AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 2005

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM F-10
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INTEROIL CORPORATION
(Exact name of registrant as specified in its charter)

<Table>

NEW BRUNSWICK, CANADA 2911 NOT APPLICABLE
(Province or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification Number
of incorporation or organization) Classification (If Applicable))
Code Number (If Applicable))
</Table>

SUITE 5300, COMMERCE COURT WEST, 199 BAY ST.
TORONTO, ONTARIO M5L 1B9, CANADA
(416) 869-5500
(Address and telephone number of registrant's principal executive offices)

GARY M. DUVALL
25025 I-45 NORTH, SUITE 420
THE WOODLANDS, TEXAS 77380
(281) 292-1800
(Name, address, (including zip code) and telephone number
(including area code) of agent for service in the United States)

COPIES TO:

<Table>

GEORGE G. YOUNG III, ESQ. GARY M. DUVALL
HAYNES AND BOONE, L.L.P. INTEROIL CORPORATION
1221 MCKINNEY STREET, SUITE 2100 25025 I-45 NORTH, SUITE 420
HOUSTON, TEXAS 77010 THE WOODLANDS, TEXAS 77380
(713) 547-2000 (281) 292-1800
</Table>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after effectiveness of this Registration Statement.

PROVINCE OF ONTARIO
(Principal jurisdiction regulating this offering (if applicable))

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

A. [ ] Upon filing with the Commission, pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in the United
States and Canada)

B. [X] At some future date (check the appropriate box below):

1. [ ] pursuant to Rule 467(b) on (date) at (time) (designate
a time not sooner than 7 calendar days after filing)

2. [ ] pursuant to Rule 467(b) on (date) at (time) (designate
a time 7 calendar days or sooner after filing) because the
securities regulatory authority in the review jurisdiction has
issued a receipt or notification of clearance on (date).

3. [ ] pursuant to Rule 467(b) as soon as practicable after notification
of the Commission by the Registrant or the Canadian securities
regulatory authority of the review jurisdiction that a receipt or
notification of clearance has been issued with respect hereto.

4. [X] After the filing of the next amendment to this form (if preliminary
material is being filed).

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

CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------

Common Shares, no par value, issuable upon
conversion of the Indirect Participation
Interests 3,333,334 $37.50 $125,000,025 $14,712.50
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) Calculated pursuant to Rule 457(g) under the Securities Act of 1933, as
amended, based upon the conversion price of the Indirect Participation
Interests, equal to $37.50 per Common Share issued.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES
ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a)
OF THE ACT, MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART I

INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

The information in this prospectus is not complete and may be changed. We
may not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer to sale is not permitted.

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

This base shelf prospectus has been filed under legislation in Ontario that
permits certain information about these securities to be determined after this
prospectus has become final and that permits the omission from this prospectus
of that information. The legislation requires the delivery to purchasers of a
prospectus supplement containing the omitted information within a specified
period of time after agreeing to purchase any of these securities.

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

Information has been incorporated by reference in this prospectus from
documents filed with securities commissions or similar authorities in Canada.
Copies of the documents incorporated herein by reference may be obtained on
request without charge from the Corporate Secretary of the Corporation at
InterOil, Suite 2, Level 2, Orchid Plaza 79-88 Abbott Street, Cairns, QLD 4870
Australia, Telephone: +61 7 4046 4600.

May 3, 2005

PRELIMINARY BASE SHELF PROSPECTUS

INTEROIL CORPORATION

$125,000,000
3,333,334 COMMON SHARES

We entered into agreement on February 25, 2005 with investors who agreed to
participate in our oil and gas exploration program in Papua New Guinea. Under
this agreement, the investors may elect to receive our common shares. This
prospectus may be used by these investors to resell these common shares. Such
common shares are sometimes referred to in this prospectus as the "Registrable
Securities". We will not receive any of the proceeds of the sale of these common
shares under this prospectus.

Our common shares currently trade under the symbol "IOL" on the Toronto
Stock Exchange and under the symbol "IOC" on the American Stock Exchange and on
the Port Moresby Stock Exchange. Our shares will also trade on the Australian
Stock Exchange as CHESS Depositary Interests on a 10:1 basis until on or after
June 14, 2005. On May 2, 2005 the last reported sale price of our common shares
on the Toronto Stock Exchange was C$36.65 per share and on the American Stock
Exchange was U.S.$29.20 per share.

