by 7% over 2009, then again in 2011 by a further 8% over 2010 volumes. These increases are primarily due to increased
demand driven by resources projects in PNG. These increases have occurred in an environment where there has been continued importation
of refined products by certain industry participants which we believe is contrary to our agreement with the State (see “Material
Contracts – Refinery Project Agreement”, and see “Risk factors – Our downstream competitors
have progressively increased their direct importation of refined petroleum products rather than sourcing from the refinery”).



During 2011, there were seven export cargoes
of Naphtha averaging approximately 28,506 metric tons each for a total of approximately 200,000 tonnes or 1.8 million bbls. The
production of Naphtha at the refinery is variable and depends on the composition of the crude feedstock used, the relative economics
for gasoline and Naphtha, and our ability (hampered during 2011 by our inability to operate the CRU) to convert Naphtha to gasoline.
Also during 2011, there were seven export cargoes of LSWR totaling approximately 720,571 bbls under a combination of both spot
and term arrangements that will continue into 2012. During November 2009, we made an export sale of diesel and gasoline to the
Pacific Island of Nauru. We made 3 additional export sales of diesel and gasoline to Nauru in 2010 and no export sales of diesel
or gasoline in 2011.



During 2011, our total throughput per
day (excluding shut down days) was 24,856 bblspd versus 24,682 bblspd in 2010 and 21,155 bblspd in 2009. The total number of barrels
processed into product at our refinery for 2011 was 6.73 million compared with 6.71 million for 2010, and 5.72 million in 2009.
During 2011, our refinery was shut down for a total of 82 days, versus 81 days in 2010 and 80 days in 2009.



During 2011, management received results
of an independent assessment of the potential asset retirement obligations of the refinery at the time of decommissioning and
a provision for $4,100,735 has been recognized for this. The provision as at December 31, 2011 was $4,562,269. This decommissioning
provision represents the net present value of the estimated costs of future dismantlement, site restoration and abandonment of
properties based upon current regulations and economic circumstances as at December 31, 2011.



Midstream – Liquefaction
segment



On December 23, 2009, the LNG Project
Agreement between the State and LNGL was executed. The agreement contains provisions for development of the LNG Project, including
development plans for the pipeline infrastructure required to deliver gas from our Elk and Antelope fields, established the fiscal
and taxation regime to be applied to the LNG Project for a twenty year period and provided for the acquisition by the State, through
its nominee, of an interest totaling up to 20.5% of the equity in the LNG Project. A further 2% ownership stake is expected to
be assumed by directly affected landowners. The obligations under the agreement are contingent upon the finalization of certain
additional agreements, the LNG Project obtaining certain approvals and authorizations, obtaining leases for required land, certain
initial and conditional agreements, passage of enabling legislation and FID. The LNG Project Agreement provides for a FID sunset
date to occur in mid-2013.



On September 28, 2010, we, together with
LNGL, signed a heads of agreement with Energy World Corporation Ltd. (“EWC”) to construct a modular land-based LNG
plant in the Gulf Province of Papua New Guinea. On February 2, 2011, the parties signed certain initial and conditional agreements
(a Project Funding and Construction Agreement and a Shareholders Agreement) governing the parameters in respect of the aforementioned
development, construction, financing and the operation of a planned three million tonne per annum (“mtpa”) land-based
modular LNG plant. We intend to develop the LNG plant in two initial phases; 2 mtpa followed immediately by a 1 mtpa expansion.
Commercial and certain contractual terms relating to the 3 mtpa plant have been largely defined with the execution of these two
agreements. In return for its commitment to fully fund the construction of the LNG plant EWC is to be entitled to a fee of 14.5%
of the proceeds from LNG revenue from the LNG plant, less agreed deductions, and subject to adjustments based on timing and execution
for a 15 year period. The agreements with EWC contemplate the negotiation of further definitive agreements and are conditional
on, amongst other things, reaching FID to proceed with the LNG plant by March 31, 2012. We can provide no assurances that we will
reach FID by this date, that this date will not be further extended or that we will enter into unconditional or other definitive
agreements with EWC.



Annual Information Form   INTEROIL CORPORATION     13







On April 11, 2011, we and Pac LNG entered
into certain conditional framework agreements with FLEX LNG and Samsung Heavy Industries for the proposed construction of a 1.8
mtpa or 2 mtpa fixed-floating liquefied natural gas vessel. Such a vessel is expected to integrate with and augment the land-based
modules to be developed with EWC. The framework agreements provided that the parties were to undertake project specific FEED work
and negotiate final binding agreements in time for a FID decision in mid-December 2011. Project specific FEED work was carried
out. However, as FID was not reached by mid-December 2011, these framework agreements with FLEX LNG and Samsung lapsed and were
not extended. We are continuing to negotiate with FLEX LNG. Additionally, under the framework agreement we entered into with FLEX
LNG, an equity purchase option was granted to InterOil to acquire common shares in FLEX LNG at an average strike price of 4.5909
Norwegian Kroner. On May 16, 2011, this option was exercised, and we acquired 8,938,913 common shares of FLEX LNG at a cost of
$7.5 million.



During the 2011 year, site-specific engineering
for the land based modular LNG and fixed-floating LNG facilities were undertaken along with other pre-investment in the LNG Project
to lower bidder risks and to secure our LNG Project timeline and costs.



On June 21, 2011, our Board approved capital
expenditures on certain critical steel infrastructure ahead of FID on our LNG Project in order to help preserve the proposed schedule
and take advantage of advantageous steel pricing. A total of up to $100.0 million was authorized for condensate and processed
gas line pipe, and other required items with long lead times.



The PNG Government’s Minister for
Petroleum and Energy and the Secretary of his department issued certain press releases and correspondence during 2011 asserting
that our development of the LNG Project may not, were it to continue without amendment to its current form, be in compliance with
the terms of the LNG Project Agreement signed with the State in December 2009, and would not be approved by the State. We have
provided appropriate assurances to the PNG Government in relation to the development of this project and are continuing to work
with the PNG Government and its relevant departments in relation to our development plans for the Elk and Antelope fields and
the LNG Project. Additionally, the constitution of the PNG Government became a matter of dispute during 2011 and remains so. National
elections are expected to take place in mid-2012. We can provide no assurance that the PNG Government will approve our development
plans as they are currently constituted.



In September 2011, we retained Morgan
Stanley & Co.LLC, Macquarie Capital (USA) Inc. and UBS AG as joint financial advisors to assist us with soliciting and evaluating
proposals from potential strategic partners. Proposals are being solicited to obtain an internationally recognized LNG operating
and equity partner for development of the LNG Project’s gas liquefaction and associated facilities in the Gulf Province
of Papua New Guinea, which may include a sale of an interest in the Elk and Antelope fields, and in our other exploration tenements
in Papua New Guinea.



On August 3, 2011, we signed a Heads of
Agreement with Noble Clean Fuels Limited, a wholly owned subsidiary of Noble Group Limited, for the supply of one mtpa of LNG
per annum from the LNG Project for a ten year period beginning in 2014. Definitive, binding agreements are currently being negotiated.
We can provide no assurances that we will finalize and enter into such agreements.



In addition, on November 25, 2011, a Heads
of Agreement was signed with Gunvor Singapore Pte. Ltd for the supply of an additional one mtpa of LNG from the LNG Project. On
December 2, 2011, a further Heads of Agreement was signed with ENN Energy Trading Company Ltd of China, for the supply of one
to one and one half mtpa of LNG from the LNG Project. The Heads of Agreement, while not binding, provides exclusivity on the LNG
volumes, during negotiation of the definitive agreement, and sets out the basis upon which the parties intend to negotiate and
document terms for the purchase and sale of LNG, for a period of 15 years, commencing in 2015. We can provide no assurances that
we will finalize and enter into such agreements.



Annual Information Form   INTEROIL CORPORATION     14







Downstream – Wholesale
and Retail Distribution



As of December 31, 2011, we provided petroleum
products to 52 retail service stations with 42 operating under the InterOil brand name and the remaining 10 operating under their
own independent brand. Of the 52 service stations that we supply, 16 are either owned by or head leased to us, which we then sublease
to company-approved operators. The remaining 36 service stations are independently owned and operated. Three new retail sites
were identified and we expect to develop these sites during the 2012 and 2013 financial years. We supply products to each of these
service stations pursuant to distribution supply agreements. We also provide fuel pumps and related infrastructure to the operators
of the majority of these retail service stations that are not owned or leased by us under cover of equipment loan agreement.



In 2009, we entered into our first direct
chartering shipping arrangement with the owner of a fuel transport vessel which resulted in us being able to direct vessel movements
rather than co-ordinate shipping with other distributors. During 2010, a second vessel was directly chartered and we now directly
manage all our sea freight movements of fuel within Papua New Guinea. Increased demand for fuel has led to our planning for the
chartering of a larger vessel during 2012, to replace the second vessel chartered in 2010.



In November 2010, the ICCC completed its
review of the pricing arrangements for petroleum products in PNG. The purpose of the review was to consider the extent to which
the existing regulation of price setting arrangements at both wholesale and retail levels should continue, or be revised for the
five year period ending at the end of 2014. The report recommended an increase in margins for wholesaling and certain other activities
while the retail margin is to remain the same. It also recommended some increases in monitoring industry activity in PNG. All
recommendations were implemented in 2011.



In 2011, we signed supply agreements with
several key contractors and sub-contractors associated with the Exxon Mobil LNG project, Papua New Guinea’s largest resource
project in its history to date. In addition, we re-signed supply agreements with all of our existing major customers in the agricultural,
commercial and aviation sectors for further three year terms.



Our retail business accounted for approximately
13% of our total downstream sales in 2011. Investments were made in 2010 and 2011 in new electronic systems for both pumps and
the forecourt control units to support the further development of this business.



Financing



In 2009, InterOil undertook the following
financing transactions:



| | · | During
                                                                                                               May and June 2009,
                                                                                                               the remaining outstanding
                                                                                                               8% convertible
                                                                                                               debentures (being
                                                                                                               $79.0 million principal
                                                                                                               amount issued in
                                                                                                               May 2008) were
                                                                                                               converted into
                                                                                                               an aggregate of
                                                                                                               3,159,000 common
                                                                                                               shares.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On
                                                                                                               June 8, 2009, we
                                                                                                               completed a registered
                                                                                                               direct stock offering
                                                                                                               of 2,013,815 common
                                                                                                               shares to a number
                                                                                                               of institutional
                                                                                                               investors at a
                                                                                                               purchase price
                                                                                                               of $34.98 per share,
                                                                                                               raising gross proceeds
                                                                                                               of $70.4 million.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In
                                                                                                               August 2009, 302,305
                                                                                                               of the 337,252
                                                                                                               warrants then outstanding
                                                                                                               were exercised
                                                                                                               and converted into
                                                                                                               common shares at
                                                                                                               an exercise price
                                                                                                               of $21.91. All
                                                                                                               remaining unexercised
                                                                                                               warrants lapsed
                                                                                                               on August 27, 2009
                                                                                                               in accordance with
                                                                                                               their terms.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our
                                                                                                               working capital
                                                                                                               facility with BNP
                                                                                                               Paribas was renewed
                                                                                                               for the existing
                                                                                                               limit amount of
                                                                                                               $190 million for
                                                                                                               a period of 15
                                                                                                               months expiring
                                                                                                               at the end of December
                                                                                                               2010.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | In
                                                                                                               October 2009, we
                                                                                                               renewed our revolving
                                                                                                               working capital
                                                                                                               facility with BSP.
                                                                                                               The existing facility
                                                                                                               had a facility
                                                                                                               limit of 70.0 million
                                                                                                               Kina (approximately
                                                                                                               $26.5 million).
                                                                                                               However, on renewal,
                                                                                                               the facility limit
                                                                                                               was reduced to
                                                                                                               50.0 million Kina
                                                                                                               (approximately
                                                                                                               $18.9 million).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





In 2010, InterOil undertook the following
financing transactions:





| | · | In
                                                                                                               August 2010, we
                                                                                                               entered into a
                                                                                                               $25.0 million secured
                                                                                                               term loan bearing
                                                                                                               a 10% interest
                                                                                                               rate with Clarion
                                                                                                               Finanz.  The
                                                                                                               amount was made
                                                                                                               available in two
                                                                                                               instalments of
                                                                                                               $12.5 million and
                                                                                                               each instalment
                                                                                                               was drawn down
                                                                                                               during August 2010.
                                                                                                               The term loan facility
                                                                                                               matured on January
                                                                                                               31, 2011 and was
                                                                                                               used for upstream
                                                                                                               development and
                                                                                                               general corporate
                                                                                                               purposes. The loan
                                                                                                               was repaid out
                                                                                                               of our proceeds
                                                                                                               from $280.0 million
                                                                                                               concurrent debt
                                                                                                               and equity offerings
                                                                                                               that closed in
                                                                                                               November 2010.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Annual Information Form   INTEROIL CORPORATION     15









| | · | In
                                                                                                               October 2010, we
                                                                                                               renewed our revolving
                                                                                                               working capital
                                                                                                               facility with BSP
                                                                                                               for the existing
                                                                                                               limit of 50.0 million
                                                                                                               Kina (approximately
                                                                                                               $18.9 million).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On
                                                                                                               November 10, 2010,
                                                                                                               we closed concurrent
                                                                                                               public offerings
                                                                                                               of (i) 2,800,000
                                                                                                               common shares at
                                                                                                               $75.00 per share
                                                                                                               for $210.0 million
                                                                                                               and (ii) $70.0
                                                                                                               million aggregate
                                                                                                               principal amount
                                                                                                               of 2.75% convertible
                                                                                                               senior notes due
                                                                                                               2015, raising gross
                                                                                                               proceeds of $280.0
                                                                                                               million. 
                                                                                                               The net proceeds
                                                                                                               after deducting
                                                                                                               the underwriting
                                                                                                               discounts, commissions
                                                                                                               and estimated offering
                                                                                                               expenses were approximately
                                                                                                               $266.0 million.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our
                                                                                                               working capital
                                                                                                               facility with BNP
                                                                                                               Paribas was renewed
                                                                                                               for $220.0 million
                                                                                                               until January 31,
                                                                                                               2012.  This
                                                                                                               represented a $30.0
                                                                                                               million increase
                                                                                                               to the facility
                                                                                                               limit to allow
                                                                                                               for rising crude
                                                                                                               prices and volumes.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





In 2011, InterOil undertook the following
financing transactions:





| | · | On
                                                                                                               May 23, 2011, the
                                                                                                               BNP Paribas working
                                                                                                               capital facility
                                                                                                               agreement was amended
                                                                                                               to allow a $10.0
                                                                                                               million increase
                                                                                                               in the facility
                                                                                                               limit. Total facility
                                                                                                               limit stood at
                                                                                                               $230.0 million
                                                                                                               subsequent to its
                                                                                                               amendment. Subsequent
                                                                                                               to the year end,
                                                                                                               the facility has
                                                                                                               been extended and
                                                                                                               further amended
                                                                                                               in February 2012
                                                                                                               with the allowance
                                                                                                               of a further $10.0
                                                                                                               million increase
                                                                                                               in the facility
                                                                                                               limit to $240.0
                                                                                                               million.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In
                                                                                                               August 2011, we
                                                                                                               renewed our revolving
                                                                                                               working capital
                                                                                                               facility with BSP
                                                                                                               for the existing
                                                                                                               limit of 50.0 million
                                                                                                               Kina (approximately
                                                                                                               $23.3 million at
                                                                                                               the time of renewal)
                                                                                                               for another year.
                                                                                                               The facility will
                                                                                                               be next due on
                                                                                                               August 15, 2012.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In
                                                                                                               October 2011, the
                                                                                                               Westpac working
                                                                                                               capital facility
                                                                                                               was temporarily
                                                                                                               extended until
                                                                                                               January 2012. Subsequent
                                                                                                               to the year end,
                                                                                                               the facility was
                                                                                                               renewed for a total
                                                                                                               amount of 90.0
                                                                                                               million Kina (approximately
                                                                                                               $42.0 million).
                                                                                                               This facility is
                                                                                                               now set to expire
                                                                                                               in October 2014.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In
                                                                                                               addition to the
                                                                                                               Westpac working
                                                                                                               capital facility,
                                                                                                               subsequent to the
                                                                                                               year end in February
                                                                                                               2012, Westpac also
                                                                                                               provided us a secured
                                                                                                               term loan of $15.0
                                                                                                               million which is
                                                                                                               repayable in half
                                                                                                               yearly installments
                                                                                                               ending 3.5 years
                                                                                                               from first drawdown.
                                                                                                               InterOil Corporation
                                                                                                               is required to
                                                                                                               provide a parent
                                                                                                               guarantee supporting
                                                                                                               this additional
                                                                                                               facility.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Subsequent
                                                                                                               to the year end
                                                                                                               in February 2012,
                                                                                                               the BNP Paribas
                                                                                                               working capital
                                                                                                               facility was renewed
                                                                                                               with an increase
                                                                                                               in the overall
                                                                                                               limit of $10.0
                                                                                                               million, increasing
                                                                                                               the total facility
                                                                                                               to $240.0 million.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Management Team



During 2009 and 2010, our Board and senior
management changed as follows:





| | · | In
                                                                                                               January 2009, Mr.
                                                                                                               Anthony Poon resigned
                                                                                                               as General Manager
                                                                                                               of Supply, Trading
                                                                                                               & Risk Management.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On
                                                                                                               June 22, 2010,
                                                                                                               Mr. Edward Speal
                                                                                                               resigned from the
                                                                                                               Board and Mr. Ford
                                                                                                               Nicholson was appointed.
                                                                                                               Mr. Nicholson was
                                                                                                               also appointed
                                                                                                               to the Board’s
                                                                                                               Audit and Reserves
                                                                                                               Committees.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





During 2011, no changes occurred at Board
or executive officer levels. However, certain important appointments were made during the year. In August, the Right Honourable
Sir Rabbie Namaliu, a former Prime Minister and former Petroleum and Energy Minister of Papua New Guinea, joined us as chair of
our PNG Advisory Board, a body being formed to provide advice and assist in discussions with PNG government and departments, particularly
associated with the development of our LNG Project. Also in August, our General Manger Exploration & Production, Mr. Wayne
Hamal, left our employ and was replaced by Mr. David Holland, formerly our Chief Geologist. Mr. Holland assumed responsibility
of our upstream business segment’s exploration and field development activities. Mr. Allan Zirgulis also joined us during
that month as PNG Country Manager for our LNG Project and CS Project.



Annual Information Form   INTEROIL CORPORATION     16







BUSINESS
STRATEGY








Our strategy is to develop a vertically
integrated energy company in Papua New Guinea and the surrounding region, focusing on niche market opportunities which provide
financial rewards for our shareholders, while being environmentally responsible, providing a quality working environment and contributing
positively to the communities in which we operate. A significant current element of that strategy is to develop gas liquefaction
and condensate stripping facilities in Papua New Guinea and to establish gas and gas condensate reserves. We are aiming to pursue
this strategy by:



Developing our position as
a prudent and responsible business operator



| | · | Build
                                                                                                               on 16 years of
                                                                                                               engagement in Papua
                                                                                                               New Guinea;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Maintain
                                                                                                               a sound health,
                                                                                                               safety and security
                                                                                                               record;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Continue
                                                                                                               developing sound
                                                                                                               relationships with
                                                                                                               government, partners
                                                                                                               and stakeholders;
                                                                                                               and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Remain
                                                                                                               a significant employer
                                                                                                               in Papua New Guinea.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Maximizing the value of our
exploration assets





| | · | Manage
                                                                                                               our exploration
                                                                                                               program to minimize
                                                                                                               relinquishment
                                                                                                               at license renewal;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Use
                                                                                                               our experience
                                                                                                               in Papua New Guinea
                                                                                                               to successfully
                                                                                                               target seismic
                                                                                                               and drilling activities;
                                                                                                               and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Employ
                                                                                                               our second drilling
                                                                                                               rig to develop
                                                                                                               existing discoveries.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Monetizing our discovered
resources



| | · | Introduce
                                                                                                                                                        strategic
                                                                                                                                                        investors
                                                                                                                                                        through
                                                                                                                                                        the
                                                                                                                                                        sale
                                                                                                                                                        of
                                                                                                                                                        interests
                                                                                                                                                        in
                                                                                                                                                        the
                                                                                                                                                        Elk
                                                                                                                                                        and
                                                                                                                                                        Antelope
                                                                                                                                                        fields,
                                                                                                                                                        the
                                                                                                                                                        CS
                                                                                                                                                        Project,
                                                                                                                                                        the
                                                                                                                                                        LNG
                                                                                                                                                        Project
                                                                                                                                                        and
                                                                                                                                                        associated
                                                                                                                                                        LNG
                                                                                                                                                        off-take
                                                                                                                                                        to
                                                                                                                                                        support
                                                                                                                                                        exploration
                                                                                                                                                        and
                                                                                                                                                        development
                                                                                                                                                        activities;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Progress
                                                                                                                                                        our
                                                                                                                                                        planned
                                                                                                                                                        condensate
                                                                                                                                                        stripping
                                                                                                                                                        facilities
                                                                                                                                                        and
                                                                                                                                                        liquefaction
                                                                                                                                                        facilities
                                                                                                                                                        with
                                                                                                                                                        a
                                                                                                                                                        focus
                                                                                                                                                        on
                                                                                                                                                        accelerating
                                                                                                                                                        cash
                                                                                                                                                        flows;
                                                                                                                                                        and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Seek
                                                                                                                                                        licenses,
                                                                                                                                                        enabling
                                                                                                                                                        legislation
                                                                                                                                                        and
                                                                                                                                                        approvals
                                                                                                                                                        required
                                                                                                                                                        for
                                                                                                                                                        our
                                                                                                                                                        planned
                                                                                                                                                        developments
                                                                                                                                                        from
                                                                                                                                                        the
                                                                                                                                                        State.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Enhancing the existing refining
and distribution business





| | · | Continue
                                                                                                               growth in profitable
                                                                                                               market share in
                                                                                                               the region;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Look
                                                                                                               for added value
                                                                                                               in refining production,
                                                                                                               and improved economies
                                                                                                               of scale; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Explore
                                                                                                               improved transport
                                                                                                               efficiencies and
                                                                                                               economics.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Positioning for long term
success



| | · | Seek
                                                                                                               new opportunities
                                                                                                               in the Southwest
                                                                                                               Pacific region
                                                                                                               for future growth.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Annual Information Form   INTEROIL CORPORATION     17







DESCRIPTION
OF OUR BUSINESS








Overview



Our operations are organized into four
major business segments:





|Segments   |  | Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Upstream   |  | Exploration and Production – Explores, appraises and develops crude oil and natural
    gas structures in Papua New Guinea.  Currently developing infrastructure for the Elk and Antelope fields which includes
    condensate stripping and associated facilities, and the gas gathering and associated facilities, in connection with commercializing
    significant gas discoveries.  This segment also manages our construction business which services the development projects
    underway in Papua New Guinea.                                                                                                                                                   
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Midstream  |  | Refining – Produces refined
        petroleum products at Napa Napa in Port Moresby, Papua New Guinea for the domestic market and for export.


        Liquefaction – The LNG Project.
        Developing liquefaction and associated facilities in Papua New Guinea for the export of LNG.                                                                                                                                                                                                                                                                                                                                                                              
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Downstream |  | Wholesale and Retail Distribution– Markets and distributes refined 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.  General and administrative and integrated
    costs are recovered from business segments on an equitable basis.  This segment also manages our shipping business which
    currently operates two vessels transporting petroleum products for our Downstream segment and external customers, both within
    PNG and for export in the South Pacific region.





As of December 31, 2011, we had 756 full-time
employees in all segments, with 124 in upstream, 114 in midstream refining, 403 in downstream and 115 in corporate. Our work force
is not unionized.



UPSTREAM
- EXPLORATION AND PRODUCTION








As at December 31, 2011, we had interests
in three PPLs and one PRL in Papua New Guinea covering 3,996,453 gross acres, all of which were operated by us. PPLs 236, 237
and 238 and PRL 15 are located onshore in the Eastern Papuan Basin, northwest of Port Moresby.



On November 30, 2010, we were granted
PRL 15, covering a total of nine graticular blocks including and surrounding the Elk and Antelope fields and extracted from PPLs
237 and 238. This PRL unifies the Elk and Antelope fields into a single license and separates the fields from our exploration
acreage. The PRL has a separate minimum work program and expenditure commitment for the next five years.



The following table summarizes our interests
and on acreage currently held by InterOil as at December 31, 2011:





|License Numbers |  |  | Basin  |  |  |  | Location |  |  |  | Operator |  |  |  | InterOil
                                                                                    Registered License
Interest |   |  |  | Blocks
                                                                                    Covered |  |  |  | Acreage
                                                                                    Gross |  |  |  | Acreage
                                                                                    Net | 
|--------------- |  |  | ------ |  |  |  | -------- |  |  |  | -------- |  |  |  | ------------------------------------------------------------------------------------------------------------------------ | - |  |  | -------------------------------------------------------------------------------------------------- |  |  |  | ------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------------------------------------------------------------------------- | 
|PPL 236         |  |  | Papuan |  |  |  | Onshore  |  |  |  | InterOil |  |  |  | 100.00                                                                                                                   | % |  |  | 53                                                                                                 |  |  |  | 1,112,464                                                                                         |  |  |  | 1,112,464                                                                                       | 
|PPL 237         |  |  | Papuan |  |  |  | Onshore  |  |  |  | InterOil |  |  |  | 100.00                                                                                                                   | % |  |  | 34                                                                                                 |  |  |  | 715,648                                                                                           |  |  |  | 715,648                                                                                         | 
|PPL 238         |  |  | Papuan |  |  |  | Onshore  |  |  |  | InterOil |  |  |  | 100.00                                                                                                                   | % |  |  | 94                                                                                                 |  |  |  | 1,978,565                                                                                         |  |  |  | 1,978,565                                                                                       | 
|PRL 152         |  |  | Papuan |  |  |  | Onshore  |  |  |  | InterOil |  |  |  | 97.50                                                                                                                    | % |  |  | 9                                                                                                  |  |  |  | 189,776                                                                                           |  |  |  | 185,032                                                                                         | 
|                |  |  |        |  |  |  |          |  |  |  |          |  |  |  |                                                                                                                          |   |  |  | Total                                                                                              |  |  |  | 3,996,453                                                                                         |  |  |  | 3,991,709                                                                                       | 



1See
Petroleum License Details – Net Working Interest on PPL 236, PPL 237 and PPL 238

2An
application to transfer 2.5% interest in PRL15 to Pac LNG pursuant to an agreement entered into in 2009 was submitted to the PNG
Department of Petroleum and Energy; and was approved in December 2011.



Annual Information Form   INTEROIL CORPORATION     18







Costs incurred in relation
to Exploration and Development activities



The
following table outlines costs incurred by InterOil during the year ended December 31, 2011 for acquisitions and capital expenditure
associated with exploration and development activities.





|Nature of Cost                                               |  | Amount (US $ million) |      
|------------------------------------------------------------ |  | --------------------- | -----
|Property acquisition costs (Proved and unproved properties): |  |                       | -    
|Exploration costs                                            |  | $                     | 18.4 
|Development costs                                            |  | $                     | 107.6
|Total                                                        |  | $                     | 126.0





Additionally
the following table summarizes the results of exploration and development activities on a gross and net basis (with net costs
reflecting the cost to us, not including the portion of costs met by IPI holders, PNGDV and/or Pac LNG), as further broken down
by well type, during the year ended December 31, 2011.



|Wells   |  | Development          |       |  | Exploration        |   |       | Total                | 
|------- |  | -------------------- | ----- |  | ------------------ | - | ----- | -------------------- | 
|        |  | Gross (US $ million) |       |  | Net (US $ million) |   |       | Gross (US $ million) | 
|Gas     |  | $                    | 116.5 |  |                    | $ | 107.6 |                      | 
|Oil     |  |                      | -     |  |                    |   | -     |                      | 
|Service |  |                      | -     |  |                    |   | -     |                      | 
|Dry     |  |                      | -     |  |                    |   | -     |                      | 
|Total   |  | $                    | 116.5 |  |                    | $ | 107.6 |                      | 



During the year ended December 31, 2011,
we have commenced the construction of certain infrastructure such as roads, wharves, warehouses and camps to support the proposed
appraisal and development drilling in the Elk and Antelope gas fields. In addition, we also undertook exploration activities in
our three exploration licenses, PPL 236, PPL 237 and PPL 238. These exploration activities involved a regional airborne geophysical
survey, various seismic surveys across a number of prospects and preparation for drilling of our next appraisal well, Triceratops
2, which was spudded in mid-January 2012. No wells were drilled during the year ended December 31, 2011. The preparation of the
Triceratops 2 well site was completed at the end of 2011 and the Triceratops 2 well was spudded on January 15, 2012. The Triceratops
2 well is an appraisal well to test the presence of hydrocarbons and determine whether a potential reefal carbonate reservoir
exists in the Triceratops field.



Annual Information Form   INTEROIL CORPORATION     19







Operated License Commitments,
Terms, Expiry and Re-Application



In March 2009, PPLs 236, 237 and 238 were
extended for 5 years, with an initial term of 2 years and a subsequent 3 year term. The PPL license renewals require that we expend
the amounts set out below and drill a total of 6 wells within those license areas during the renewed license term. The first 2
year term of the license anniversaries occurred in March 2011. On May 17, 2011, the State approved our request to extend all three
licenses for the second two year term (years 3 and 4).



In January 2011, we applied for a variation
of license conditions on PPL 238 to defer the commitment to drill a well from first two year term to the second term which ends
in March 2013. The State also approved this request on May 17, 2011.



We have met all other commitments under
our licenses as of December 31, 2011.



Following are our applicable expenditure
commitments for each PPL and PRL based on the approved renewals in March 2009 and the PRL granted in November 2010:



|License |  | License Issued
for second
term on |  |  | Term     |  |        | Commitment Years 1/2( $ Millions) |      |   | Commitment Years 3/5( $ Millions) |   |      | Total License Commitment( $ Millions) |      |   | License Expiry |    
|------- |  | --------------------------------- |  |  | -------- |  | ------ | --------------------------------- | ---- | - | --------------------------------- | - | ---- | ------------------------------------- | ---- | - | -------------- | ---
|PPL 236 |  | March 27, 2009                    |  |  | 5 years  |  |        | $                                 | 5.0  |   |                                   | $ | 10.0 |                                       |      | $ | 15.0           |    
|PPL 237 |  | March 27, 2009                    |  |  | 5 years  |  |        | $                                 | 14.0 |   |                                   | $ | 34.0 |                                       |      | $ | 48.0           |    
|PPL 238 |  | March 6, 2009                     |  |  | 5 years  |  |        | $                                 | 2.0  |   |                                   | $ | 30.0 |                                       |      | $ | 32.0           |    
|PRL15   |  | November 30, 2010                 |  |  | 15 years |  |        | $                                 | 53.0 |   |                                   | $ | 20.0 |                                       |      | $ | 73.0           | (1)
|        |  |                                   |  |  |          |  | Totals |                                   |      | $ | 74.0                              |   |      | $                                     | 94.0 |   |                | $  

(1) Commitment total is for the first 5 years
only



Petroleum License Details



Net Working Interests in Licenses



Our licenses are located onshore in the
eastern Papuan Basin, northwest of Port Moresby and are largely owned by us, subject to investor elections to earn a working interest
in certain discoveries pursuant to the terms of our various indirect participation interest agreements. All properties are currently
operated by us. The State has the right under relevant PNG legislation to acquire a 22.5% interest (which includes 2% on behalf
of landowners) in any PDL, by contributing its share of exploration and development costs. Pac LNG holds a 2.5% working interest
in gas and condensate in the Elk and Antelope fields (which fields are located on PRL 15) under an agreement entered into in 2009.
The table below sets forth the working interest position in the Elk and Antelope fields, currently under PRL 15, in the event
that the State, Pac LNG and indirect participation interest holders all exercise their rights to acquire their allocated interests
in the Elk and Antelope discoveries.



|Participant            |  | Working interests * |         |   | With State
participation | 
|---------------------- |  | ------------------- | ------- | - | ------------------------ | 
|InterOil               |  |                     | 75.6114 | % |                          | 
|IPI holders            |  |                     | 15.1386 | % |                          | 
|PNGDV                  |  |                     | 6.75    | % |                          | 
|Pac LNG                |  |                     | 2.50    | % |                          | 
|State entitlement      |  |                     | 0.00    | % |                          | 
|Landowners entitlement |  |                     | 0.00    | % |                          | 
|Total                  |  |                     | 100.00  | % |                          | 

* These interests assume all existing
potential partners as at December 31, 2011 elect to participate.





Annual Information Form   INTEROIL CORPORATION     20













Petroleum Prospecting License
236



We have a 100% working interest in PPL
236, subject to potential participation and elections made by holders of indirect participation interests and the State. The license
consists of 53 graticular blocks covering an area of 4,502 square kilometres or 1,112,464 acres.



The following are the work commitments
for PPL 236 for the subsequent 2 year term, ending in March 2013:



| | · | A minimum expenditure of $ 9.85 million;
| | - | ----------------------------------------

| | · | Drill an exploration well at a location acceptable to the State; and
| | - | --------------------------------------------------------------------

| | · | Complete a thorough petroleum system and basin study in PPL 236 to determine the likely controls
on the distribution and reservoir quality of the onshore Late Oligocene to Late Miocene shallow marine reefal and shelfal carbonate
depositional systems, likely controls on the source rock quality and maturity and tectonostratigraphic influences on the timing
of the generation and expulsion of hydrocarbons, their migration, charge and preservation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Petroleum Prospecting License
237



We have a 100% working interest in PPL
237, subject to potential participation and elections made by holders of indirect participation interests and the State. The license
consists of 34 graticular blocks covering an area of 3,238 square kilometers or 715,648 acres. On November 30, 2010, a total of
four graticular blocks were excised from PPL 237 and incorporated into PRL 15.



The following are the work commitments
for PPL 237 for the two year term ending in March 2013:



| | · | Minimum expenditure of $10.0 million;
| | - | -------------------------------------

| | · | Acquire, process and interpret new seismic data focused on selecting a drilling location; and
| | - | ---------------------------------------------------------------------------------------------

| | · | Complete a thorough petroleum system and basin study to determine the likely controls on the distribution
and reservoir quality of the onshore Late Oligocene to Late Miocene shallow marine reefal and shelfal carbonate depositional systems,
likely controls on the source rock quality and maturity and tectonostratigraphic influences on the timing of the generation and
expulsion of hydrocarbons, their migration, charge and preservation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Petroleum Prospecting License
238



We have a 100% working interest in PPL
238, subject to potential participation and elections made by holders of indirect participation interests and the State. The license
consists of 94 graticular blocks covering an area of 7,922 square kilometers or 1,978,565 acres. On November 30, 2010, a total
of five graticular blocks, including the blocks in which the Elk-1 and Elk-4A gas /condensate discovery wells were drilled, were
excised from PPL 238 and incorporated into PRL 15.



Following are the work commitments for
PPL 238 for the two year term ending in March 2013:



| | · | Minimum expenditure of $ 10.0 million
| | - | -------------------------------------

| | · | Acquire, process and interpret new seismic data focused on selecting a drilling location;
| | - | -----------------------------------------------------------------------------------------

| | · | Complete thorough petroleum system and basin study to determine the likely controls on the distribution
and reservoir quality of the onshore Late Oligocene to Late Miocene shallow marine reefal and shelfal carbonate depositional systems,
likely controls on the source rock quality and maturity and tectonostratigraphic influences on the timing of the generation and
expulsion of hydrocarbons, their migration, charge and preservation; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Drill a well at a location acceptable to the State.
| | - | ---------------------------------------------------



Annual Information Form   INTEROIL CORPORATION     21







Petroleum Retention License 15



Petroleum retention licenses may be granted
to licensees of PPLs in which petroleum fields or parts of petroleum fields have been discovered to permit time for the licensee
to develop the means for commercialization of the gas discoveries. In August 2009, we applied for a PRL over the declared location
and on November 30, 2010, PRL 15 was granted by the State and was excised from of PPL 237 and PPL 238.



At the end of 2011, we still held a 97.50%
registered interest in PRL 15. However, this is subject to elections to be made by the State’s nominee to acquire a 22.5%
interest on behalf of the State and landowners, to elections by holders of certain indirect participation interests, as set out
in the table on the preceding page.



The initial period of a petroleum retention
license is for five years and further extensions of two, five year terms may be granted at the discretion of the State.



The total commitment over the first five
year term amounts to $73.0 million. Following are the work commitments for PRL15 for the first two years of this term, ending in
November 2012.



| | · | Drill 2 wells in the Elk and Antelope fields;
| | - | ---------------------------------------------

| | · | Acquire, process and interpret 100 kilometers of two dimensional seismic acquisition and complete
geoscience studies;
| | - | ---------------------------------------------------------------------------------------------------------------------

| | · | Conduct social mapping and social and economic impact studies;
| | - | --------------------------------------------------------------

| | · | Conduct commercial and marketing studies; and
| | - | ---------------------------------------------

| | · | Conduct surface and subsurface engineering studies
| | - | --------------------------------------------------

| | - | Static and dynamic reservoir modeling
| | - | -------------------------------------

| | - | Base case depletion plan
| | - | ------------------------

| | - | Surface facilities
| | - | ------------------



Petroleum Development License
(“PDL”)



In order to progress the proposed development
and commercialization of the Elk and Antelope fields, we are required to apply for and obtain a PDL from the State. Assuming that
a PDL is issued, it will replace PRL 15 and include the Elk and Antelope gas fields and additional acreage required for facilities
and pipelines. We have commenced preparation of an application for a PDL.



The application for a PDL is made to the
Department of Petroleum and Energy and must be accompanied by detailed proposals for the construction, establishment and operation
of all facilities and services for and incidental to the recovery, processing, storage and transportation of gas from the PDL area.
In addition, certain agreements and approvals from the State will need to be in place prior to the grant of the PDL including a
gas agreement defining the fiscal regime applicable to the development and providing for the State’s equity participation
in the fields amongst other things. Environmental approvals will be necessary and we will also be obliged to submit comprehensive
social mapping and landowner identifications studies of those customary landowners within the PDL area. Ministerial recognition
of landowner groups is customarily based on such reports.



Upon application, the State will undertake
a comprehensive review of the development proposals and any other incidental agreement or approval required before granting the
PDL application. Following its review, the State shall take steps to conduct a ‘forum’ as set out under the Oil
and Gas Act. The forum requires that the State co-ordinate a meeting for all affected stakeholders including the provincial,
local level governments and customary landowners with a view towards establishing a regime for the distribution of royalties and
other benefits that will arise from the commercialization of the fields.



Once all formalities are completed and
the State is satisfied, the Minister for Petroleum may grant the PDL. Should the PDL be issued, the acreage would be held subject
to; (i) periodic review provided for in PNG’s Oil & Gas Act,and (ii) to the license holders continuing to meet
commitments associated with the license grant.



Participation Agreements



In May 2003, we entered into an indirect
participation agreement with PNGDV which was amended in May 2006. Under this amended agreement, PNGDV has a 6.75% interest in eight
exploration wells. We have drilled six of these exploration wells to date.  PNGDV also has the right to participate in the
next 16 wells that follow the first eight mentioned above up to an interest of 5.75% at a cost of $112,500 for each 1% per well
(with higher amounts to be paid if the depth exceeds 3,500 meters and the cost exceeds $8,500,000).



Annual Information Form   INTEROIL CORPORATION     22







In February 2005, we entered into an agreement
with IPI holders pursuant to which the IPI holders paid us an aggregate of $125.0 million and we agreed to drill eight exploration
wells in Papua New Guinea on PPLs 236, 237 and 238. We have drilled four of the eight wells to date. Following various buybacks
and conversions, IPI holders currently hold interests totaling 15.1386% of each of these existing and future wells, including those
in the Elk and Antelope fields.