INVESTING IN OUR COMMON SHARES INVOLVES RISKS. PLEASE CAREFULLY CONSIDER
THE "RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.

THIS PROSPECTUS HAS NOT BEEN FILED IN RESPECT OF, AND WILL NOT QUALIFY, ANY
DISTRIBUTION OF REGISTRABLE SECURITIES IN ONTARIO OR IN ANY OTHER PROVINCE OR
TERRITORY OF CANADA AT ANY TIME.

UNDER THE MULTI-JURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION, WE ARE PERMITTED TO PREPARE THIS
PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE REQUIREMENTS, WHICH ARE
DIFFERENT FROM THOSE OF THE UNITED STATES. WE PREPARE OUR FINANCIAL STATEMENTS
IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THEY
ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. OUR
FINANCIAL STATEMENTS MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED
STATES COMPANIES.

YOU SHOULD BE AWARE THAT OWNING THE IPI PERCENTAGES AND COMMON SHARES MAY
SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED STATES AND CANADA. SUCH
CONSEQUENCES FOR INVESTORS WHO ARE RESIDENT IN, OR CITIZENS OF, THE UNITED
STATES MAY NOT BE DESCRIBED FULLY HEREIN.

YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN CANADA,
MOST OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THIS PROSPECTUS
ARE NOT RESIDENT IN THE UNITED STATES AND MOST OF OUR ASSETS, THE ASSETS OF OUR
DIRECTORS AND OFFICERS AND OF THESE EXPERTS MAY BE LOCATED OUTSIDE THE UNITED
STATES.

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is May 3, 2005.

TABLE OF CONTENTS

<Table>

REFERENCES.................................................. 1
EXCHANGE RATE INFORMATION................................... 1
FORWARD-LOOKING STATEMENTS.................................. 2
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES................. 2
SUMMARY..................................................... 3
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 12
TRADING RANGE OF COMMON SHARES.............................. 12
DIVIDENDS................................................... 13
DESCRIPTION OF OUR COMMON SHARES............................ 13
CHANGES IN OUR SHARE AND DEBT CAPITAL....................... 14
LIST OF SELLING SHAREHOLDERS................................ 14
PLAN OF DISTRIBUTION........................................ 17
CERTAIN INCOME TAX CONSIDERATIONS........................... 20
MATERIAL CONTRACTS.......................................... 20
CORPORATE STRUCTURE......................................... 23
WITHHOLDING TAX AND CURRENCY EXCHANGE CONTROLS IN PNG....... 25
LEGAL MATTERS............................................... 26
EXPERTS..................................................... 26
AVAILABLE INFORMATION....................................... 26
DOCUMENTS INCORPORATED BY REFERENCE......................... 26
LIST OF DOCUMENTS FILED WITH THE SEC........................ 27
AUDITORS, TRANSFER AGENT AND REGISTRAR...................... 27
PURCHASER'S STATUTORY RIGHTS................................ 27
AUDITORS' CONSENT........................................... 28
INDEX TO FINANCIAL INFORMATION.............................. F-1
CERTIFICATE OF THE COMPANY.................................. C-1
</Table>

REFERENCES

In this prospectus, unless we state otherwise, "InterOil", the "Company",
"we", "us" and "our" refer to InterOil Corporation and all of its subsidiaries.
The term "PNG" refers to Papua New Guinea. The term "Shell" refers to
subsidiaries of the Royal Dutch Shell Group. The term "BP" refers to
subsidiaries of BP p.l.c. See "Glossary of Certain Terms" for additional terms
used in this prospectus.

EXCHANGE RATE INFORMATION

Unless we state otherwise or the context otherwise requires, all references
to dollar amounts in this prospectus are references to U.S. dollars. The
exchange rate between the Canadian dollar and the U.S. dollar used in this
prospectus varies depending on the date and context of the information contained
herein. Some of the financial information about BP Papua New Guinea Limited,
which we acquired in 2004, and which is included herein, is expressed in Kina,
the local currency of Papua New Guinea.

The following table sets forth, for each period indicated, the high and low
exchange rates, the average of the exchange rates on the last day of each month
during such period indicated, and the exchange rate at the end of the period
indicated, for one PNG Kina expressed in Canadian dollars.