In addition, PNGEI has the right to participate
up to a 4.25% interest in 16 wells commencing from exploration wells numbered 9 to 24.  As at the end of December 31, 2011,
we have drilled 6 exploration wells since inception of our exploration program within PPL 236, 237 and 238.  In order
to participate, PNGEI would be required to contribute for each exploration well; $112,500 per 1% plus actual costs over $1.0 million
charged pro rata for each 1%.



Pac LNG holds a 2.5% direct working interest
in gas and condensate in the Elk and Antelope fields under an agreement entered into in 2009.



If a PDL is granted, investors in our participation
interest programs set out above have the right to become registered direct working interest owners by having their interest registered
on the PDL. In order to maintain their right to earn revenues from the field, the investors are required to continue to fund their
share of ongoing appraisal drilling and all subsequent work which may be required to bring the field into production.



MIDSTREAM
- REFINING



Our refinery is located across the harbor
from Port Moresby, the capital city of Papua New Guinea. Our refinery is currently the sole refiner of hydrocarbons located in
Papua New Guinea.



Jet fuel, diesel and gasoline are the primary
products that we produce for the domestic market. The refining process also results in the production of two Naphtha grades and
low sulfur waxy residue. To the extent that we do not convert the Naphtha to gasoline, we export it to the local and Asian markets
in two grades, light Naphtha and mixed Naphtha, which are predominately used as petrochemical feedstock. LSWR can be and is being
sold as fuel for power generation domestically, local bunker fuel sales with the majority exported for use in other complex refineries
as cracker feedstock or supply to other end users, including power generators.



Facilities and Major Subcontractors



Our refinery includes a jetty with two
berths for loading and discharging vessels and a road tanker loading system (gantry). Our larger berth has deep water access of
56 feet (17 metres) and has been designed to accommodate crude and product tankers with capacity up to 130,000 dwt. Our smaller
berth can accommodate ships with a capacity of up to 22,000 dwt. Our tank farm has the ability to store approximately 750,000 barrels
of crude feedstock and approximately 1.1 million barrels of refined products. We have a reverse osmosis desalination unit that
produces all of the water used by our refinery, camp and office facilities, power generation facilities that meet all of our electricity
needs, and other site infrastructure and support facilities, including a laboratory, a waste water treatment plant, staff accommodation
and a fire station.



Our refinery’s on-site laboratory
is accredited by National Association of Testing Authorities, Australia. The lab is staffed and operated by an internationally
recognized independent inspection and testing company. All crude imports and finished products are tested and certified on-site
to contractual specifications, while independent certification of quantities loaded and discharged at the refinery are also provided
by the laboratory.



Crude Supply



In December 2001, we entered into an agreement
with BP Singapore for the supply of crude feedstock to our refinery. Supply under the agreement commenced when our refinery began
operations in June 2004 and continued for 5 years until June 2009. Since this time the agreement has been renewed annually. BP
Singapore is one of the largest marketers and shippers of crude oil in the Asia Pacific region. This contract provides us with
a reliable mechanism to access and ship the majority of the regional crudes suitable for our refinery. We will continue to review
this arrangement and other options for sources of feedstock supply for our refinery and have been successful in securing other
crude supply agreements for specific regional crudes.



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Sales



Papua New Guinea is our principal market
for the products our refinery produces, other than Naphtha and LSWR. Under our 30 year agreement with the State, the State has
agreed to ensure that all domestic distributors purchase their refined petroleum product needs from our refinery, (and from any
other refinery which may be constructed in Papua New Guinea), at IPP. In general, the IPP is the price that would be paid in Papua
New Guinea for a refined product that is being imported. In late 2007, the IPP was modified, most significantly by changing the
Singapore benchmark price from the ”Singapore Posted Prices” which was no longer being updated, to ”Mean of Platts
Singapore” (”MOPS”) which is the current benchmark price for refined products in the region in which we operate.
The Project Agreement governing our relationship with the State is yet to be formally amended to reflect the revised formula which
has been in use for the last four years. (See“Material Contracts – Refinery Project Agreement”).



The major export product from our refinery
is the two grades of Naphtha. On January 1, 2010 a 12 month term agreement with Dalian Fujia Dahua Petrochemicals (“Dalian”),
which operates a petrochemical plant in China, was entered into providing for export sales of Naphtha. This contract has been renewed
subsequently and the current term agreement with Dalian runs for an 18 month period from January 1, 2011 until June 30, 2012.



Our refinery is fully certified to manufacture
and market Jet A-1 fuel to international specifications and markets this product to both domestic Papua New Guinea and overseas
airlines.



We were a net consumer of LPG until the
conversion of the main process furnaces and commissioning of the Hyundai generators which burn LSWR in 2006. With the installation
of the LSWR firing generators, heaters and boilers, plus improved facilities for recovering LPG from the reformer off-gas and increased
percentages of sweet crudes containing LPG, we are now a net producer of LPG.



Competition



Due to their favorable properties, light
sweet crudes from the Southeast Asian and Northwest Australian region are highly sought after by refiners for use as feedstock.
Therefore, there is significant competition to secure cargoes of these crude types. Due to the limited supply of light sweet crudes
and the strong competition, we are not always able to secure our first choice crudes for our refinery and are required to obtain
alternate crudes that are available.



We own the only refinery in Papua New Guinea.
While not restricted under any agreement we have with the State, we do not envision any new entrants into the refining business
within Papua New Guinea under the current market conditions. However, domestic distributors have not sourced all of their requirements
from the refinery since 2009. Excess diesel, gasoline, Naphtha and LSWR that are exported are sold subject to prevailing commodity
market conditions. Our geographical position and limited storage capacity inhibits our ability to compete with the regional refining
center in Singapore for sales of large cargo sizes. However, these same factors may also provide competitive advantages if we expand
our exports of refined products to the small and fragmented South Pacific markets.



Customers



Domestically in Papua New Guinea we sell
Jet A-1 fuel, diesel, gasoline and small parcels of LSWR to domestic distributors. Our main domestic customer is our downstream
distribution business segment, however we also distribute fuel products to Niugini Oil Company, Islands Petroleum and Exxon Mobil.



Trading and Risk Management



Our revenues are derived from the sale
of refined petroleum products. Prices for refined products and crude feedstock are volatile and sometimes experience large fluctuations
over short periods of time as a result of relatively small changes in supplies, weather conditions, economic conditions and government
actions. Due to the nature of our business, there is always a time difference between the purchase of a crude feedstock and its
arrival at the refinery and the supply of finished products to customers.



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Our refinery faces mainly two types of
market risks:



1) Flat price (or timing) risk, which results
from the time lag between crude purchases and product sales. Generally, we are required to purchase crude feedstock approximately
one to two months in advance of processing, whereas the domestic supply or export of finished products takes place after the crude
feedstock is discharged and processed.  This timing difference can lead to differences between the cost of our crude feedstock
and the revenue from the proceeds of the sale of products, due to the fluctuation in prices during the time period.



2) Crack spread (or margin) risk. Month
to month changes of crack spreads, even when pricing of crude purchases and that of product sales fall into the same month, can
affect the profitability of our refinery.



However, we can use various derivative
instruments to assist us to reduce or hedge away the risks of changes in the relative prices of our crude feedstock and refined
products.  These derivatives, which can be used to manage our price risk, can effectively enable us to manage the refinery
margin.  At the same time, this means that if the difference between our sales price of the refined products and our acquisition
price of crude feedstock expands or increases, then the benefits are limited to the margin range we have established.



The derivative instruments which we generally
use are over-the-counter swaps. Swap transactions are executed between the counterparties in the derivatives swaps market. It is
commonplace among major refiners and trading companies in Asia Pacific to use derivative swaps as a tool to hedge their price exposures
and margins. Due to the wide usage of such derivative tools in the Asia Pacific region, the swaps market generally provides sufficient
liquidity for our hedging and risk management activities. The derivative swap instrument covers commodities or products such as
jet, kerosene, diesel, Naphtha, and also crudes such as Dated Brent and Dubai. By using these tools, we actively engage in hedging
activities to manage margins.



During 2011, we participated in a number
of hedges to reduce our risks. To manage the flat price risks, we transferred crude purchases to the months of product sales by
utilizing Dated Brent time spread; we also directly sold product swaps for the months of product sales, such as selling MOPS naphtha
swaps. To manage the crack spread risk, we sold crack spread swaps, such as MOPS naphtha vs. Dated Brent swaps and MOPS Gasoil
0.5% vs. Dated Brent swaps.



MIDSTREAM
- LIQUEFACTION



We are developing, together with our partners,
an LNG Project for the construction of liquefaction facilities now being designed to be built on the coast in the Gulf Province
of PNG. The Gulf LNG Project is a staged project which we currently plan to build in 3 stages.



Stage 1 - Start up production: Has an expected
start up in 2015 of between 3 to 5 mtpa of LNG with a condensate stripping unit of 400 to 900 mmscf/d (subject
to PNG approvals).



Stage 2 – Expected Production: The
LNG Project intends to target a total of 8 mtpa LNG production to follow, with a condensate stripping facility capacity of 1,350
mmscf/d capacity.



Stage 3 – Potential Expansion Production:
The potential final ramp up will be to 11 mtpa with condensate stripping facilities reaching 1,800 mmscf/d.



We can provide no assurances that we will
obtain the financing and approvals necessary to proceed with the LNG Project in this manner, or that we will have sufficient gas
resources to support the potential expansion stage.



Other than the core liquefaction facilities,
the infrastructure being contemplated includes wells, gas gathering pipelines, condensate stripping facilities, condensate storage,
a condensate pipeline and export handling facilities, a dry gas pipeline from the Elk and Antelope fields and LNG storage and marine
export terminal.



Initial engineering design was undertaken
in relation to the LNG Project and the regulatory and taxation regime with the State was established with the execution on December
23, 2009 of the LNG Project Agreement. This agreement also provides for the participation by the State in the LNG Project, allowing
it to take up to a 20.5% ownership stake. Affected landowners are able to take an additional 2% stake.



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During 2010, we and Pac LNG, decided to
pursue the development of the LNG Project by exploring the use of a modular plant, able to be expanded incrementally from an initial
position of 2 mtpa, and to explore locating this plant in the Gulf Province rather than near our existing refinery outside of Port
Moresby. Advantages perceived with this approach include the potential acceleration of first production and reduced operational
risks.



In line with this revised approach, certain
initial conditional agreements have been entered into with EWC for development of the LNG Project. Under the terms of these agreements,
the LNG Project is intended to be developed in two initial phases, with a 2 mtpa liquefaction module to be followed immediately
by a 1 mtpa module expansion plant. In return for fully funding the construction of the liquefaction facilities, EWC is to be entitled
to a fee of 14.5% of the proceeds from LNG revenue derived from these facilities less agreed deductions, and subject to adjustments
based on timing and execution for a 15 year period. The agreements remain conditional and the parties may still elect not to proceed
with the LNG Project on the terms specified or at all.



We are also exploring employment of a floating
liquefaction vessel, to be constructed by FLEX LNG and Samsung Heavy Industries. The vessel would integrate with and augment the
land-based modules proposed by EWC. FEED work, including work specific for the LNG Project has been carried out and commercial
negotiations are being undertaken.



Infrastructure required for the LNG Project
includes a jetty and breakwater for the LNG loading facility with expansion potential, and approximately 70 miles (115 kilometers)
of pipeline from the Elk and Antelope fields to the coast. The wells and processed natural gas pipeline from the CS Project to
the coast in the Gulf Province will be the responsibility of the owners of the Elk and Antelope fields, including us and our upstream
partners.



Completion of the required LNG Project
by us and our joint venture partners and related construction will take a number of years to complete. No assurances can be given
that we will be able to construct the proposed LNG facilities or as to the timing of such construction.



At present, the LNG Project is being pursued
by us in joint venture with Pac LNG. Our interests in the project are held through an incorporated joint venture entity, PNG LNG
which in turn wholly owns those entities formed in Papua New Guinea to pursue the LNG Project. We have equal voting rights in
the entity but hold approximately 85% of the economic interest in it by means of the Class B shares we hold and under our shareholders
agreement (see “Material Contracts – LNG Project Shareholders Agreement dated July 30, 2007”). It is
intended that our interest will be reduced and Pac LNG’s and possibly other third party interest's will increase as the
LNG Project proceeds, and as Pac LNG and possibly others make certain equalizing payments, whether in response to cash calls or
as a result of sales of a strategic interest in the LNG Project.



We are currently seeking an internationally
recognized LNG operating and equity partner for the co-development of the LNG Project, which may include their acquisition of an
interest in the Elk and Antelope fields.



DOWNSTREAM
- WHOLESALE AND RETAIL DISTRIBUTION



We have the largest wholesale and retail
petroleum product distribution base in Papua New Guinea, after acquiring the fuel distribution assets of British Petroleum and
Royal Dutch Shell several years ago. This business includes bulk storage, transportation distribution, aviation, wholesale and
retail facilities for refined petroleum products. Our downstream business supplies petroleum products nationally in Papua New Guinea
through a portfolio of retail service stations and commercial customers.



Sales



The ICCC regulates the maximum prices and
margins that may be charged by the wholesale and retail hydrocarbon distribution industry in Papua New Guinea. Margins were last
reviewed by the ICCC in 2010 and will be further reviewed in 2014. We and our competitors may charge less than the maximum margin
set by the ICCC in order to maintain competitiveness.



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Supply of Products



Our retail and wholesale distribution business
distributes diesel, jet fuel, avgas, gasoline, kerosene and fuel oil as well as branded commercial and industrial lubricants, such
as engine and hydraulic oils. In general, all of the refined products sold pursuant to our wholesale and retail distribution business
are purchased from our refinery. We import the commercial and industrial lubricants, avgas and fuel oil, which constitute a small
percentage of our sales.



We deliver refined products from our refinery
to two tanker vessels we charter, which are operated by a separate corporate division. We do not own these vessels but rather lease
them on a full time charter basis. We schedule all of our own movements and deliveries on our chartered vessels. Our inland depots
are supplied by road tankers which are owned and operated by third party independent transport contractors.



Our terminal and depot network distributes
refined petroleum products to retail service stations, aviation facilities and commercial customers. We supply retail service stations
and commercial customers with petroleum products using trucks or, in the case of some commercial customers, coastal ships. We do
not own any of these shipping or trucking distribution assets. We pass transportation costs through to our customers.



Retail Distribution



We provide petroleum products to retail
service stations, both operating under the InterOil brand name and under independent brands. The service stations are either owned
by us, head leased to us with a sublease to company-approved operators, or independently owned and operated. We supply products
to each of these service stations pursuant to distribution supply agreements. Under the cover of an equipment loan agreement, we
also provide fuel pumps and related infrastructure to the operators of many of these retail service stations that are not owned
or leased by us.



Wholesale Distribution



We supply petroleum products as a wholesaler
to commercial clients and operate aviation refueling facilities throughout Papua New Guinea. We own and operate six large terminals
and six depots that we use to supply product throughout Papua New Guinea. We enter into commercial supply agreements with mining,
agricultural, fishing, logging and similar commercial clients to supply their petroleum product needs. Pursuant to many of these
agreements, we supply and maintain company-owned above-ground storage tanks and pumps that are used by these customers. More than
two-thirds of the volume of petroleum products that we sold during 2011 was supplied to commercial customers. Although the volume
of sales to commercial customers is far larger than through our retail distribution network, these product sales are at a lower
margin due to the volume rebates offered to our larger customers as a direct result of competition in this sector. Aviation customers
represented a significant proportion of our total business by volume.



Competition



Our main competitor in the wholesale and
retail distribution business in Papua New Guinea is ExxonMobil. We also compete with smaller local distributors of petroleum products.
With the decision of our competitors early in 2010 to partly import directly from overseas refineries and the consequent cessation
of the joint industry shipping arrangements, it is difficult to accurately gauge our market share. Our competitors source small
quantities from our refinery from both the refinery gantry for the Port Moresby market and by tanker vessel for the markets outside
Port Moresby. Our major competitive advantage is the large widespread distribution network we maintain with adequate storage capacity
that services most areas of PNG. We also believe that our commitment to the distribution business in Papua New Guinea at a time
when major-integrated oil and gas companies exited the Papua New Guinea fuel distribution market provides us with a competitive
advantage. However, major-integrated oil and gas companies such as ExxonMobil have greater resources than we do and could if they
decided to do so, expand much more rapidly in this market than we can.



Major Customers



We sell approximately 15% of our refined
petroleum products to a major mining project in Papua New Guinea pursuant to a wholesale distribution contract. These volumes were
contracted with narrow margins in order to provide volumes for the Midstream Refinery operations and as such, the loss of this
customer, at least in the short term, would not adversely affect the profitability of our retail and wholesale distribution business.
We entered into an additional supply agreement with a major mine in January 2010 for a two plus two year period.



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During 2011, we sold approximately 10%
of our refined petroleum products to Pacific Energy Aviation (PNG) Ltd for aviation refueling at Papua New Guinea’s international
airport in Port Moresby.



RESOURCES



We currently have no production or reserves
as defined in NI 51-101 or under the definitions established by the United States Securities and Exchange Commission.



The Elk and Antelope gas and gas condensate
fields (see “Description of Our Business”), located in Papua New Guinea and contained within PRL 15, are reservoired
in a composite trap comprising structural and stratigraphic elements consisting of a Late Oligocene to Late Miocene limestone and
carbonate.   The Elk field overlies the northern end of the Antelope field and comprises a tectonic wedge, or over thrust,
of highly fractured deep water limestone and has been penetrated by the Elk-1 and Elk-2 wells. The Antelope field has been penetrated
by the Antelope-1 and Antelope-2 wells and the reservoir consists of a dominantly shallow water reef/platform complex with a dolomite
cap with well developed secondary porosity and permeability.



An evaluation of the resources of gas and
condensate for the Elk and Antelope fields has been completed by GLJ Petroleum Consultants Ltd. (“GLJ”), an independent
qualified reserves evaluator, as of December 31, 2011, and was prepared in accordance with the definitions and guidelines in the
COGE Handbook and NI 51-101. All resources estimated for the Elk and Antelope fields are classified as contingent resources –
economic status undetermined as follows:



Gross Contingent Resources Estimate for
Gas and Condensate*



|                                        |  | Case    | 
|--------------------------------------- |  | ------- | 
|As at December 31, 2011                 |  | Low     | 
|Initial Recoverable Sales Gas (tcf)     |  | 6.47    | 
|Initial Recoverable Condensate (mmbbls) |  | 105.3   | 
|Initial Recoverable (mmboe)             |  | 1,183.6 | 



*These estimates represent
100% of the Elk and Antelope fields. InterOil currently has a 97.5% working interest in the Elk and Antelope fields.



Contingent Resource Estimate for Gas
and Condensate – Net to InterOil*



|                                        |  | Case  | 
|--------------------------------------- |  | ----- | 
|As at December 31, 2011                 |  | Low   | 
|Initial Recoverable Sales Gas (tcf)     |  | 3.79  | 
|Initial Recoverable Condensate (mmbbls) |  | 61.7  | 
|Initial Recoverable (mmboe)             |  | 693.6 | 



*These estimates are based
upon InterOil holding a 58.5988% working interest in the Elk and Antelope fields, which assumes that: (i) the State and landowners
elect to participate in the Elk and Antelope fields to the full extent provided under applicable PNG oil and gas legislation after
a PDL has been granted in relation to the Elk/Antelope field and (ii) all elections are made to participate in the Field by all
investors pursuant to relevant indirect participation interest agreements with InterOil, including to participate fully and directly
in the PDL.



Contingent resources are those quantities
of natural gas and condensate estimated, as of a given date, to be potentially recoverable from known accumulations using established
technology or technology under development, but which are not currently considered to be commercially recoverable due to one or
more contingencies. The economic status of the resources is undetermined and there is no certainty that it will be commercially
viable to produce any portion of the resources. The following contingencies must be met before the resources can be classified
as reserves:



| | · | Sanctioning of the facilities required to process and transport marketable natural gas to market.
| | - | -------------------------------------------------------------------------------------------------

| | · | Confirmation of a market for the marketable natural gas and condensate.
| | - | -----------------------------------------------------------------------

| | · | Determination of economic viability.
| | - | ------------------------------------



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Although a final project has not yet been
sanctioned, pre-FEED studies are ongoing for the LNG Project and FEED studies conducted for the CS Project as options for potential
monetization of the gas and condensate.



The “low” estimate is considered
to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities
recovered will exceed the low estimate. With the probabilistic methods used, there should be at least a 90 percent probability
(P90) that the quantities actually recovered will equal or exceed the low estimate. The “best” estimate is considered
to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities
recovered will be greater or less than the best estimate. With the probabilistic methods used, there should be at least a 50 percent
probability (P50) that the quantities actually recovered will equal or exceed the best estimate. The “high” estimate
is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining
quantities recovered will exceed the high estimate. With the probabilistic methods used, there should be at least a 10 percent
probability (P10) that the quantities actually recovered will equal or exceed the high estimate.



The accuracy of resource estimates are
in part a function of the quality and quantity of the available data and of engineering and geological interpretation and judgment.
Other factors in the classification as a resource include a requirement for more delineation wells, detailed design estimates and
near term development plans. The size of the resource estimate could be positively impacted, potentially in a material amount,
if additional delineation wells determined that the aerial extent, reservoir quality and/or the thickness of the reservoir is larger
than what is currently estimated based on the interpretation of the seismic and well data. The size of the resource estimate could
be negatively impacted, potentially in a material amount, if additional delineation wells determined that the aerial extent, reservoir
quality and/or the thickness of the reservoir are less than what is currently estimated based on the interpretation of the seismic
and well data.



THE
ENVIRONMENT AND COMMUNITY RELATIONS



Environmental Protection



Our operations in Papua New Guinea are
subject to an environmental law regime which includes laws concerning emissions of substances into, and pollution and contamination
of, the atmosphere, waters and land, production, use, handling, storage, transportation and disposal of waste, hazardous substances
and dangerous goods, conservation of natural resources, the protection of threatened and endangered flora and fauna and the health
and safety of people.



These environmental laws require that our
sites be operated, maintained, abandoned and reclaimed to standards set out in the relevant legislation. The significant Papua
New Guinea laws applicable to our operations include the Environment Act 2000; the Oil and Gas Act 1998; the Dumping of Wastes
at Sea Act (Ch. 369); the Conservation Areas Act (Ch.362); and the International Trade (Flora and Fauna) Act (Ch.391).



The Environment Act 2000 is the single
most significant legislation affecting our operations. This regulates the environmental impact of development activities in order
to promote sustainable development of the environment and the economic, social and physical well-being of people and imposes a
duty to take all reasonable and practicable measures to prevent or minimize environmental harm. A breach of this Act can result
in significant fines or penalties. Under the Compensation (Prohibition of Foreign Legal Proceedings) Act 1995, no legal proceedings
for compensation claims arising from petroleum projects in Papua New Guinea may be taken up or pursued in any foreign court.



Compliance with Papua New Guinea’s
environmental legislation can require significant expenditures. The environmental legislation regime is complex and subject to
different interpretations. Although no assurances can be made, we believe that, absent the occurrence of an extraordinary event,
continued compliance with existing Papua New Guinea laws regulating the release of materials into the environment or otherwise
relating to the protection of the environment will not have a material effect upon our capital expenditures, earnings or competitive
position with respect to our existing assets and operations, as has been the case during 2011. Future legislative action and regulatory
initiatives could result in changes to operating permits, additional remedial actions or increased capital expenditures and operating
costs that cannot be assessed with certainty at this time.



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We have outstanding loans with OPIC, an
agency of the United States Government supporting the development of our refinery. OPIC is required by statute to conduct an environmental
assessment of every project proposed for financing and to decline support for projects that, in OPIC’s judgment, would have
an unreasonable or major adverse impact on the environment, or on the health or safety of workers in the host country. For most
industrial sectors, OPIC expects projects to meet the more stringent of the World Bank or host-country environmental, health and
safety standards. OPIC systematically monitors compliance with environmental representations and non-compliance may constitute
a default under loan agreements.



More stringent laws and regulations relating
to climate change and greenhouse gases may be adopted in the future and could cause us to incur material expenses in complying
with them. Regulatory initiatives could adversely affect the marketability of the refined products we produce and any oil and natural
gas we may produce in the future. The impact of such future programs cannot be predicted.



Environmental and Social Policies



We have developed and implemented an environmental
policy which acknowledges that the principles of sustainable development are integral to responsible resource management and will
strive to minimize impacts on the physical environment. Other environmental initiatives embrace the introduction of “Environmental
Risk Analysis” for major projects in which hazards to the environment are identified, mitigating controls implemented and
a “Hazard Register” developed to monitor any residual risks. We are also developing project specific “Environmental
Management, Monitoring & Reporting Plans”, in compliance with the PNG environmental legislation and in order to monitor
our ongoing compliance and performance, we have established corporate level controls in which all “near miss and real incidents”
are reported, and investigated.



We have not adopted any specific social
policies that are fundamental to our operations. However, we are committed to working closely with the communities we operate in
and to complying with all laws and governmental regulations applicable to our activities, including maintaining a safe and healthy
work environment and conducting our activities in full compliance with all applicable environmental laws.



We have established a dedicated Community
Relations department to oversee the management of community assistance programs and to manage land acquisition related compensation
claims and payments. Our development philosophy is based on “bottom-up planning” thus ensuring that all planning and
development takes the local community into account. In relation to our midstream refining business, the department has developed
a long-term community development assistance program that benefits the villages in the vicinity of the refinery. In addition, we
have a team of officers associated with our upstream business who operate in the field and perform a wide variety of tasks. These
include land owner identification studies, social mapping management, local recruitment, liaising with landowners, recording compensation
payments to land owners and assisting in the provision of health and medical services in the areas in which our exploration activities
are conducted. Generally, the department works closely with government, landowners and the community in order to ensure that all
our activities have a minimum environmental impact and to at least maintain, and generally improve, the quality of life of the
people inhabiting the areas in which we work.



We are currently undertaking the work required
under PNG’s Oil & Gas Act and Environment Act to support an application for a PDL for the Elk and Antelope
gas fields and other related licenses which will be required for pipelines and processing facilities associated with our LNG Project.
These studies cover social mapping, social economic impact statements, land investigations and other related base line studies.
The environmental approval process is well advanced and we have engaged expert consultants to assist us with the preparation of
a detailed environmental impact statement, a project environmental management plan, a fisheries assessment report and other baseline
environmental studies. These studies are a pre-requisite to the grant of a PDL, allow us to advance the necessary planning to formulate
our proposals as to the nature and distribution of project benefits, and will assist the State in convening a forum of all interested
stakeholders at a landowner, local and provincial government level for the purpose of procuring a development agreement on benefit
sharing.



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RISK
FACTORS



Our business is subject to numerous risks
and uncertainties, some of which are described below. The risks and uncertainties described below are not the only risks facing
us. Additional risks not presently known to us or which we consider immaterial based on information currently available to us may
also materially adversely affect us. If any of the following risks or uncertainties actually occurs, our business, financial condition
and results of operations could be materially adversely affected.



Our ability to develop our
resources, including developing our planned condensate stripping or liquefaction facilities, together with associated pipelines
and common facilities, is contingent on our ability to obtain significant funding.



Our share of the cost for the construction
of liquefaction facilities will be significant, both to maintain our existing ownership interest in the joint venture or to meet
the requirements of any reduced interest in the event we sell a portion of it, and may amount to hundreds of millions of dollars.
Separate condensate stripping facilities, pipelines and common facilities will also be required at significant cost. Our existing
cost estimates, which in some cases are in early stages of development, are subject to change due to such items as scope changes,
revisions resulting from more detailed estimation work, cost overruns, change orders, delays in construction, increased material
costs, escalation of labor costs, and increased spending to maintain the construction schedule.



To fund these development projects, we
will need to pursue a variety of sources of funding besides those that we currently have planned, such as financing at the project
level and/or divestment of a portion of our interest, including through potential joint ventures with Mitsui and with EWC and through
the sell down process commissioned by us in September 2011. Our ability to obtain such significant funding will depend, in part,
on factors beyond our control, such as the status of capital and industry markets at the time financing is sought and such markets’
view of our industry and of the prospects of us and our partners at the relevant time. We may not be able to reduce our funding
obligations by selling a portion of our interest in the project on terms acceptable to us. We may not be able to obtain financing
on terms that are acceptable to us, if at all, even if our development project is otherwise proceeding on schedule. In addition,
our ability to obtain some types of financing may be dependent upon our ability to obtain other types of financing. For example,
project-level debt financing is typically contingent upon a significant equity capital contribution from the project sponsor. As
a result, even if we are able to identify potential project-level lenders, we may have to obtain another form of external financing
for us to fund an equity capital contribution to the project subsidiary. A failure to obtain financing at any point in the development
process could cause us to delay or fail to complete our business plan for our liquefaction facilities or our condensate stripping
facilities.



Our business relies in part on our
ability to negotiate definitive agreements following conditional framework agreements and heads of agreement relating to the development
of liquefaction and condensate stripping facilities, or to otherwise negotiate and secure arrangements with other entities for
such development and the associated financing thereof.



In order to operate our business,
we will need to negotiate and enter into definitive agreements with our joint venture partners under existing and future conditional
framework agreements and heads of agreement relating to the development of liquefaction and condensate stripping facilities. We
have limited experience negotiating these types of agreements. Each of these agreements is important to our business, and we cannot
be certain of entering into definitive agreements with any of these parties. If we lose our business relationships with any of
our potential collaborators for any reason, and are unable to otherwise negotiate and secure similar arrangements with other potential
collaborators, our business and prospects could be adversely affected.



We depend upon access to the
capital markets to fund our growth strategy.



As a result of the weakened global economic
situation, including the European sovereign debt crisis and the downgrading of United States government debt, we, along with all
other oil and gas entities, may have restricted access to capital, bank debt and equity, and may also face increased borrowing
costs. Although our business and asset base have not declined, the lending capacity of many financial institutions has diminished
and risk premiums have increased. As future capital expenditures will be financed out of funds generated from operations, funds
raised in the equity and debt markets, borrowings and possible future asset sales, our ability to do so is dependent on, among
other factors, the overall state of the capital markets and investor appetite for investments in the energy industry and our assets
and securities in particular.





Annual Information Form   INTEROIL CORPORATION     31







To the extent that external sources
of capital are limited or unavailable or available only on onerous terms, our ability to make capital investments and maintain
existing assets may be restricted, and our 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, we believe we have sufficient funds available to fund our refining and distribution business operations
in the normal course, but not the full development of our exploration assets, our proposed condensate stripping facilities, and
the liquefactions facilities, each of which would require significant capital. Significant capital will also be required in order
to fund additional exploration and development of the Elk and Antelope fields and meet our exploration license commitments. Failure
to obtain any financing necessary for our capital expenditure plans, including through transactions with joint venture parties
or otherwise, will likely result in delays in these activities.



Even with the agreements we
have signed to date for development of our liquefaction facilities and condensate stripping facilities, we may not be able to timely
construct and commission them.



We may not complete construction of our
liquefaction facilities or condensate stripping facilities in a timely manner within budget, or at all, due to numerous factors,
some of which are beyond our control. Factors that could adversely affect our planned construction include, but are not limited
to, the following:



| | · | our inability to finalize agreements with Mitsui, EWC, FLEX LNG and other potential joint venture
partners or proceed with them on satisfactory terms;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our inability to attract a suitable partner for the development of these
facilities on acceptable terms.
| | - | --------------------------------------------------------------------------------------------------------



| | · | uncertainties in PNG’s existing political environment and pending national
elections.
| | - | -------------------------------------------------------------------------------------



| | · | failure to obtain all required governmental and third-party permits, licenses
and approvals for construction and operation;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | our failure to enter into satisfactory agreements with contractors for construction of the facilities;
| | - | ------------------------------------------------------------------------------------------------------



| | · | failure by contractors to fulfill their obligations under construction contracts, or disagreements
with them over contractual obligations;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | our inability to obtain sufficient funding for construction of associated pipelines and common
facilities, or to develop the Elk and Antelope fields;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | · | shortages of materials or delays in delivery of materials;
| | - | ----------------------------------------------------------



| | · | cost overruns and difficulty in obtaining sufficient financing to pay for
such additional costs;
| | - | ------------------------------------------------------------------------------------------------



| | · | difficulties or delays in obtaining gas for commissioning activities necessary
to achieve commercial operability of the liquefaction or condensate stripping facilities;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our inability to finalize binding offtake agreements;
| | - | -----------------------------------------------------



| | · | weather conditions and other catastrophes;
| | - | ------------------------------------------



| | · | difficulties in obtaining a proper workforce for construction purposes, increased
labor costs and potential labor disputes;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | resistance in the local and global community to the developments due to safety,
environmental or security concerns; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | local economic and infrastructure conditions.
| | - | ---------------------------------------------



Our inability to timely complete (or complete
at all) our liquefaction facilities or our condensate stripping facilities may prevent us in part or in whole from commencing operations
with respect to those projects. Thus, as a result, we may not receive any cash revenues from these facilities on time or at all.



Annual Information Form   INTEROIL CORPORATION     32







We must obtain and maintain necessary
permits, licenses and approvals from relevant Papua New Guinea government authorities to develop our gas and condensate resources
and to develop liquefaction and condensate stripping facilities within reasonable time periods and upon reasonable terms, which
can be a costly and time consuming process.



We
do not hold title to our properties in Papua New Guinea, but hold licenses granted by the Papua New Guinea government. There can
be no assurance that we will be able to renew any of our licenses when they expire, or obtain additional licenses necessary to
develop our properties in the future. If we do not satisfy the Papua New Guinea government that we have the financial and technical
capacities necessary to operate under such licenses, or to develop and operate liquefaction or condensate stripping facilities,
such licenses may be withdrawn, or not obtained or renewed. Additionally, our ability to renew our licenses, develop our resources
and develop liquefaction and condensate stripping facilities may be dependent on our ability to secure a strategic partner for
the development of our resources and/or our proposed liquefaction and condensate stripping facilities. There are no assurances
that we will be able to obtain such a strategic partner on terms acceptable to us, or that the Papua New Guinea government will
grant us the necessary permits and approvals to develop our gas and condensate resources or to develop liquefaction and condensate
stripping facilities even if such a partner is obtained. Any such negative developments with respect to our permits, licenses or
other approvals from the Papua New Guinea government would have a material adverse effect on our ability to conduct our business.



We may not be successful in
our exploration for oil and gas.



As of December 31, 2011, we had drilled
a total of eight exploration wells and a number of appraisal wells in our licenses since the inception of our exploration program.
Of the exploration wells, we consider two to have been successful. We are drilling and plan to drill additional wells in Papua
New Guinea during the coming years in line with our commitments under our PPL’s and PRL’s. We cannot be certain that
the wells we drill will be productive or that we will recover all or any portion of the costs to drill these wells. Because of
the high cost, topography and subsurface characteristics of the areas we are exploring, we have limited seismic or other geosciences
data to assist us in identifying drilling objectives. The lack of this data makes our exploration activities more risky than would
be the case if such information were readily available.



Our exploration and development plans may
be curtailed, delayed or cancelled as a result of a lack of adequate capital funding and other factors, such as weather, compliance
with governmental regulations, price controls, landowner interference, mechanical difficulties, shortages of materials, delays
in the delivery of equipment, success or failure of activities in similar areas, current and forecasted prices for oil and natural
gas and changes in the estimates of costs to complete the plans. We will continue to gather information about our exploration acreage
and discoveries, and it is possible that additional information may cause us to alter our schedule or determine that an exploration
program or development project should not be pursued at all. You should understand that our plans regarding our exploration programs
are subject to change. We cannot assure you that our exploration activities have or will result in the discovery of any reserves.
In addition, the costs of exploration and development may materially exceed our initial estimates.



Our refinery’s financial
condition may be materially adversely affected if we are unable to obtain crude feedstocks at economic rates, or if we are unable
to secure sufficient working capital.



While we have a number of possible sources
we employ for crude supply, and our agreement with BP currently provides for the delivery of crude feedstock, we cannot assure
you that we will continue to be able to source adequate feedstock for our refinery.



Some crude oils that are suitable for use
as refinery feedstock are available in the nearby region. However, our access to these crudes and to oil sourced from farther outside
Papua New Guinea may be more limited as there are a limited number of crude oil sources currently available that are compatible
with our refinery and economic for us to refine. The number of these alternative sources is also declining. In addition, the increased
cost of oil from outside Papua New Guinea may reduce our gross profit margins and negate the operational benefits of using such
oil. We can provide no assurances that we will be able to obtain all of the oil needed to operate our refinery or that we will
be able to obtain the crude feedstocks that allow us to operate our refinery at profitable levels.



In addition, these same factors, as well
as other factors outside our control, may affect our ability to maintain our working capital or to continue to secure adequate
working capital to fund our refinery’s operations.



Annual Information Form   INTEROIL CORPORATION     33







There is uncertainty associated
with the regulated prices at which our products are sold by our refinery.



Under our refinery project agreement with
the State (See “Material Contracts – Refinery Project Agreement”), refined products produced by our refinery
are required to be sold at a defined import parity price in order for domestic distributors in Papua New Guinea to be required
to source their fuel needs from our refinery. In general, the IPP is the price that would be paid in Papua New Guinea for a refined
product that is being imported, which price is set monthly. A revised formula was established with the State during 2008 and has
been in operation since such time. Our agreement with the State has not been amended formally to capture that revised formula and
the formula we have been operating under may be subject to attempted change. The State has made certain statements indicating further
review of the formula during 2010 and 2011. It is possible that the State will refuse to maintain the project formula and that
it may seek to reduce our refining margins.



We are purchasing our crude at a fluctuating
spot market price. A primary reason for the renegotiation of the pricing formula with the State was to establish a new pricing
mechanism that will correlate more closely with the daily movements in the price of refined products and therefore the price of
crude. In the event that such pricing mechanism is not maintained there is a possibility that such misalignment between the IPP
for our products and the fluctuating market price of our supply may reduce our profit and cause us to cease operating the refinery.



Our ability to recruit and
retain qualified personnel may have a material adverse effect on our operating results and stock price.



Our success depends in large part on the
continued services of our directors, executive officers, senior managers and other key personnel. The loss of these people, especially
without sufficient advance notice, could have a material adverse impact on our business. It is also very important that we attract
and retain highly skilled personnel, including technical personnel, to manage our LNG Project and associated development plans,
to operate our refinery, execute our exploration plans and replace personnel who leave. Competition for qualified personnel can
be intense, and there are a limited number of people with the requisite knowledge and experience, particularly in Papua New Guinea
where a substantial number of our skilled personnel are required to work. Under these conditions, we could be unable to recruit,
train, and retain employees. If we cannot attract and retain qualified personnel, it could have a material adverse effect on our
business, operating results and stock price.



Our hedging activities may
result in losses.



To reduce the risks of changes in the relative
prices of our crude feedstocks and refined products, we may enter into hedging arrangements. Hedging arrangements would expose
us to risk of financial loss in some circumstances, including the following:



| | · | if the amount of refined products produced is less than expected or is not produced or sold during
the planned time period;
| | - | ---------------------------------------------------------------------------------------------------------------------------

| | · | if the other party to the hedging contract defaults on its contract obligations; or
| | - | -----------------------------------------------------------------------------------

| | · | if there is a change in the expected differential between the underlying price in the hedging agreement
and actual prices received.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



In addition, these hedging arrangements
may limit the benefit we would receive from increases in the price of our refined products relative to the prices for our crude
feedstocks.