<Table>
<Caption>
FISCAL YEAR ENDED
---------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(C$) 2002 2003 2004
- ---- --------------- --------------- ---------------

High............................................ $0.45440 $0.42800 $0.43200
Low............................................. $0.35480 $0.37810 $0.37290
Average......................................... $0.41150 $0.40291 $0.40529
Close........................................... $0.40490 $0.40130 $0.38310
</Table>

On May 2, 2005 the noon buying rate was C$.42540 per K1.

<Table>
<Caption>
FISCAL YEAR ENDED
---------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(U.S.$) 2002 2003 2004
- ------- --------------- --------------- ---------------

High............................................ $0.29150 $0.31000 $0.31800
Low............................................. $0.22760 $0.25530 $0.30450
Average......................................... $0.26206 $0.28841 $0.31150
Close........................................... $0.25680 $0.31000 $0.31800
</Table>

On May 2, 2005 the noon buying rate was U.S.$0.33780 per K1.

High............................................ $0.66530 $0.77470 $0.85320
Low............................................. $0.61750 $0.63270 $0.71380
Average......................................... $0.63724 $0.71629 $0.77014
Close........................................... $0.63440 $0.77270 $0.83030
</Table>

On May 2, 2005, the noon buying rate was U.S.$0.79470 per C$1.

FORWARD-LOOKING STATEMENTS

Certain statements contained in, or incorporated by reference into, this
prospectus are forward-looking statements as defined in the U.S. federal
securities laws. All statements, other than statements of historical facts,
included herein or incorporated by reference herein, including without
limitation, statements regarding plans for expanding our refinery, upstream or
downstream business, business strategies, plans and objectives of management for
future operations and those statements preceded by, followed by or that
otherwise include the words "believes", "expects", "anticipates", "intends",
"estimates" or similar expressions or variations on such expressions are
forward-looking statements. We can give no assurances that such forward-looking
statements will prove to be correct. Each forward-looking statement reflects our
current view of future events and is subject to risks, uncertainties and other
factors that could cause actual results to differ materially from any results
expressed or implied by our forward-looking statements. Risks and uncertainties
include, but are not limited to:

- our lack of a substantial operating history;

- the ability of our refinery to operate at full capacity and to operate
profitability;

- the success of our exploration activities;

- political, legal and economic risks related to our operations in PNG;

- our ability to market refinery output;

- our dependence on exclusive relationships with our suppliers and
customers;

- our ability to obtain necessary licenses;

- adverse weather, explosions, fires, natural disasters and other operating
risks and hazards, some of which may not be insured;

- the impact of competition;

- the enforceability of your legal rights;

- the volatility of prices for crude oil and the volatility of the
difference between our purchase price of oil feedstocks and the sales
price of our refined products;

- the uncertainty of our ability to attract capital; and

- covenants in our financing and other agreements that may limit our
ability to engage in business activities, raise additional financing or
respond to changes in markets or competition.

The information contained in this prospectus and the documents incorporated
by reference into this prospectus, including the information set forth under the
heading "Risk Factors" contain more information about factors that could affect
our forward-looking statements. Our forward-looking statements are expressly
qualified in their entirety by this cautionary statement.

ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES

We are a corporation organized under the laws of New Brunswick, Canada and
substantially all of our assets are located in PNG. Most of our directors and
officers are not residents of the United States of America. As a result, it may
be difficult for United States investors to effect service of process within the
United States on us or our directors or officers or to enforce in the United
States upon judgments of courts of the United States predicated upon civil
liability under United States federal securities laws against us or our
directors or officers.

Certain selling shareholders are incorporated, continued or otherwise
organized under the laws of a foreign jurisdiction or reside outside of Canada.
Although certain selling shareholders may have appointed agents for service of
process in Ontario, it may not be possible for investors to collect from us or
any selling shareholder, judgments obtained in Canadian courts.

SUMMARY

This summary highlights information found in greater detail elsewhere in
this prospectus or in documents incorporated by reference herein. You should
read the entire prospectus and the documents we incorporate by reference,
including the financial data and related notes, before making an investment
decision.

USE OF THIS PROSPECTUS

This prospectus may be used by selling shareholders in connection with the
resale of the Registrable Securities. A selling shareholder may sell some, none
or all of the Registrable Securities offered by this prospectus. We cannot
predict when or in what amounts a selling shareholder may sell any of the
Registrable Securities. For details of how the Registrable Securities may be
sold, see "Plan of Distribution."

This prospectus has not been filed in respect of, and will not qualify, any
distribution of Registrable Securities in Ontario or in any other province or
territory of Canada at any time.