While we believe our hedge counterparties
to be strong and creditworthy, disruptions occurring in the financial markets, the European sovereign debt crisis and the downgrading
of United States government debt could lead to sudden changes in a counterparty’s liquidity, which could restrict their ability
to perform under the terms of the hedging contract. We are unable to predict sudden changes in a counterparty’s creditworthiness
or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending
upon market conditions.



Annual Information Form   INTEROIL CORPORATION     34







Our results of operations and
financial condition may be adversely affected by changes in currency exchange rates.



Our results of operations and financial
condition may be affected by currency exchange rates. Exchange rates may fluctuate widely in response to international political
conditions, general economic conditions and other factors beyond our control. While our domestic product sales are denominated
in the Papua New Guinean currency, Kina (“PGK”), portions of our operating costs, with respect to the purchase of crude
and other imported products, and our indebtedness are denominated in US dollars. A strengthening of the US dollar versus the PGK
may have the effect of increasing operating costs while a weakening of the US dollar versus the PGK may reduce operating costs.
Additionally, a significant portion of our operating costs are denominated in Australian currency. Strengthening of this currency
against the US dollar has the effect of increasing our operating costs. In addition, since our indebtedness needs to be paid in
US dollars, a strengthening of the US dollar versus the PGK may negatively impact our ability to service our US-dollar denominated
debt. Moreover, we may have additional exposure to currency exchange risk since we may not be able to convert our PGK-based revenue
cash flow in a timely manner in order to meet our US-dollar denominated debt obligations.



Our investments in Papua New
Guinea are subject to political, legal and economic risks that could materially adversely affect their value.



Our investments in Papua New Guinea involve
risks typically associated with investments in developing countries, such as uncertain political, economic, legal and tax environments;
expropriation and nationalization of assets; war; renegotiation or nullification of existing contracts; taxation policies; foreign
exchange restrictions; international monetary fluctuations; currency controls; and foreign governmental regulations that favor
or require the awarding of service contracts to local contractors or require foreign contractors to employ citizens of, or purchase
supplies from, a particular jurisdiction.



Political conditions have at times been
unstable in Papua New Guinea, including the unresolved constitutional crisis affecting the country beginning in the final quarter
of 2011. We attempt to conduct our business pursuant to various agreements with the State, and pursuant to its laws, in such a
manner that political and economic events of this nature will have minimal effects on our operations. We believe that hydrocarbon
exploration and development, development of liquefaction and gas stripping facilities and refinery operations are in the long term
best interests of Papua New Guinea. Notwithstanding current conditions, our ability to conduct operations or exploration and development
activities is subject to changes in government regulations or shifts in political attitudes over which we have no control. Elections
of Papua New Guinea’s national government are due to occur during 2012 which may have an effect on such attitudes. There
can be no assurance that we have adequate protection against any or all of the risks described above or that present or future
administrations or government regulations in Papua New Guinea will not materially adversely affect our operations.



In addition, if a dispute arises with respect
to our Papua New Guinea operations or proposed development projects, we may be subject to the exclusive jurisdiction of foreign
courts or may not be successful in subjecting foreign persons, especially foreign oil ministries and national oil companies, to
the jurisdiction of Canada or the United States.



Title to certain of our properties,
or to properties we require for the development of our liquefaction facilities, pipelines, common facilities and condensate stripping
facilities, may be defective or challenged by third party landowner claims, and landowner action may impede access to or activity
on those properties.



Some risk exists that title to certain
properties may be defective or subject to challenge. In particular, our properties or properties we require in Papua New Guinea
could be subject to native title or traditional landowner claims, which may deprive us of some of our property rights that consequently
may have a material adverse effect on our exploration and drilling operations and our development projects. In particular, certain
Special Purpose Leases have been granted in Papua New Guinea in past years which have created uncertainty for landowners and other
leaseholders such as us. A Commission of Enquiry is being conducted into the grants of these SPL’s which is due to conclude
by April 2012. There is no guarantee that the enquiry will be finalized by this time, that its findings will be implemented, or
that it will provide certainty to us in respect of our leased and licensed rights over certain lands upon which we operate.



In addition, landowner disturbances may
occur on our properties which disrupt our business in Papua New Guinea.



Annual Information Form   INTEROIL CORPORATION     35







The implementation of new Papua
New Guinean laws or the failure for permits and approvals under existing Papua New Guinean laws to be granted in a timely fashion,
may have a material adverse effect on our operations, developments, and financial condition.



Our operations require licenses and permits
from various governmental authorities to drill wells, develop the liquefaction facilities, pipelines and condensate stripping facilities,
operate the refinery and market our refined products. We believe that we hold all necessary licenses and permits required under
applicable laws and regulations for our existing operations in Papua New Guinea and believe we will be able to comply in all material
respects with the terms of such licenses and permits based upon our current plans. However, such licenses and permits are subject
to change and there can be no guarantee that we will be able to obtain or maintain all necessary licenses and permits that may
be required to maintain our continued operations. Moreover, it is possible that new laws may be enacted in Papua New Guinea (such
as a limitation on foreign ownership of local assets) that may have a material adverse effect on our operations and financial condition.



Additional licenses and permits will be
required to allow us to develop our Elk and Antelope discoveries, planned liquefaction facilities, pipelines and our proposed condensate
stripping facilities. There can be no guarantee that we will be able to obtain such licenses and permits in a timely fashion or
at all.



We are subject to extensive laws and regulations,
including those relating to the discharge of materials into the environment, waste management, pollution prevention measures and
the characteristics and composition of gasoline and diesel fuels. If we violate or fail to comply with these laws and regulations,
we could be fined or otherwise sanctioned. Because environmental laws and regulations are increasingly becoming more stringent
and new environmental laws and regulations are continuously being enacted or proposed, the level of future expenditures required
for environmental matters could increase in the future. In addition, environmental gas laws and permits may be an obstacle to the
development of our liquefaction and condensate stripping facilities, while any major upgrades to our refinery could require material
additional expenditures to comply with environmental laws and regulations.



Our refinery has not operated
at full capacity since commencing operations and our profitability may be materially negatively affected if it continues not to
do so.



Our refinery has never operated at full
capacity for a full fiscal year, as our supplying all of Papua New Guinea’s domestic needs does not require us to operate
at such capacity. In addition, our ability to operate our refinery at its rated capacity must be considered in light of the risks
inherent in the operation of, and the difficulties, costs, complications and delays we face as the operator of, a relatively small
refinery. These risks include, without limitation, shortages and delays in the delivery of crude feedstocks or equipment; contractual
disagreements; labor shortages or disruptions; difficulties marketing our refined products; parallel importation of refined products,
political events; accidents; and unforeseen engineering, design or environmental problems. If these risks prevent us from operating
at full capacity in the future, our profitability may be negatively affected.



The project agreement with the government
of Papua New Guinea gives us certain rights to supply the domestic market in Papua New Guinea with our refined products. However,
not all domestic demand was sourced from our refinery during 2011 as some competing product has been imported and sold in Papua
New Guinea, which we believe, is in contravention of our rights.



Our refinery is rated to process up to
36,500 barrels of oil per day. We are able to fulfill the domestic market in Papua New Guinea’s demand for our products by
refining approximately 18,000 barrels of crude feedstock a day. We are currently operating the refinery at less than full capacity
due to an inability to profitably export our refined products and as a result of competing imports of finished products. Therefore,
in order to process these additional barrels of crude feedstock, we must identify markets into which we can sell our products profitably.
The operating margins currently needed for our refinery to sell refined products profitably and the cost and availability of obtaining
tankers to export our refined products limit our ability to export our refined products from Papua New Guinea. In addition, under
our current refinery configuration we are unable to export diesel and gasoline to Australia due to Australian regulations regarding
permitted sulfur and benzene content that our refined products currently do not meet.



In addition, our project agreement with
the State does not provide us with an exclusive right to supply the domestic market in Papua New Guinea. Therefore, if one or more
additional refineries are built in Papua New Guinea, our share of the domestic market will be diminished.



Annual Information Form   INTEROIL CORPORATION     36







The exploration and production,
refining and distribution businesses are competitive.



We operate in the highly competitive areas
of hydrocarbon exploration and production, refining and distribution of refined products. A number of our competitors have materially
greater financial and other resources than we possess. Such competitors have a greater ability to bear the economic risks inherent
in all phases of the industry.



In our exploration and production business,
we compete for the purchase of licenses from the government of Papua New Guinea and the purchase of leases from other oil and gas
companies. Factors that affect our ability to compete in the marketplace include:



| | · | Our access to the capital necessary to drill wells and undertake other exploration activities necessary
to retain our exploration licenses or PPL’s, and to acquire additional properties;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our ability to acquire and analyze seismic, geological and other information relating to a property;
| | - | ----------------------------------------------------------------------------------------------------



| | · | Our ability to retain and hire the personnel necessary to properly evaluate seismic and other information
relating to a property;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | · | Our ability to contract for drilling equipment;
| | - | -----------------------------------------------



| | · | The development of, and our ability to access, transportation systems to bring future production
to the market, and the costs of such transportation systems; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The standards we establish for the minimum projected return on an investment of our capital.
| | - | --------------------------------------------------------------------------------------------



We will also compete with other oil and
gas companies in Papua New Guinea for the labor and equipment needed to carry out our exploration operations and assist us with
development projects. Many of our competitors have substantially greater financial and other resources than we have. In addition,
larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily
than we can, which would adversely affect our competitive position. These competitors may be able to pay more for exploratory prospects
and productive oil and gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties
and prospects than we can. Our ability to explore for oil and gas prospects and to acquire additional properties in the future
will depend on our ability to conduct operations, to evaluate and select suitable properties, and to consummate transactions in
this highly competitive environment. In addition, most of our competitors have been operating in the oil and gas business for a
much longer time than us and have demonstrated the ability to operate through industry cycles.



In our refining business, we compete with
several companies for available supplies of crude oil and other feedstocks and for outlets for our refined products. Many of our
competitors obtain a significant portion of their feedstocks from company-owned production, which may enable them to obtain feedstocks
at a lower cost. The high cost of transporting goods to and from Papua New Guinea reduces the availability of alternate fuel sources
and retail outlets for our refined products. Competitors that have their own production or extensive distribution networks are
at times able to offset losses from refining operations with profits from producing or retailing operations, and may be better
positioned to withstand periods of depressed refining margins or feedstock shortages. In addition, new technology is making refining
more efficient, which could lead to lower prices and reduced margins. We cannot be certain that we will be able to implement new
technologies in a timely basis or at a cost that is acceptable to us.



Our proposed LNG Project faces competition,
including competing liquefaction facilities and related infrastructure, from competitors with far greater resources, including
major international energy companies. Many competing companies have secured access to, or are pursuing development or acquisition
of, liquefaction facilities to serve the same markets we intend to target. In addition, competitors have developed or reopened
additional liquefaction facilities in other international markets, which may also compete with our LNG Project. Almost all of these
competitors have longer operating histories, more development experience, greater name recognition, larger staffs and substantially
greater financial, technical and marketing resources and access to natural gas and LNG supplies than we do. The superior resources
that these competitors have available for deployment could allow them to compete successfully against our LNG businesses, which
could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.



Our downstream competitors
have progressively increased their direct importation of refined petroleum products rather than sourcing from our refinery.



During
2011, our competitors continued with their direct importation of refined petroleum products rather than sourcing from our refinery.
We believe that at least some of this competing product has been imported and distributed in Papua New Guinea in contravention
of our legal rights. Such an increase in our competitors’ importation has a negative effect on our business and could materially
affect our results from operations.



Annual Information Form   INTEROIL CORPORATION     37







If our refining margins do
not meet our expectations, we may be required to write down the value of our refinery.



The determination of our refinery’s
fair market value is highly dependent upon the difference between the sale price we receive for refined products that we produce
and the cost of the crude feedstocks used to produce those refined products. This difference is commonly referred to as refining
margin. Volatile market conditions beyond our control could cause our refining margins and resulting cash flows to fall below expectations
for extended periods. Should this occur, the refinery will become impaired and we will be required to write down the carrying value
of our refinery on our balance sheet. Any significant write down of the value of our refinery could result in our failure to meet
the financial covenants under our outstanding loan agreements.



The prices we receive for the refined products
we produce and sell are likely to continue to be subject to large fluctuations in response to relatively minor changes in the supply
of and demand for oil and a variety of additional factors beyond our control. These factors include, but are not limited to, the
condition of the worldwide economy, including the European sovereign debt crisis and the downgrading of United States government
debt, and the demand for and supply of oil, the actions of the Organization of Petroleum Exporting Countries, governmental regulations,
political stability in the Middle East and elsewhere, and the availability of alternate fuel sources. Oil and gas markets are both
seasonal and cyclical. The prices for oil will affect:



| | · | Our revenues, cash flows and earnings;
| | - | --------------------------------------



| | · | Our ability to attract capital to finance our operations, and the cost of
such capital;
| | - | ---------------------------------------------------------------------------------------



| | · | The value of our oil and gas properties;
| | - | ----------------------------------------



| | · | The profit or loss we incur in refining petroleum products; and
| | - | ---------------------------------------------------------------



| | · | The profit or loss we incur in exploring for and developing reserves.
| | - | ---------------------------------------------------------------------



There are inherent limitations
in all control systems, and misstatements due to error that could seriously harm our business may occur and not be detected.



A company’s internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with required regulations and guidelines,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material effect on the financial statements.



A control system, no
matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Changes to our internal controls,
such as our implementation of a new enterprise resource and planning system in 2010 and 2011, may enhance the likelihood of the
occurrence of these events. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.



Our operations expose us to
risks, not all of which are insured.



Our operations are subject to various hazards
common to the industry, including explosions, fires, toxic emissions, maritime hazards and uncontrollable flows of hydrocarbons
and refined products. In addition, these operations are subject to hazards of loss from earthquakes, tsunamis and severe weather
conditions. As protection against operating hazards, we maintain insurance coverage against some, but not all of such potential
losses. We may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates. In addition, losses
may exceed coverage limits. As a result of market conditions, premiums and deductibles for certain types of insurance policies
for refiners have increased substantially and could escalate further. In some instances, certain insurance could become unavailable
or available only for reduced amounts of coverage. For example, insurance carriers now require broad exclusions for losses due
to risk of war and terrorist acts. If we were to incur a significant liability for which we were not fully insured, it could have
a material adverse effect on our financial position.



Annual Information Form   INTEROIL CORPORATION     38







Third parties may default
on their contractual obligations.



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



Variable rate indebtedness
subjects us to interest rate risk, which could cause our debt service obligations to increase.



Certain of our borrowings are at variable
rates of interest and expose us to interest rate risk and we may in the future borrow additional money at variable rates. This
exposes us to interest rate risk if interest rates increase, as our debt service obligations on the variable rate indebtedness
would increase even though the amount borrowed would remain the same, and our net income would decrease. A 1% change in interest
rates in 2011 would have resulted in a $507,666 reduction in profit.



Weather and unforeseen operating
hazards may adversely impact our operating activities.



Our operations are subject to risks inherent
in the oil and gas industry, such as blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, equipment
failures including damages to our wharf facilities, pollution, and other environmental risks. These risks could result in substantial
losses due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental
damage, and suspension of operations. Our Papua New Guinea operations are subject to a variety of additional operating risks such
as earthquakes, mudslides, tsunamis, cyclones and other effects associated with active volcanoes, extensive rainfall or other adverse
weather conditions. Our operations could result in liability for personal injuries, property damage, oil spills, discharge of hazardous
materials, remediation and clean-up costs and other environmental damages. For some risks, we may not obtain insurance if we believe
the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally
are not fully insurable. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment
of which could have a material adverse effect on our financial condition and results of operations.



Significant physical effects of climatic
change have the potential to damage our facilities, disrupt our production activities and cause us to incur significant costs in
preparing for or responding to those effects.



Climate change could have an effect on
the severity of weather (including hurricanes and floods), sea levels, the arability of farmland, and water availability and quality.
If such effects were to occur, our operations have the potential to be adversely affected. Potential adverse effects could include
damages to our facilities from powerful winds or rising waters in low-lying areas, disruption of our production activities either
because of climate-related damages to our facilities in our costs of operation potentially arising from such climatic effects,
less efficient or non-routine operating practices necessitated by climate effects or increased costs for insurance coverage in
the aftermath of such effects. Significant physical effects of climate change could also have an indirect affect on our financing
and operations by disrupting the transportation or process-related services provided by midstream companies, service companies
or suppliers with whom we have a business relationship. We may not be able to recover through insurance some or any of the damages,
losses or costs that may result from potential physical effects of climate change.



Annual Information Form   INTEROIL CORPORATION     39







Compliance with environmental and
other government regulations could be costly and could negatively impact our business.



The laws and regulations of Papua New Guinea regulate
our current business.  Our operations could result in liability for personal injuries, property damage, natural resource damages,
oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages.  Failure to
comply with environmental laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures,
including the assessment of monetary penalties and the issuance of orders enjoining operations.  In addition, we could be
liable for environmental damages caused by, among others, previous property owners or operators.  We could also be affected
by more stringent laws and regulations adopted in the future, including any related to climate change and greenhouse gases, resulting
in increased operating costs.  As a result, substantial liabilities to third parties or governmental entities may be incurred,
the payment of which could have a material adverse effect on our financial condition, results of operations and liquidity. Additionally,
more stringent green house gas regulation could impact demand for oil and gas.



These laws and governmental regulations,
which cover matters including drilling, refinery and liquefaction and gas stripping operations, and environmental
protection, may be changed from time to time in response to economic or political conditions and could have a significant impact
on our operating costs.  While we believe that we are currently in compliance with environmental laws and regulations applicable
to our operations, no assurances can be given that we will be able to continue to comply with such environmental laws and regulations
without incurring substantial costs.



Our debt levels and debt covenants
and other factors may limit our future flexibility in obtaining additional financing.



At the current date, we had $26.5 million
in long-term debt with OPIC which matures in 2015, together with principal repayments due during 2012 totaling $9.0 million. We
also operate significant working capital facilities with BNP Paribas, Bank of South Pacific Limited and Westpac Banking PNG Limited,
in the amounts of $240.0 million, $23.0 million and $42.0 million, respectively, for our midstream and downstream refining businesses,
and have $70.0 million principal amount of 2.75% senior convertible notes due 2015 on issue. The level of our indebtedness will
have important effects on our future operations, including:



| | · | A portion of our cash flow will be used to pay interest and principal on
our debt and will not be available for other purposes;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | Our loan agreements and facilities contain financial tests which we must
satisfy in order to avoid a default under such credit facilities; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our ability to obtain additional financing for capital expenditures and other
purposes may be limited.
| | - | ------------------------------------------------------------------------------------------------------



Substantial capital, which may not
be available to us in the future, is required for us to complete our business plans.



We make, and will continue to make, substantial
capital expenditures for exploration, development, acquisition and production of oil and gas reserves, our proposed liquefaction
facilities and other infrastructure associated with that proposed LNG Project, our proposed condensate stripping facilities, refinery
expansions and improvements, acquisitions of distribution assets, and for further capital acquisitions and expenses. We will need
additional financing to complete our business plans. If we are unable to obtain debt or equity financing because of lower operating
returns, lower oil or gas prices, delays, operating difficulties, construction costs, lack of drilling success, the status of global
financial and credit markets, or other reasons, we may not have the ability to expend the capital necessary to undertake or complete
future drilling programs, fund development activities and to make other needed capital expenditures. There can be no assurance
that additional debt or equity financing or cash generated by operations will be available to meet these requirements.



We may be party to lawsuits
and other proceedings which may adversely affect our financial position or ability to pursue our business.



We
may be party to lawsuits and other proceedings that arise in the future. There is a risk that we will not be successful with respect
to the legal actions to which we are a party, which could have a material adverse effect on our consolidated financial position,
results of operations or cash flows, or in our ability to pursue our business strategy.



Annual Information Form   INTEROIL CORPORATION     40











You may be unable to enforce
your legal rights against us.



We are a Yukon Territory, Canada Corporation.
Substantially all of our assets are located outside of Canada and the United States. It may be difficult for investors to enforce,
outside of Canada and the United States, judgments against us that are obtained in Canada or the United States in any such actions,
including actions predicated upon the civil liability provisions of the securities laws of Canada and the United States. In addition,
many of our directors and officers are nationals or residents of countries outside of Canada and the United States, and all, or
a substantial portion of, the assets of such persons are located outside of Canada and the United States. As a result, it may be
difficult for investors to affect service of process within Canada or the United States upon such persons or to enforce judgments
against them obtained in Canadian or United States courts, including judgments predicated upon the civil liability provisions of
the securities laws of Canada or the United States.



DIVIDENDS



To date we have not paid dividends on our
common shares and currently reinvest all cash flows from operations for the future operation and development of our business. No
change to this policy or approach is intended or under consideration at the present date. There are no restrictions which prevent
us from paying dividends on our common shares. Any decision to pay dividends on our common shares in the future depend upon our
earnings and financial position (including the effect on financial ratios and covenants with our lenders) and such other factors
as the Board may consider appropriate in the circumstances.



DESCRIPTION
OF CAPITAL STRUCTURE



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 at December 31, 2011, 48,121,071 common shares were issued and outstanding. All of the series A preferred
shares that had been issued were converted into common shares during 2008 and none remain outstanding as at December 31, 2011.
We also have outstanding $70.0 million principal amount of 2.75% convertible senior notes due 2015.



Common Shares



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



Preferred Shares



Preferred shares may
at any time and from time to time be issued in one or more series, each series to consist of such number of shares as may, before
the issue thereof, be determined by unanimous resolution of the directors of InterOil. Subject to the provisions of the YBCA, the
Board may by unanimous resolution fix from time to time, before the issue thereof, the designation, rights, privileges, restrictions
and conditions attaching to each series of the preferred shares.



2.75% Convertible Senior Notes



We currently have outstanding $70.0 million
principal amount of 2.75% convertible senior notes due November 2015. The convertible notes are unsecured and unsubordinated obligations
of InterOil Corporation. The convertible notes rank junior to any secured indebtedness and to all existing and future liabilities
of our subsidiaries, including the BNP Paribas working capital facility, the OPIC secured loan facility, the Mitsui preliminary
financing agreement, trade payables and lease obligations.



Annual Information Form   INTEROIL CORPORATION     41







We pay interest semi-annually on May 15
and November 15. The notes are convertible into cash or common shares, based on an initial conversion rate of 10.4575 common shares
per $1,000 principal amount, which represents an initial conversion price of approximately $95.625 per common share. The initial
conversion price is subject to standard anti-dilution provisions designed to maintain the value of the conversion option in the
event we take certain actions with respect to our common shares, such as stock splits, reverse stock splits, stock dividends and
cash dividends, that affect all of the holders of our common shares equally and that could have a dilutive effect on the value
of the conversion rights of the holders of the notes or that confer a benefit upon our current shareholders not otherwise available
to the convertible notes. Upon conversion, holders will receive cash, common shares or a combination thereof, at our option. The
convertible notes are redeemable at our option if our share price has been at least 125% ($119.53 per share) of the conversion
price for at least 15 trading days during any 20 consecutive trading day period. Upon a fundamental change, which would include
a change of control, holders may require us to repurchase their convertible notes for cash at a purchase price equal to the principal
amount of the notes to be repurchased, plus accrued and unpaid interest.



Shareholder Rights Plan



On May 27, 2007, we adopted a rights plan
which was approved by our shareholders at the June 25, 2007 annual and special meeting of shareholders. The rights plan was re-confirmed
with certain minor amendments by our shareholders at the June 22, 2010 annual and special meeting of shareholders. The rights plan
was adopted to ensure, to the extent possible, that all shareholders of the Company are treated fairly in connection with any take-over
bid for InterOil. As long as a bid meets certain requirements intended to protect the interests of all shareholders, the provisions
of the rights plan will not be invoked. Under the provisions of the rights plan, one right has been issued for each common share
of InterOil outstanding. The rights will trade together with the common shares and will not be separable from the common shares
or exercisable unless a take-over bid is made which is not a permitted bid. The rights entitle shareholders, other than shareholders
making the take-over bid, to purchase additional common shares of InterOil at a substantial discount to the market price at the
time. Phil Mulacek, the Chairman and Chief Executive Officer of InterOil, holds a large proportion of the common shares of InterOil
and, subject to certain grandfather provisions in the rights plan, his shareholdings will not trigger its operation.



The rights plan is similar to those adopted
by other Canadian listed companies. A copy of the rights plan is available under the Company's SEDAR profile at www.sedar.com.



Options



Our 2009 Stock Incentive
Plan, authorised by our shareholders at the annual and special meeting held on June 19, 2009, that allows employees to acquire
our common shares. Option exercise prices are governed by the plan rules and equal the market price for the common shares on the
date the options were granted. Options granted under the plan are generally fully exercisable after one year or more and expire
five years after the grant date, although some have shorter vesting periods. Default provisions in the plan rules provide for immediate
vesting of granted options and expiry ten years after the grant date. Some options granted under a predecessor plan approved in
2006 also remain in effect. No further grants may now be made under this superseded 2006 plan.



As of December 31, 2011,
there were options outstanding to purchase 1,457,827 common shares pursuant to our stock incentive plans.



Restricted Stock Units



In addition to the options
noted above, our 2009 Stock Incentive Plan also allows employees to acquire our common shares pursuant to restricted stock unit
grants. As of December 31, 2011, restricted stock units entitling employees rights to 152,190 common shares were outstanding pursuant
to our stock incentive plans. The restricted stock units provided those employees with the right to receive common shares on a
one-for-one basis on certain vesting dates. Vesting dates generally occur one, two and/or more years after grant.



Other instruments Convertible
into or Exchangeable for Common Shares



We have granted IPI holders
(see “Material Contracts – Amended and Restated Indirect Participation Interest Agreement dated February 25, 2005”)
the right to convert their interests under the IPI Agreement into a certain number of our common shares. Certain investors under
that agreement have waived their conversion right. At December 31, 2011, IPI holders held rights to convert up to 340,480 common
shares remained.



Annual Information Form   INTEROIL CORPORATION     42







MARKET
FOR OUR SECURITIES



Our common
shares are listed and posted for trading on the New York Stock Exchange under the symbol IOC. We are also listed on the Port Moresby
Stock Exchange under the symbol IOC in Papua New Guinea. The following table discloses the monthly high and low trading prices
and volumes of our common shares as traded on the New York Stock Exchange during 2011:



|New YorkStock Exchange (NYSE:IOC) in United States Dollars | 
|---------------------------------------------------------- | 
|Month                                                      | 
|January                                                    | 
|February                                                   | 
|March                                                      | 
|April                                                      | 
|May                                                        | 
|June                                                       | 
|July                                                       | 
|August                                                     | 
|September                                                  | 
|October                                                    | 
|November                                                   | 
|December                                                   | 
|Total                                                      | 



Prior sales



| | · | 265,440 common shares were issued during 2011 upon the exercise of stock options by employees,
officers or directors at various prices defined by the option grant terms in accordance with relevant stock incentive plans.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 50,079 common shares were issued during 2011 upon the vesting of restricted stock units granted
to employees, officers or directors defined by the restricted stock unit grant terms in accordance with relevant stock incentive
plans.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 5,000 common shares were issued to Petroleum Independent & Exploration Corporation, a company
owned and controlled by our Chairman and Chief Executive Officer, Phil Mulacek, during 2011 in exchange for an equivalent number
of shares held by that entity in our subsidiary South Pacific Refining Limited (formerly SP InterOil LDC) at a deemed issue price
of $48.77 per share.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Annual Information Form   INTEROIL CORPORATION     43







DIRECTORS AND EXECUTIVE OFFICERS







The following table provides information
with respect to all of our directors and executive officers:





|Directors and Executive Officers                    
|----------------------------------------------------
|Name, Address                                       
|Phil E. Mulacek
        Texas, USA                  
|                                                    
|Christian Vinson
        Port Moresby, PNG          
|                                                    
|Gaylen Byker
        Michigan, USA                  
|                                                    
|Roger Grundy
        Derbyshire, UK                 
|                                                    
|Roger F. Lewis
        Western Australia, Australia 
|                                                    
|Ford Nicholson
        British Columbia, Canada     
|                                                    
|William Jasper III
        Texas, USA               
|                                                    
|Collin Visaggio
        Western Australia, Australia
|                                                    
|Mark Laurie
        South Australia, Australia      







Notes:

(1)   Gaylen
Byker acts is the Company’s Lead Independent Director and acts as Chairman of each of the Board’s Nominating and Governance
Committee and Compensation Committee and has held such positions throughout 2011. He is a member of the Audit Committee and of
the Reserves Committee. He acts as deputy Chairman of the Board and chairs a number of its meetings.

(2)   Roger
Grundy was Chairman of the Reserves Committee throughout 2011.

(3)   Roger
Lewis was Chairman of the Audit Committee, and a member of the Nominating and Governance Committee and Compensation Committee throughout
2011.

(4)   Ford
Nicholson was a member of the Audit Committee and Reserves Committee throughout 2011.

(5)   Certain information has been furnished by our directors and executive officers. Such information includes information as to
our common shares in the Company beneficially owned, controlled or directed, directly or indirectly, by them, their places of
residence and principal occupations, both present and historical, interests in material transactions and potential conflicts
of interest.



The term of office of each of the directors
of InterOil will expire at the next annual meeting of our shareholders. All executive officers generally hold office at the pleasure
of the Board.





As of February 29, 2012, our directors and executive officers
as a group beneficially owned, or controlled or directed, directly or indirectly, 4,896,898 common shares, representing 10.17%
of our outstanding issued common shares.  In addition to the common shares beneficially owned or controlled or directed, directly
or indirectly, by our directors and executive officers, 1,000,868 shares are issuable upon exercise of outstanding options and
restricted stock units, resulting in directors and executive officers holding 11.63% of our issued common shares on a diluted basis.





Our Board has established an Audit Committee,
a Compensation Committee, and a Nominating and Governance Committee. Dr. Byker and Mr. Lewis are members of each of these committees
while Mr. Nicholson is an additional member of the Audit Committee. Mr. Lewis chairs the Audit Committee while Dr. Byker is the
Chairman of each of the other two committees. In addition, the Board has established a Reserves Committee. Mr. Grundy is Chairman
of this committee while Mr. Nicholson and Dr. Byker are additional members.





Annual Information Form   INTEROIL CORPORATION     44









The following is a brief description of
the background and principal occupations of each director and executive officer at present and during the preceding five years:



Phil E. Mulacek is the Chairman
of our Board of Directors and our Chief Executive Officer. He has held these positions since InterOil’s inception. Mr. Mulacek
is the founder and President of Petroleum Independent & Exploration Corporation based in Houston, Texas. Petroleum Independent
& Exploration Corporation was established in 1981 for the purposes of oil and gas exploration, drilling and production, and
operated across the southwest portion of the United States. Petroleum Independent & Exploration Corporation led the development
of our refinery and the commercial activities that were necessary to secure the refinery's economic viability. Mr. Mulacek has
over 25 years experience in oil and gas exploration and production and holds a Bachelor of Science degree in petroleum engineering
from Texas Tech University.



Christian M. Vinson is the Executive
Vice President of InterOil responsible for Corporate Development & Government Affairs. From 1995 to August 2006, he was our
Chief Operating Officer. Mr. Vinson joined us from Petroleum Independent Exploration Corporation, a Houston, Texas based oil and
gas exploration and production company. Before joining InterOil, Mr. Vinson was a manager with NUM Corporation, a Schneider company
involved in mechanical and electrical engineering automation, in Naperville, Illinois where he established of the company’s
first office in the United States. Mr. Vinson earned an Electrical and Mechanical Engineering degree from Ecole d’Electricité
et Mécanique Industrielles, Paris, France.



Gaylen J. Byker is President of
Calvin College, a liberal arts institution of higher learning, located in Grand Rapids, Michigan. He is also a director and chairman
of the Finance and Audit Committee of Priority Health, Inc, an entity regulated by the State of Michigan Office of Financial and
Insurance Services. Dr. Byker has obtained four university degrees including a PhD in international relations from the University
of Pennsylvania and a Doctorate of Jurisprudence from the University of Michigan. Dr. Byker is a former partner of Offshore Energy
Development Corporation (“OEDC”) where he was head of development, hedging and project finance for gas exploration
and transportation projects offshore. Prior to joining OEDC, he was co-head of commodity derivatives at Phibro Energy, Inc., a
subsidiary of Salomon, Inc. and head of the commodity-indexed transactions group at Banque Paribas, New York, with worldwide responsibility
for hedging and financing transactions utilizing long-term commodity price risk management. Dr. Byker was manager of commodity-indexed
swaps and financings for Chase Manhattan Investment Bank, New York, and was also a lawyer at Morgan, Lewis & Bockius in Philadelphia,
Pennsylvania, U.S.



Roger N. Grundy is the Managing
Director of Breckland Ltd, a UK-based engineering consulting firm, and is an internationally recognized expert in the area of refinery
efficiency. Mr. Grundy has acted as a consultant to more than 200 existing refineries on six continents for major oil companies,
independents and various banks. Mr. Grundy has 40 years experience in all areas of oil refinery and petrochemical operations and
construction and holds an Honors Degree in Mechanical Engineering from University College, London. He is also a Fellow of the UK
Institute of Mechanical Engineers, a member of the American Institute of Chemical Engineers and a member of the Energy Institute.



Roger F. Lewis
is an Australian and a former senior finance executive, having spent 22 years with Woodside Energy Ltd in Western Australia, finishing
as Group Financial Controller. Prior to that he worked in commercial and finance roles for over 15 years in the heavy manufacturing
industry both in Australia and overseas. He is a Fellow Certified Practicing Accountant (FCPA) with the Australian Society of Certified
Practicing Accountants. Mr Lewis was a Commissioner of the Lottery Commission of Western Australia until his retirement earlier
this year, with particular responsibility for finance and accounting matters and as a member of the Commission’s Audit and
Major Projects committees.



Ford Nicholson is the President
of Kepis & Pobe Financial Group which specializes in developing international energy and other natural resource assets. Over
the past 25 years Mr. Nicholson has provided executive management to several international projects. He was a co-founder and Director
of Nations Energy Ltd. producing heavy oil in Kazakhstan and a founding shareholder and former board member of Bankers Petroleum
Ltd. producing heavy oil in Albania. Mr. Nicholson was also a board member of Tartan Energy Inc, a heavy oil company based in California.
Mr. Nicholson is currently the chairman of TSX listed BNK Petroleum Inc. producing and exploring for unconventional natural gas
in Europe and the USA. Ford is also on the President's council of the International Crisis Group. Mr. Nicholson resides in British
Columbia, Canada.



William J Jasper IIIis President
and Chief Operating Officer of InterOil. Mr. Jasper joined the Company on September 18, 2006 and leads the refining and downstream
businesses. Prior to joining InterOil, Mr. Jasper had worked for Chevron Pipe Line Company since 1974, serving in leadership and
management capacities over facilities, pipelines and terminals. Mr. Jasper has an extensive background in operations and maintenance.
Prior to this role Mr. Jasper had served four years as Chairman of the West Texas LPG Partnership Board of Directors. Mr. Jasper
also held positions as President and General Manager of Kenai Pipe Line Company in Alaska, and of West Texas Gulf Pipeline in Texas.



Annual Information Form   INTEROIL CORPORATION     45







Collin F. Visaggio is the Chief
Financial Officer of InterOil. Mr. Visaggio joined us in a consulting capacity on July 17, 2006 and was appointed as Chief Financial
Officer on October 26, 2006. He is a Certified Practicing Accountant with a Masters Degree in Business. He has also attended the
Stanford Senior Executive Program in management. Mr. Visaggio has 24 years of experience in senior financial and business positions
within Woodside Petroleum and BP Australia. His career has given him a broad spectrum of financial and business experience in Exploration,
Offshore Oil and Gas Development and Production, Oil Refining, LNG and Domestic Gas. Mr. Visaggio was at Woodside Petroleum from
March 1988 until July 2005, with his final position being Manager, Compliance and Business for the Africa Business Unit, and prior
position as Manager, Commercial and Planning for the Gas Business Unit. His responsibilities included the administration and management
of the business unit, financial and business processes, and governance. Prior to this and during his 17 years with Woodside, he
was Deputy Chief Financial Officer, Financial Analyst and Planning Manager within the corporate finance group. Prior to joining
InterOil, Mr. Visaggio was Chief Financial Officer for Alocit Group Ltd from July 2005 until March 2006. He also served on the
board of Santa Maria Ladies college from 2004 to March 2010, including as chairman for four of those years.



Mark Laurie is General Counsel and
Corporate Secretary of InterOil. Mr. Laurie joined us on June 12, 2007. He holds Law and Economics degrees from the University
of Adelaide in South Australia. He was admitted to practice law as a barrister and solicitor in Australia in 1991. Mr. Laurie was
also appointed a notary public in 1997. Prior to joining InterOil, and from August 2003, he was Company Secretary, General Counsel,
Manager Corporate and Investor Relations, and Manager - Town Infrastructure with Lihir Gold Limited, a Papua New Guinea gold mining
company listed in Australia, the United States and in Papua New Guinea. Mr. Laurie lived in Papua New Guinea throughout this period.
Immediately prior to working for Lihir Gold, he worked as Commercial Manager for the Electronic Systems Division of Tenix Defence
Pty Limited, a privately held government contractor specializing in high-tech electronic and computer engineering work for defence
and other applications. Between mid-1996 and December 2001, he held positions as General Counsel, Company Secretary and Vice President
of Investor Relations with F.H. Faulding and Co. Limited, an Australian based multinational pharmaceutical and health care company
listed in Australia and the United States. Prior to that Mr. Laurie worked with commercial law firms in Ottawa, Canada and Adelaide,
South Australia.



Conflicts of Interest



There
are potential conflicts of interest to which some of the directors and officers of InterOil will be subject in connection with
the operations of InterOil.  Situations may arise where some of the business activities of the directors and officers will
be in direct competition with InterOil. In particular, certain directors and officers of InterOil will be in managerial or director
positions with other oil and gas companies, whose operations may, from time to time, be in direct competition InterOil or entities
which may, from time to time, provide financing to, or make equity investments in, competitors of InterOil.  In addition,
certain of the directors have on-going relationships with other entities in respect of which InterOil has entered or may enter
into material agreements or has a business relationship. These relationships may create a real or perceived conflict of interest.



Conflicts,
if any, will be subject to the procedures and remedies in the YBCA.  The YBCA provides that a director or officer shall disclose
the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed,
if the director or officer: is a party to the contract or transaction,  is a director or an officer, or an individual
acting in a similar capacity, of a party to the contract or transaction, or has a material interest in a party to the contract
or transaction, and shall refrain from voting on any matter in respect of such contract or transaction unless otherwise provided
under the YBCA. InterOil intends to resolve all conflicts of interest in accordance with the provisions of the YBCA.



Relationships and interests which have
been disclosed as potentially giving rise to conflicts of interest include:



| | · | Mr. Grundy is a principal of Breckland Limited, which has provided technical engineering advisory
services to InterOil on customary commercial terms.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



See also under the heading “Interests
of Management and Others in Material Transactions”.



Annual Information Form   INTEROIL CORPORATION     46







AUDIT
COMMITTEE



Charter of the Audit Committee



The full text of the Charter of the Audit
Committee is attached as Schedule C to this Annual Information Form. The Charter was reviewed and revised during 2011.



Composition of the Audit Committee



The current members of the Audit Committee
are Mr. Roger Lewis, Dr. Gaylen Byker and Mr. Ford Nicholson. All held their positions throughout 2011.Mr. Lewis, Dr. Byker and
Mr. Nicholson are independent and financially literate within the meaning of NI 52-110.