OUR BUSINESS

OVERVIEW

We are developing a vertically-integrated energy company whose focus is PNG
and the surrounding region. We operate through six subsidiaries. Please see
"Corporate Structure" for additional details on our corporate structure. Our
assets consist of an oil refinery, upstream petroleum exploration licenses and
retail and commercial distribution facilities.

Our operations are organized into three major business segments:

- The upstream segment, which includes the exploration for crude oil and
natural gas;

- The midstream segment, which includes the refining of crude oil and the
marketing of refined products both domestically in PNG and for export;
and

- The downstream segment, which includes distribution of refined products
in PNG.

UPSTREAM

We have an extensive upstream portfolio of exploration licenses covering
approximately 8 million acres in PNG. Our licenses are primarily located onshore
in the Eastern Papuan Basin and have the logistical advantage of moderate
terrain, barge access to infrastructure and proximity to our refinery. We
believe that, if we discover oil in our exploration program, this logistical
advantage will allow for lower cost of development and provide cash-flow from
early production. We have not discovered any oil or gas reserves on our licenses
that are deemed proved, probable or possible.

In February 2005, we entered into an agreement with institutional and
accredited investors in which the investors agreed to participate in the
drilling of eight exploration wells in our licenses in PNG.

Drilling of the first well, on the Black Bass prospect in Petroleum
Prospecting Licence (PPL) 236 in Papua New Guinea, as part of our 2005/2006
eight well drilling program commenced on 25, April 2005. The target of this well
is a reef limestone estimated to be approximately 3,937 feet (1,200 metres)
deep. Please see "-- The Offering" for a description of this agreement.

MIDSTREAM

Our refinery is centrally located across the harbor from Port Moresby, the
capital city of PNG. Our refinery has a nameplate operating capacity of 32,500
barrels per day and was designed to comply with the World Bank's environmental
standards. We expect the refinery to be capable of operating above the

nameplate capacity, at up to 36,500 barrels per day, with a 96% annual
throughput rate, resulting in an annual production of 12.8 million barrels of
refined product. Our refinery is designed to process "sweet" crude, which is low
in sulphur content and does not require product processing beyond distillation,
reforming and blending. This simplified refinery design is expected to lower the
processing cost, which should make the cost per barrel for processing comparable
with the processing costs of much larger facilities.

In 2002, we entered into a crude supply contract with BP. Under this
agreement, BP will be the exclusive supplier of crude feedstock for our
refinery.

The margin expected to drive refinery profitability is the spread between
the sales price of our refined product and the cost of crude feedstocks. Through
an agreement with the government of PNG:

- We are entitled to sell refined products in PNG for the import parity
price, or IPP; and

- The government of PNG has agreed to prohibit the dumping of imports of
refined products below the IPP.

In general, the IPP is the price that would be paid in PNG for a refined
product that is being imported. For each refined product produced, the IPP is
calculated by adding the cost that would typically be incurred to import such
product to the posted price for such product in Singapore. The costs that are
included in this calculation include freight cost, insurance cost, landing
charges, losses incurred in the transportation of refined products, demurrage
and taxes.

We anticipate that between 50% and 60% of our refinery's throughput will be
sold into the PNG domestic market. We currently own distribution assets in PNG
that we believe will be able to distribute approximately 10-12% of our refinery
output and have agreements to purchase retail distribution facilities that we
believe will be able to distribute approximately an additional 20% of our
refinery output. We expect to sell the majority of the remaining product into
the export market under our agreement with Shell, with the balance to be sold
under a sales agreement with Origin Energy Holdings Limited and pursuant to
export sales in the spot market.

We have entered into an operating contract with a PNG subsidiary of
Petrofac Facilities Management Limited, a leading facilities management company.
Petrofac commenced management of the day-to-day operations and maintenance of
the refinery on January 31, 2005, following practical completion of the
refinery.

DOWNSTREAM

We own and operate distribution, commercial and retail assets in PNG
through a wholly-owned subsidiary. Our assets account for approximately 20% of
the wholesale product market in PNG based on total volume of sales for such
products in 2004. In September 2004, PNG introduced a new pricing regime for
downstream sales of diesel, gasoline and kerosene, which reduces the maximum
wholesale margins for these products. We expect this will reduce our downstream
revenues. We also have an agreement with Shell to acquire their wholesale and
distribution assets in PNG. We will lease these assets back to Shell under a
long-term lease back arrangement, and Shell will continue to operate the
business. This agreement is subject to obtaining all necessary PNG government
approvals.