Relevant Education and Experience



The relevant education and experience of
the current members of the Audit Committee is set out in detail under the heading “Directors and Executive Officers”:



This education and experience is such that
each member has an understanding of the accounting principles used by InterOil to prepare its financial statements; the ability
to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and reserves;
experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of issues raised by InterOil’s financial statements,
or experience actively supervising one or more individuals engaged in such activities; and an understanding of internal controls
and procedures for financial reporting.



Pre-Approval Policies and Procedures



The
Audit Committee is authorized and required by the Board to review, discuss and pre-approve non-audit services to be performed by
the external auditors, save where such services are subject to the de-minimis exceptions described in the U.S. Securities Exchange
Act of 1934. In the event that non-audited services are required, a documented scope and estimate are submitted by the Company’s
auditors to the Chairman of the Audit Committee who will consult with other committee members, as necessary, before providing any
approval on the Audit Committee’s behalf.



External Auditor Service Fees



PricewaterhouseCoopers, Chartered Accountants,
have served as InterOil's auditors since June 6, 2005. The following table sets forth the Audit Fees, Audit – Related Fees,
Tax Fees and All Other Fees billed by PricewaterhouseCoopers in each of the last two financial years.





|PricewaterhouseCoopers | 
|---------------------- | 
|                       | 
|Audit Fees(1)          | 
|Audit-Related Fees(2)  | 
|Tax Fees(3)            | 
|All Other Fees(4)      | 
|Total                  | 





Notes:

1.     "Audit
Fees" means the aggregate fees billed by the issuer's external auditor in each of the last two fiscal years for audit fees

2.     "Audit-Related
Fees" means the aggregate fees billed in each of the last two fiscal years for assurance and related services by the issuer's
external auditor that are reasonably related to the performance of the audit or review of the issuer's financial statements and
are not reported as Audit Fees above.

3.     "Tax
Fees" means the aggregate fees billed in each of the last two fiscal years for professional services rendered by the issuer's
external auditor for tax compliance, tax advice, and tax planning.

4.     "All
Other Fees" means the aggregate fees billed in each of the last two fiscal years for products and services provided by the
issuer's external auditor, other than the services reported as Audit Fees, Audit-Related Fees and Tax Fees above and principally
relate to the unaudited quarterly reporting of our subsidiaries.



Annual Information Form   INTEROIL CORPORATION     47







LEGAL
PROCEEDINGS AND REGULATORY ACTIONS



During the second half of 2011, the PNG
Customs Service commenced an audit of our petroleum product imports into Papua New Guinea for the years 2007 to 2010.  We
received a letter in November 2011 from the then Commissioner of Customs setting out certain findings from the audit. This letter
included comments alleging that payment of import GST was required and had not been made on imports of certain refined products.
As well as requiring payment of GST, the letter noted that administrative penalties were able to be levied by Customs in the range
of 50% to 200% of the assessed amounts as per the Customs Act. We have since met with the Customs Service and provided it with
supporting documentation to demonstrate that the GST amounts claimed in their letter have all been paid. We have currently made
a provision based on our best estimate in relation to this matter and are working closely with the authority to provide all requested
information in order to finalize the audit.



From time to time we are involved in various
claims and litigation arising in the normal course of business. While the outcome of these matters is uncertain and there can be
no assurance that such matters will be resolved in our favor, we do not currently believe that the outcome of adverse decisions
in any pending or threatened proceedings related to these and other matters or any amount which it may be required to pay by reason
thereof would have a material adverse impact on our financial position, results of operations or liquidity.



INTERESTS
OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS



Breckland Limited has provided technical
and advisory services to us on customary commercial terms. Roger Grundy, one of our directors, is a director and principal of Breckland
and he has provided consulting services to us. Breckland was paid $21,293 in respect of consulting fees and expenses during 2010.
No payments for consulting services were made to Breckland Limited in 2009 or 2011.



In November of 2011, we elected to exchange
the 5,000 shares held in SP InterOil LDC (now South Pacific Refining Limited) by Petroleum Investment & Exploration Corporation,
a company owned and controlled by our Chairman and Chief Executive Officer, Mr. Phil Mulacek, for 5,000 shares in InterOil.



See also under the heading “Directors
and Executive Officers – Conflicts of Interest”.



Other than as discussed above, there are
no material interests, direct or indirect, of directors, executive officers of the Company or any person or company that beneficially
owns or controls or directs, directly or indirectly, more than 10% of the outstanding common shares, or any known associate or
affiliate of any such persons, in any transaction within the three most recently completed financial years or during the current
financial year that has materially affected or is reasonably expected to materially affect the Company.



MATERIAL
CONTRACTS



The following represent material contracts
entered into or still in effect during 2011:



Condensate Stripping Plant Joint
Venture Operating Agreement dated August 4, 2010



The CSP JV between Mitsui and certain of
our subsidiaries sets out their rights and obligations as participants in the joint venture to develop a proposed condensate stripping
plant at InterOil’s Elk and Antelope field site in Gulf Province, Papua New Guinea. Under the CSP JV, InterOil and Mitsui
will each have a 50% ownership interest in the proposed plant, before the State of Papua New Guinea’s statutory right to
acquire up to 22.5%. The CSP JV provides for the ownership in and management of, the joint venture for the development and operation
of the condensate stripping facility, both before and after a FID is taken.



Indenture Governing the 2.75%
Convertible Senior Notes Due 2015 dated November 10, 2010



The $70.0 million principal amount of 2.75%
convertible senior notes due 2015 were issued on November 10, 2010 pursuant to an indenture between us and The Bank of New York
Mellon Trust Company, N.A., as trustee, dated as of August 6, 2008, as supplemented by the first supplemental indenture, dated
as of November 10, 2010. We refer to the indenture as so supplemented as the “Note Indenture”.



Annual Information Form   INTEROIL CORPORATION     48







For a summary of the material terms
of the convertible senior notes due 2015, see “Description of Capital Structure – Convertible Senior Notes Due
2015”.



Investment Agreement dated
October 30, 2008



On October 30, 2008, Petromin, a government
entity mandated to invest in resource projects on behalf of the State, together with its subsidiary, Eda LNG Limited (“Eda”),
entered into an agreement with InterOil and its subsidiary, SPI (208) Limited, under which Eda agreed to take a 20.5% direct interest
in the Elk and Antelope fields and to fund 20.5% of the costs of developing those fields. The interest and funding was contingent
upon Petromin’s nomination by the State as the entity designated to hold the State’s interest in accordance with PNG’s
Oil & Gas Act and upon issuance of the PDL. Certain funding, in relation to sunk costs, was contingent upon grant of
a PDL for the field. The interest and funding commitment was able to be increased to 22.5% subsequent to grant of a PDL in the
event that Petromin was also nominated to hold the 2% interest also provided for under the Oil & Gas Act on behalf of
relevant landowners.



At the end of the 2011 year, the parties
agreed that the Agreement’s intended operation had ended and that it should terminate.



LNG Project Shareholders Agreement
dated July 30, 2007



The shareholders’ agreement dated
July 30, 2007 by and between InterOil LNG Holdings Inc., Merrill Lynch PNG LNG Corporation (“Merrill Lynch”) and Pac
LNG (the “Shareholders”) provided for the establishment and governance of PNG LNG with respect to the LNG Project described
in more detail under the heading “Description of the Business– Midstream - Liquefaction”. The
agreement sets out the rights and obligations of the Shareholders and the terms governing their relationship and provides that
the authorized share capital structure of PNG LNG is to be made up of Class A Shares and Class B Shares. No other classes of shares
may be issued. Only holders of Class A Shares have voting rights and the right to appoint directors to the board of PNG LNG. Class
B shares recognize the holders’ economic interests in the PNG LNG and in the LNG Project. This agreement allows for the admission
of one or more strategic investors as Class A and/or B shareholders subject to the prior approval of each existing Shareholder.
The agreement also allows for the State to elect to purchase up to 10% of the issued and outstanding shares in Liquid Niugini Gas
Limited (a wholly owned subsidiary of PNG LNG).



Pursuant to a Share Purchase and Sale and
Settlement Agreement dated February 27, 2009 under which InterOil and Pac LNG acquired all of Merrill’s interest in the PNG
LNG, Merrill retains no ongoing economic interest, legal rights or involvement in the LNG Project. A revised version of this shareholders
agreement is still to be agreed to, to respond to that significant change, and to reflect other changes to the relationship between
Pac LNG and InterOil and to the proposed aligned structure of the LNG Project.



Amended and Restated Indirect
Participation Interest Agreement dated February 25, 2005



In February 2005, we entered into
an indirect participation agreement with institutional accredited investors in which the investors paid us $125.0 million and
we agreed to drill eight exploration wells in Papua New Guinea on PPL’s 236, 237 and/or 238. We have drilled four of these
eight exploration wells to date. The terms of this agreement are described under the heading “Description of Our Business—Upstream-Exploration
and Production—Indirect Participation Agreements”. Under the agreement, investors are also required to contribute
their proportionate share of completion costs associated with the eight exploration wells and to subsequent development and appraisal
works. In the event that exploration proves successful, investors may elect to convert their interests to direct working interests
in the relevant PDL, or may continue to maintain indirect participation interests. Investors also have the right, prior to completion
of the eighth well, to convert their interest into our common shares, based upon a certain formula set out in the agreement. Some
investors have elected to waive this conversion right. This agreement was amended by Amendment No. 1 signed on November 5, 2007.
The amendment allows us to pay from the joint account all commissions and other expenses incurred in connection with structuring
this agreement, soliciting investors and otherwise entering into this agreement.



Annual Information Form   INTEROIL CORPORATION     49







Amended Indirect Participation
Interest Agreement dated May 12, 2004



We entered into an Amended Indirect Participation
Interest Agreement with PNG Energy Investors, LLC on May 12, 2004. This agreement grants PNG Energy Investors, LLC the right to
acquire up to a 4.25% working interest in sixteen exploration wells following our drilling of an initial eight exploration wells.
As of December 31, 2011, we had drilled six exploration wells associated with this program. PNG Energy Investors, LLC will have
the right to acquire a working interest in the ninth through the twenty fourth exploration wells and in order to participate PNGEI
would be required to contribute for each exploration well, $112,500 per percentage point plus actual cost over $1.0 million charged
pro rata per percentage point.



Drilling Participation Agreement
dated July 21, 2003



During 2004, we raised $12.2 million from
PNGDV, as agent and trustee for its investors, pursuant to the Drilling Participation Agreement dated July 21, 2003 with InterOil.
Under this agreement PNGDV had the right to acquire a working interest in our first sixteen exploration wells equal to 13.5% multiplied
by the result of eight divided by the number of exploration wells we drill. PNGDV will be required to pay its share of any completion
costs for future exploration wells or future development costs if an exploration well is a commercial success. By December 31,
2005, PNG Drilling Ventures Limited had converted $2.5 million of their investment into 141,545 of our common shares. In May 2006,
PNGDV converted their remaining interest into an additional 575,575 shares and also retained a 6.75% interest in the next four
wells. Elk–1 was the first of these wells and Antelope-1 the second. PNGDV also has the right to participate in a further
sixteen wells to follow the four mentioned above up to a level of 5.75% at a cost per well of $112,500 per 1%, with higher amounts
to be paid if the depth exceeds 3,500 metres and the cost of the well exceeds $8.5 million.



OPIC Loan Agreement dated June
12, 2001



An $85.0 million loan from OPIC to EP InterOil
Limited, a subsidiary of InterOil, was used to finance the construction of our refinery at Napa Napa, Port Moresby (see under the
heading “Description of the Business – Midstream - Refining”)and is secured by all of the refinery’s
capital assets. The loan matures on December 31, 2015 and requires semi-annual principal payments of $4.5 million and semi-annual
interest payments. Each disbursement under the loan bears interest at a rate equal to a weighted average of treasury rates at the
time of disbursement plus 3.0%. During 2011, the weighted average interest rate of all disbursements pursuant to this loan agreement
was 6.93%, and the two required installments, were paid. In addition, during 2011 OPIC agreed to release certain sponsor support
collateral associated with the loan agreement provided by various InterOil subsidiary companies and by interests associated with
Mr. Mulacek. The parent guarantee provided by InterOil is to continue for the life of the loan.



Refinery Project Agreement



On May 29, 1997, we entered into a project
agreement with the State under which we agreed to construct and operate a refinery in Port Moresby, Papua New Guinea. The project
agreement expires on January 31, 2035. In the project agreement, the State has agreed to use its best efforts to enable us to purchase
sufficient crude oil produced in Papua New Guinea for the refinery to run at full capacity. If necessary, these efforts would include
proposing legislation and issuing executive orders or policy directives. In addition, the government of Papua New Guinea has agreed
that future agreements between Papua New Guinea and producers of oil in Papua New Guinea will contain provisions requiring such
producers to sell oil produced in Papua New Guinea to local refineries to meet Papua New Guinea’s requirements for refined
petroleum products. The purchase price for this oil will be the prevailing fair market price of such oil at the time of purchase.
The Refinery Project Agreement also provides that the State will take all actions necessary to ensure that local distributors of
petroleum products in Papua New Guinea purchase such product first and foremost from the local refinery at the IPP.  In general,
the IPP represents the equivalent price that would be paid in Papua New Guinea for a refined product if it were imported. 
For each refined product produced and sold locally in Papua New Guinea, the IPP was originally calculated by adding the costs that
would typically be incurred to import such product to the average Posted Price for such product in Singapore as reported by Platts. 
The costs that are added to the reported Platts’ price include freight costs, insurance costs, landing charges, losses incurred
in the transportation of refined products, demurrage and taxes.  This pricing model has since been jointly reviewed by the
State and InterOil due to the cessation of Singapore Posted Prices.  The basis of calculating IPP price was revised in November
2007 to an interim agreement and then amended in June 2008 to a modified IPP formula by changing the benchmark price for each refined
product from ‘Singapore Posted Prices’, which is no longer being updated, to ‘Mean of Platts Singapore’
(‘MOPS’), which is the interim benchmark price for refined products in the Asia Pacific region, plus an agreed premium. 
The project agreement provides that, until December 31, 2010, income from the refinery will not be taxed.



Each of the above material agreements have
been filed on SEDAR and are available through the SEDAR website at, www.sedar.com.



Annual Information Form   INTEROIL CORPORATION     50







All other contracts entered or still in
effect during 2011 were done so in the ordinary course of our business or were not material to us.



TRANSFER
AGENT AND REGISTRAR



The transfer agent and registrar for our
common shares and the Series A Preferred Shares is Computershare Investor Services, Inc.



Transfer Agent and Registrar



Main Agent



Computershare Investor Services Inc.

100 University Avenue, 9th Floor

Toronto, Ontario

Canada M5J 2YI

Tel: 1-800-564-6253 (toll free North America)

Fax: 1-888-453-0330 (toll free North America)

E-mail: service@computershare.com

Website: www.computershare.com



Co-Transfer Agent (USA)



Computershare Trust Company N.A.

350 Indiana Street

Golden, Colorado 80401

U.S.A.

Tel: 1-800-962-4284 (toll free North America)

International: 1-514-982-7555



INTERESTS
OF EXPERTS



PricewaterhouseCoopers, Chartered Accountants,
are the Corporation's auditors and have audited the financial statements of the Corporation for the year ended December 31, 2011.
As at the date hereof, PricewaterhouseCoopers are independent within the meaning of Public Company Accounting Oversight Board Rule
3520.



Information relating to reserves of the
Corporation set forth in the Statement of Resources Data and Other Oil and Gas Information was evaluated by GLJ Petroleum Consultants
Limited, as independent qualified reserves evaluators. As at the date hereof, the principals of GLJ Petroleum Consultants Limited,
did not hold any registered or beneficial ownership interests, directly or indirectly in the common shares or the 2.75% convertible
senior notes.



ADDITIONAL
INFORMATION



Additional information, including that
related to directors’ and officers’ remuneration, principal holders of our common shares and securities authorized
for issuance under equity compensation plans was contained in our information circular for our annual meeting of shareholders held
on June 21, 2011 and will be contained in our information circular for our upcoming annual meeting of shareholders expected to
be held in June 2012. Additional financial information is provided in our audited consolidated financial statements for the year
ended December 31, 2011 (the “Annual Financial Statements”) and related 2011 MD&A. Our Annual Financial Statements,
2011 MD&A, Information Circular and additional information can be found on the Canadian System for Electronic Document Analysis
and Retrieval (“SEDAR”) at www.sedar.com and on
our website at www.interoil.com.



Copies of the Annual Financial Statements,
2011 MD&A, and any additional copies of this Annual Information Form may also be obtained by contacting Mr. Wayne Andrews,
Vice President Capital Markets at 25025 I-45 North, Suite 420, The Woodlands, Texas 77380 Telephone: +1 281 292 1800.



Annual Information Form   INTEROIL CORPORATION     51







Schedule A – Report of Management
and Directors on Oil and Gas Disclosure



FORM 51-101F3 REPORT OF

MANAGEMENT AND DIRECTORS

ON OIL AND GAS DISCLOSURE



Management of InterOil Corporation (the
"Company") is responsible for the preparation and disclosure of information with respect to the Company's oil and gas
activities in accordance with the securities regulatory requirements. This information includes (i) reserves date, which are estimates
of proved reserves and probable reserves and related future net revenue as at December 31, 2011, and (ii) resources as at December
31, 2011.



The board of directors of the Company has
determined that the Company had no reserves as at December 31, 2011.



An independent qualified reserve evaluator
has evaluated the Company's resources data. The report of the independent qualified reserves evaluator will be filed with securities
regulatory authorities concurrently with this report.



The Reserves Committee of the board of
directors of the Company has:



(a)          reviewed
the Company's procedures for providing information to the independent qualified reserves evaluator;



(b)          met
with the independent qualified reserves evaluator to determine whether any restrictions affected the ability of the independent
qualified reserves evaluator to report without reservation; and



(c)          reviewed
the reserves data with management and the independent qualified reserves evaluator.



The Reserves Committee of the board of
directors has reviewed the Company's procedures for assembling and reporting other information associated with oil and gas activities
and has reviewed that information with management. The board of directors has, on the recommendation of the Reserves Committee,
approved:



(a)          the
content and filing with securities regulatory authorities of Form 51-101F1 containing the Company’s oil and gas activities
and resources data;



(b)          the
filing of the Form 51-102F2 which is the report of the independent qualified reserves evaluator on the resources data; and



(c)          the
content and filing of this report.



Because the resources data are based on
judgments regarding future events, actual results will vary and the variations may be material.



DATED effective March 16, 2012.





|"Phil E. Mulacek"       |  | "Roger Grundy"
|----------------------- |  | --------------
|Phil E. Mulacek         |  | Roger Grundy  
|Chief Executive Officer |  | Director      
|                        |  |               
|"Collin F. Visaggio"    |  | "Gaylen Byker"
|Collin F. Visaggio      |  | Gaylen Byker  
|Chief Financial Officer |  | Director      





Annual Information Form   INTEROIL CORPORATION     52







Schedule B – Report on Resources
Data by Independent Qualified Reserves Evaluator



REPORT ON
RESOURCES DATA



BY



INDEPENDENT
QUALIFIED RESERVES



EVALUATOR
OR AUDITOR



To the
board of directors of InterOil Corporation (the "Company"):





| | 1. | We have prepared an assessment of the Company’s resources data as at December 31, 2011. The
resources data are estimates of low, best and high estimates of contingent resources as at December 31, 2011.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The resources data are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the resources data based on our assessment.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



We carried out our assessment
in accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") prepared jointly
by the Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum
(Petroleum Society).



| | 3. | Those standards require that we plan and perform an assessment to obtain reasonable assurance as
to whether the resources data are free of material misstatement. An assessment also includes assessing whether the resources data
are in accordance with principles and definitions in the COGE Handbook.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The following table sets forth the estimates of low, best and high estimates of contingent resources
as at December 31, 2011:
| | -- | -----------------------------------------------------------------------------------------------------------------------------





|                          |  | Description |                   |  | Location of |  |                  |                      | 
|------------------------- |  | ----------- | ----------------- |  | ----------- |  | ---------------- | -------------------- | 
|                          |  | and         |                   |  | Reserves    |  |                  |                      | 
|                          |  | Preparation |                   |  | (Country or |  |                  | Company Gross        | 
|Independent               |  | Date of     |                   |  | Foreign     |  |                  | Contingent Resources | 
|Qualified Reserves        |  | Assessment  |                   |  | Geographic  |  |                  | MMBOE                | 
|Evaluator                 |  | Report      |                   |  | Area)       |  |                  | Low                  | 
|                          |  |             |                   |  |             |  |                  |                      | 
|GLJ Petroleum Consultants |  |             | February 28, 2012 |  |             |  | Papua New Guinea |                      | 





| | 5. | In our opinion, the resources data evaluated by us have, in all material respects, been determined
and are in accordance with the COGE Handbook, consistently applied.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | We have no responsibility to update our reports referred to in paragraph 4 for events and circumstances
occurring after their respective preparation dates.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Because the resources data are based on judgments regarding future events, actual results will
vary and the variations may be material.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------



| | 8. | Contingent resources estimates will not be classified as reserves until the following contingencies
are satisfied: (i) sanctioning of the facilities required to process and transport marketable natural gas, (ii) confirmation of
a market for the marketable natural gas, and (iii) determination of economic viability. Contingent resources entail commercial
risk not applicable to reserves. There is no certainty that it will be commercially viable to produce any portion of the contingent
resources.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Annual Information Form   INTEROIL CORPORATION     53







EXECUTED as to our report referred to above:



GLJ Petroleum Consultants Ltd., Calgary,
Alberta, Canada, February 28, 2012





|                          | 
|------------------------- | 
|Keith M. Braaten, P. Eng. | 
|Executive Vice-President  | 





Annual Information Form   INTEROIL CORPORATION     54







Schedule C



INTEROIL CORPORATION CHARTER OF THE

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS



This Audit Committee Charter (the “Charter”)
sets forth the purpose and membership requirements of the Audit Committee (the “Committee”) of the Board
of Directors (the “Board”) of InterOil Corporation (the “Company”) and establishes
the authority and responsibilities delegated to it by the Board.





| | 1. | Purpose. The purpose of the Committee is to assist the Board in fulfilling its oversight
responsibilities. In fulfilling this purpose, the Committee’s primary duties and responsibilities are to:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | Review management's identification of principal financial risks and monitor the process to manage
such risks.
| | - | -------------------------------------------------------------------------------------------------------------



| | · | Oversee and monitor the Company’s compliance with legal and regulatory requirements.
| | - | ------------------------------------------------------------------------------------



| | · | Oversee audits of the Company's financial statements.
| | - | -----------------------------------------------------



| | · | Oversee and monitor the integrity of the Company’s accounting and financial reporting processes,
financial statements and system of internal controls.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Oversee and monitor the qualifications, independence and performance of the Company’s external
auditor and the performance of the Company’s internal auditors.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Provide an avenue of communication among the Board, the external auditor, management and the internal
auditors.
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | Report to the Board regularly.
| | - | ------------------------------



The Committee shall be empowered
to conduct or cause to be conducted any investigation appropriate to fulfilling its responsibilities, and shall have direct access
to the external auditors, the internal auditor and Company employees as necessary. The Committee shall be empowered to retain,
at the Company’s expense, independent legal, accounting, or other consultants or experts as the Committee deems necessary
in the performance of its duties. The Committee shall have sole authority to approve related fees and retention terms, and the
Company shall provide for payment of such fees and for the compensation to the external auditor for the purpose of rendering or
issuing an audit report or performing other audit, review or attest services for the Company, as well as funding for the payment
of ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.



| | 2. | Committee Membership.
| | -- | ---------------------







| | 2.1. | Composition and Appointment. The Committee shall consist of three or more members
of the Board. The Board shall designate members of the Committee. Membership on the Committee shall rotate at the Board’s
discretion. The Board shall fill vacancies on the Committee and may remove a Committee member from the membership of the Committee
at any time without cause. Members shall serve until their successors are appointed by the Board and as otherwise required by applicable
law or the rules of the New York Stock Exchange (“NYSE”).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2.2. | Independence and Financial Literacy. Each member of the Committee must qualify as an independent
and financially literate director pursuant to National Instrument 52-110 - Audit Committees (as implemented by the Canadian
Securities Administers), as amended from time to time, and meet the independence, or an applicable exception, financial literacy,
and experience requirements of the NYSE rules and applicable U.S. federal securities laws, including the rules and regulations
of the U.S. Securities and Exchange Commission (“SEC”). In addition, at least one member of the Committee
must be an “audit committee financial expert” as defined by the SEC.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2.3. | Service on Multiple Audit Committees. If a member of the Committee serves on the audit committee
(or, in the absence of an audit committee, the board committee performing equivalent functions, or in the absence of such committee,
the board of directors) of more than two other public companies, the Board must affirmatively determine that such simultaneous
service on multiple audit committees will not impair the ability of such member to serve on the Committee.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Annual Information Form   INTEROIL CORPORATION     55









| | 2.4. | Subcommittees. The Committee may form and delegate authority to subcommittees consisting
of one or more members to grant pre-approvals of permitted non-audit services, provided that decisions of said subcommittee to
grant preapprovals shall be presented to the full Committee at its next scheduled meeting.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 3. | Meetings.
| | -- | ---------



| | 3.1. | Frequency of Meetings. The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The schedule for regular meetings of the Committee shall be established by the Committee. The Chairperson
of the Committee may call a special meeting at any time he or she deems advisable. Meetings may be by written consent. At least
annually, the Committee will meet in executive session outside the presence of any senior executive officer of the Company. The
Committee may request any officer or employee of the Company or the Company’s outside counsel or external auditor to attend
a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.2. | Minutes. Minutes of each meeting of the Committee shall be kept to document the discharge
by the Committee of its responsibilities.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------



| | 3.3. | Quorum. A quorum shall consist of at least one-half of the Committee’s members, but
no fewer than two persons. The act of a majority of the Committee members present at a meeting at which a quorum is present shall
be the act of the Committee.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.4. | Agenda. The Chairperson of the Committee shall prepare an agenda for each meeting of the
Committee, in consultation with Committee members and any appropriate member of the Company’s management or staff, as necessary.
As requested by the Chairperson, members of the Company’s management and staff shall assist the Chairperson with the preparation
of any background materials necessary for any Committee meeting.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.5. | Presiding Officer. The Chairperson of the Committee shall preside at all Committee
meetings. If the Chairperson is absent at a meeting, a majority of the Committee members present at a meeting shall appoint a different
presiding officer for that meeting.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.6. | Private Meetings. The Committee shall meet periodically in separate executive sessions with
management (including the chief executive officer, chief financial officer and chief accounting officer), the internal auditors
and the external auditor, and have such other direct and independent interaction with such persons from time to time as the members
of the Committee deem appropriate.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | General Review Procedures.
| | -- | --------------------------



| | 4.1. | Annual Report Review. The Committee shall review and discuss
with management, the external auditors, and the internal auditors, the Company’s year-end financial results prior to the
release of earnings, or profit or loss, as applicable, and the Company’s year-end financial statements prior to filing or
distribution. Such review shall also include theCompany’s disclosures that are to be included in the Company’s
Annual Information Form, Annual Report, Management’s Discussion and Analysis for the year and Annual Report on Form 40-F.
The Committee shall also discuss with management, the external auditors and the internal auditors any significant issues, judgments
or findings or any changes to the Company’s selection or application of accounting principles and any items required to be
communicated by the external auditors in accordance with Statement on Auditing Standard No. 114, as amended, generally accepted
accounting principles or International Financial Reporting Standards (“IFRS”), as applicable, and various topics and
events that may have a significant impact on the Company or that are the subject of discussions between management and the external
auditors. The Committee shall approve the audited financial statements, Management’s Discussion and Analysis, and the Annual
Information Form (as to financial information included therein) and recommend to the Board whether or not the audited financial
statements, Management’s Discussion and Analysis, and the Annual Information Form (as to financial information included therein)
should be approved by the Board, filed on SEDAR and included in the Company’s Annual Report on Form 40-F filed on EDGAR for
the last fiscal year.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Annual Information Form   INTEROIL CORPORATION     56









| | 4.2. | Quarterly Report Review. The Committee shall review and discuss with management, the internal
auditors and the external auditors, the Company’s interim financial results prior to the release of earnings, or profit or
loss, as applicable, and the Company’s interim financial statements and Management’s Discussion and Analysis, including
the results of the external auditor’s review of the interim financial statements, prior to filing or distribution and the
disclosures that are to be included in the Company’s Management’s Discussion and Analysis for each quarter and Form
6-K. The Committee shall discuss with management, the internal auditors and the external auditors, any significant issues, judgments
or findings or any changes to the Company’s selection and application of accounting principles and any items required to
be communicated by the external auditors in accordance with Statement on Auditing Standards No. 114 and No. 100, as amended, generally
accepted accounting principles or IFRS, as applicable.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.3. | Canadian and SEC Filings Review. The Committee shall review with financial management and
the external auditor filings with Canadian securities regulators and the SEC which contain or incorporate by reference the Company’s
financial statements or Management’s Discussion and Analysis and consider whether the information in these documents is consistent
with information contained in the financial statements.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.4. | Reporting System Review. In consultation with management, the external auditors, and the
internal auditors, the Committee shall consider the integrity of the Company’s financial reporting processes and controls
including computerized information system controls and security. The Committee shall review and discuss with management the Company’s
significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures. The Committee
shall review significant findings prepared by the external auditors and the internal auditors together with management’s
responses, including the status of previous recommendations.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.5. | Financial Data Review. The Committee shall review and discuss with management earnings including
the use of “proforma,” “adjusted” or other non-GAAP or non-IFRS information, as applicable, financial guidance
and other press releases of a material financial nature, as well as financial information, and earnings or profit or loss guidance
provided to analysts and rating agencies. Such discussion may be done generally consisting of discussing the types of information
to be disclosed and the types of presentations to be made.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.6. | Off-Balance Sheet Review. The Committee shall discuss with management and the external auditor
the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.7. | Risk Assessment. Although it is the job of the CEO and senior management to assess and manage
the Company’s exposure to risks, the Committee shall discuss guidelines and policies to govern the process by which risk
assessment and risk management is addressed.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.8. | Audit Difficulties. The Committee shall review with the external auditor any audit problems
or difficulties encountered in the course of the audit work and management’s response, any restrictions on the scope of activities
or access to requested information; and any significant disagreements between auditors and management. The Committee shall work
to resolve disagreements that may have occurred between auditors and management related to the Company’s financial statements
or disclosures.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.9. | Hiring Approval. The Committee shall approve the hiring of any partner, former partner,
employee or former employee of the external auditor.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------



| | 4.10. | Financial Officer Code of Ethics Review. The Committee shall review and periodically recommend
modifications to the Company’s Code of Ethics for the Chief Executive Officer and Senior Financial Officers.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.11. | Certification Review. The Committee shall review disclosures made to the Committee by the
Company’s CEO and CFO during the certification process for the audited annual financial statements, interim financial statements,
related Management’s Discussion and Analysis and Annual Information Form/Form 40-F concerning significant deficiencies or
material weaknesses in internal controls and any fraud.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.12. | Legal Counsel Review. On at least an annual basis, the Committee shall review with the Company’s
general counsel any legal matters that could have a significant impact on the Company’s financial statements or the Company’s
compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Annual Information Form   INTEROIL CORPORATION     57









| | 5. | External auditors.
| | -- | ------------------





Auditor Performance Review.
The Committee shall confirm with the external auditors their ultimate accountability to the Committee. The external auditors will
report directly to the Committee. The Committee will ensure that the external auditors are aware that the Chairperson of the Committee
is to be contacted directly by the external auditor (i) to review items of a sensitive nature that can impact the accuracy of financial
reporting or (ii) to discuss significant issues relative to the overall Board responsibility that have been communicated to management
but, in their judgment, may warrant follow-up by the Committee. The Committee shall review and evaluate the performance of the
auditors and the lead partner on the external auditor team.



Approval of External auditor
and Pre-Approval of Services. The Committee shall recommend to the Board the appointment, compensation, retention and termination
of the Company’s external auditor. The Committee shall be directly responsible for the oversight of the work of the external
auditors engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. The Committee
shall pre-approve all auditing services, including the compensation and terms of the audit engagement, and all other non-audit
services (including the fees and terms thereof) to be performed by the external auditors, subject to the de-minimus exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 or applicable Canadian federal
and provincial legislation and regulations which are approved by the Committee priorto the completion of the audit. The
Committee shall periodically discuss current year non-audit services performed by the external auditors, including the nature and
scope of any tax services to be approved, a well as the potential effects of the provisions of such services on the auditor’s
independence, and review and pre-approve all permitted non-audit service engagements.



Auditor Independence.
The Committee shall oversee the independence of the external auditors by, among other things, (i) on an annual basis, receiving
from the external auditors a formal written statement delineating all relationships between the external auditors and the Company,
consistent with rules of the Public Accounting Oversight Board, that could impair the auditors’ independence; (ii) actively
engaging in a dialogue with the external auditors with respect to any disclosed relationships or services that may impact the objectivity
and independence of the external auditors; and (iii) taking, or recommending to the Board the appropriate action to be taken, in
response to the external auditors’ report to satisfy itself of the external auditors’ independence.



Auditor Report. The Committee
shall annually obtain from the external auditor and review a written report describing (i) the external auditor’s internal
quality-control procedures; and (ii) any material issues raised by (a) the external auditor’s most recent internal quality-control
review, or peer review or (b) any inquiry or investigation by governmental or accounting profession authorities, in each case,
within the preceding five years, respecting one or more independent audits carried out by the external auditor, and any steps taken
to deal with any such issues.



Audit Partner Rotation.
The Committee shall ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit
and the audit partner responsible for reviewing the audit as required by law. The Committee shall obtain, annually, from the external
auditor a written statement confirming that neither the lead (or coordinating) audit partner having primary responsibility for
the Company’s audit nor the audit partner responsible for reviewing the Company‘s audit has performed audit services
in those roles for the Company prior to the Company’s five previous fiscal years.



Internal Controls Report.
The Committee shall annually obtain from the external auditor a written report in which the external auditor attests to and reports
on the assessment of the Company’s internal controls made by the Company’s management and its control environment as
it pertains to the Company’s financial reporting process and controls. Each quarter, the Committee shall review and discuss
with management, the internal auditor, and the Company’s external auditor (i) the operation, adequacy and effectiveness of
the Company’s internal controls (including any significant deficiencies, any special steps adopted in light of material control
deficiencies, any significant changes in internal controls and the adequacy of disclosures about changes in internal control over
financial reporting); (ii) the Company’s internal controls report and the auditor’s attestation of the report; (iii)
the Company’s internal audit procedures; and (iv) the adequacy and effectiveness of the Company’s disclosures controls
and procedures, and management reports thereon.



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National Office Consultation.
The Committee shall discuss with the external auditor material issues on which the national office of the external auditor was
consulted by the Company’s audit team and matters of audit quality and consistency.



Audit Planning. The Committee
shall review and discuss with the external auditors their audit plan and engagement letter and discuss with the external auditors
and the internal auditor the scope of the audit, staffing, locations, reliance upon management, and internal audit and general
audit approach.



Accounting Principles.
The Committee shall consider the external auditors’ judgments about the quality and appropriateness of the Company’s
accounting principles as applied in its financial reporting, including critical accounting policies and practices used by the Company,
GAAP or IFRS alternatives, as applicable, discussed with management (including the ramifications and the auditor’s preferred
treatment), and any other material written communications between the external auditor and management.



Auditor Assurance. The
Committee shall obtain from the external auditor assurance that Section 10A of the Securities Exchange Act of 1934, addressing
the reporting of illegal acts, has not been implicated.



Additional Auditors.The Committee shall review the use of auditors other than the external auditor where management has requested a second opinion
or another auditor is proposed to be engaged for other reasons.



6.     Internal
Audit Department and Legal Compliance.



Budget and Plan. The
Committee shall review the budget, planned scope of the internal audit, changes in plan, activities, organizational structure,
and qualifications of the internal auditor. The internal auditor function shall be responsible to senior management, but shall
have a direct reporting responsibility to the Board through the Committee. The “internal auditor”will be responsible
for contacting the Chairperson of the Committee directly (i) to review items of a sensitive nature that can impact the accuracy
of financial reporting or (ii) to discuss significant issues relative to the overall Board responsibility that have been communicated
to management but, in the internal auditor’s judgment, may warrant follow-up by the Committee.



Approval of Internal Auditor.
The Committee shall review and approve the appointment, performance, dismissal and replacement of the internal auditor or the entity
retained to provide internal audit services.



Internal Audit Review.
The Committee shall review a summary of findings from completed internal audits and, where appropriate, review significant reports
prepared by the internal audit department together with management’s response and follow-up to these reports.



7.     General
Audit Committee Responsibilities.



Code of Ethics for the Chief
Executive Officer and Senior Financial Officers. The Committee shall inquire of management, the external auditor and the internal
auditor as to their knowledge of (i) any violation of the Code of Ethics for the Chief Executive Officer and Senior Financial Officers,
(ii) any waiver of compliance with such code, and (iii) any investigations undertaken with regard to compliance with such code.
The Committee may makerecommendations to the Board regarding the waiver of any provision of the Code of Ethics for the
Chief Executive Officer and Senior Financial Officers, however any waiver of such codemay only be granted by the Board.All waivers granted by the Board shall be promptly publicly disclosed as required by the rules and regulations of the SEC and
the NYSE.



Complaints Procedure.
The Committee shall establish procedures to (i) receive, process, retain and treat complaints received by the Company regarding
accounting, internal audit controls or auditing matters and (ii) the confidential and anonymous submission by employees of
concerns regarding questionable accounting or audit practices.



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Related Party Transactions.
The Committee shall approve all related party transactions after a review of the transactions by the Committee for potential conflicts
of interest. A transaction will be considered a “related party transaction” if the transaction would be required to
be disclosed in the Company’s Management’s Discussion and Analysis or any other filings with Canadian Securities Administrators
or the SEC. The Committee shall review reports and disclosures of related party transactions.



General Activities. The
Committee shall perform any other activities consistent with this Charter, the Company’s bylaws, the Company’s Code
of Ethics and Business Conduct and governing law, as the Committee or the Board deems necessary or appropriate, including reviewing
the Company’s corporate compliance activities.



8.     Reports
and Assessments.





| | 8.1. | Board Reports. The Chairperson shall, periodically at his or her discretion, report to the
Board on Committee actions and on the fulfillment of the Committee’s responsibilities under this Charter. Such reports shall
include any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s
compliance with legal or regulatory requirements, the performance and independence of the Company’s external auditors and
the performance of the Company’s internal audit function.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8.2. | Charter Assessment. The Committee shall annually assess the adequacy of this Charter and
advise the Board of its assessment and of its recommendation for any changes to the Charter. The Committee shall, if requested
by management, assist management with the preparation of a certification to be presented annually to the NYSE affirming that the
Committee reviewed and reassessed the adequacy of this Charter.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8.3. | Committee Self-Assessment. The Committee shall annually make a self-assessment of its performance.
| | ---- | --------------------------------------------------------------------------------------------------



| | 8.4. | Audit Committee Report. The Committee shall prepare any Audit Committee Reports required
by the rules of the Canadian Securities Administrators or the SEC to be included in the Company’s filings with such agencies.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





The duties and responsibilities of a member
of the Audit Committee are in addition to those duties set out for a member of the Board. While the Committee has the responsibilities
and powers set forth by this Charter, it is the responsibility of management to prepare the financials and it is the responsibility
of the external auditor to plan or conduct audits or to determine that the Company’s financial statements are complete and
accurate in accordance with generally accepted accounting principles and IFRS, as applicable.



The material in this Charter is not soliciting
material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities
Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date this
Charter is first included in the Company’s filings with the SEC and irrespective of any general incorporation language in
such filings.



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