THE OFFERING

The common shares offered by this prospectus are being offered by investors
who entered into an indirect participation agreement with us in February 2005.
Under the indirect participation agreement, the investors paid us $125 million
and we agreed to drill eight exploration wells in PNG. If any of these wells
discovers oil or gas in commercial quantities, the investors will have the right
to participate in the development of the field discovered if the investor pays
its share of the costs of development. In the aggregate, the investors would
have the right to participate in 25% of the costs and revenues of any field
discovered by an exploration well. In addition, between June 15, 2006 and the
later of 90 days after the

drilling of the eighth exploration well and December 15, 2006, each investor may
elect to convert its interest under the agreement into our common shares. An
investor's interest, or any portion thereof, may be converted into a number of
common shares equal to the amount paid by the investor for its interest divided
by $37.50. If all of the investors converted their entire indirect participation
interest into common shares, we would be obligated to issue 3,333,334 common
shares. This prospectus covers resales of the common shares the investors may
elect to receive upon conversion of the indirect interests into common shares.

We also entered into a registration rights agreement with the investors'
party to the indirect participation agreement. In the registration rights
agreement we agreed to register the common shares issuable under the indirect
participation agreement for resale in the United States. This prospectus has
been prepared and filed pursuant to the registration rights agreement.

We will not receive any of the sales proceeds of the common shares sold by
the investors using this prospectus.

RISK FACTORS

An investment in our common shares is speculative and involves a high
degree of risk. Before making an investment, you should give careful
consideration to the following risk factors relating to our business and our
common shares as well as to the other information in this prospectus or
incorporated herein. In addition, this prospectus contains or incorporates
statements that constitute forward-looking statements regarding, among other
matters, our intent, belief or current expectations about our business. These
forward-looking statements are subject to risks, uncertainties and assumptions.

RISK RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY.

We received the first revenues from the sale of products in our
distribution business in April 2004. On January 31, 2005, our refinery achieved
practical completion. Most of our business efforts prior to 2005 were devoted to
constructing our refinery and acquiring our wholesale distribution business.
Therefore, we have only limited financial results upon which you may judge our
potential. We may not become profitable. In the past, we have experienced delays
and other problems frequently associated with a construction project such as our
refinery. We may continue to experience many of the problems, delays and
expenses encountered by any early stage business, many of which are beyond our
control. These include, but are not limited to, substantial delays and expenses
in conducting our exploration drilling program, difficulty in obtaining
financing and competition from larger and more established companies.

OUR REFINERY HAS NOT OPERATED AT FULL CAPACITY FOR AN EXTENDED PERIOD OF TIME.

We have completed the construction of our refinery in PNG. We began testing
our refinery at its approximate nameplate capacity in November 2004. In January
2005, testing of the refinery was completed and we declared practical completion
of the refinery. Our ability to continue to operate our refinery at its
nameplate capacity must be considered in light of the risks inherent in, and the
difficulties, costs, complications and delays frequently encountered by start-up
companies. These risks include, without limitation, shortages of equipment,
materials or labor; delays in delivery of equipment or materials; contractual
disagreements; labor disruptions; political events; local or political
opposition; accidents and unforeseen engineering, design or environmental
problems. We were unable to operate our refinery for a period of 10 days in
March 2005 as a result of a shortage of crude feedstocks. Such shortages may
occur in the future as well. Accordingly, there can be no assurance of the
future profitability of us or our refinery.

OUR REFINERY OPERATIONS MAY NOT BE PROFITABLE.

Our refining operations are expected to be primarily affected by the
difference or margin between the sales prices of our refined products and the
costs we incur to purchase crude oil and other feedstocks. Historically,
refining margins have been volatile, and we expect this volatility will exist in
the future. Therefore, we will be subject to the risk that the difference
between the cost to us of our crude oil supply and the price at which we can
sell our refined products will not be sufficient for the profitable operation of
our company and to allow us to service our indebtedness. We cannot control the
prices at which our feedstocks will be purchased or at which refined petroleum
products can be sold.

WE MAY NOT BE SUCCESSFUL IN OUR EXPLORATION FOR OIL.

We currently do not have any oil or gas reserves that are deemed proved,
probable or possible pursuant to National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities. We have drilled one exploration well,
suspended the drilling of two exploration wells and one exploration/appraisal
well, and have plans to drill at least 8 additional exploration wells in PNG
during the next several years. We cannot be certain that the exploration 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
geoscience 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 available.

In addition, our exploration and development plans may be curtailed,
delayed or cancelled as a result of lack of adequate capital and other factors,
such as weather, compliance with governmental regulations, mechanical
difficulties, materials shortages, delays in the delivery of equipment, success
or failure of activities in similar areas, current and forecasted prices for oil
and changes in the estimates of costs to complete the projects. We will continue
to gather information about our exploration projects, and it is possible that
additional information may cause us to alter our schedule or determine that a
project should not be pursued at all. You should understand that our plans
regarding our projects are subject to change.

OUR INVESTMENTS IN PNG ARE SUBJECT TO POLITICAL, LEGAL AND ECONOMIC RISKS.

Our investments in PNG involve risks typically associated with investments
in developing countries, such as uncertain political, economic, legal and tax
environments; expropriation and nationalization of assets; the risks of war,
expropriation, nationalization, 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 PNG. We attempt to
conduct our business in such a manner that political and economic events of this
nature will have minimal effects on our operations. In addition, we believe that
oil exploration and refinery operations are in the long term best interests of
PNG and that we will continue to have the support of the current government.
Notwithstanding the current support, 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.
There can be no assurance that we have adequate protection against any or all of
the risks described above.

In addition, if a dispute arises with respect to our PNG operations, 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.

WE MAY NOT BE ABLE TO MARKET ALL OF OUR REFINERY'S OUTPUT.

The Project Agreement described under "Material Contracts" gives us certain
rights to supply the domestic market in PNG with refined products. We have
entered into domestic sales contracts with the major distributors in PNG under
which they will purchase refined products for distribution in PNG exclusively
from us. We have estimated that between 50% and 60% of the refinery's net output
will be used to supply the PNG market. We will market the balance of the
refinery's output in nearby regional markets. We have signed three-year export
contracts with Shell. While we will sell refined products through our domestic
retail network and other distributors, these agreements are the only commercial
agreements for the purchase of our refined products for export. We can give no
assurances that we will be able to market the refinery's output to these nearby
regional markets and we may be unable to market all of the refinery's output we
produce. If our relationship with Shell were to terminate for any reason, we
cannot assure you that we will be able to enter into other commercial agreements
for the export of our refinery's output. In addition, early termination of the
Shell agreements could have a material adverse effect on our results of
operations and financial condition.

Further, our Project Agreement with the PNG government provides that if
there is more than one refinery operating in PNG during the term of the Project
Agreement, the right to supply the domestic market will be shared by the
refineries in proportion to their refining capacities. Therefore, if one or more
additional refineries are built in PNG, our share of the domestic market will be
diminished.

WE MAY NOT BE ABLE TO OBTAIN CRUDE FEEDSTOCKS FOR OUR REFINERY.

The Project Agreement requires the government of PNG to take action to
ensure that domestic crude oil producers sell us their PNG domestic crude
production for use in our refinery and that refined products for domestic PNG
use will be purchased from us at the IPP. However, our agreement with BP is our
only commercial agreement for the delivery of crude feedstock. The BP agreement
expires on June 14, 2009. If our relationship with BP were to terminate for any
reason, we cannot assure you that we will be able to enter into other commercial
agreements to supply adequate feedstock to our refinery. In addition, early
termination of the BP agreement could have a material adverse effect on our
results of operations and financial condition.

PNG crude oil production rates are expected to satisfy the refinery's
requirements for at least five years after commercial start-up. Alternative
crude oils that are suitable for use as project feedstock are available in the
nearby region. However, crude oil sourced from outside PNG may be more expensive
than domestic crude oil and may reduce our gross profit margins. Alternatively,
imported crude oil may be selected to alter the refinery product mix in response
to changing market conditions.

It is also possible that PNG domestic crude deliveries to our refinery may
be delayed or curtailed because of conditions such as weather, accidents and
other unexpected events. For example, in March 2005 our scheduled deliveries of
domestic crude oil in PNG were delayed because of the notification of force
majeure by the supplier of the domestic PNG crude, Kutubu Blend, out of the
Kumul Terminal in the Gulf of Papua. We were required to suspend operations at
our refinery for 10 days while we arranged for alternate crude oil supplies.
Similar supply interruptions could occur in the future.

WE MAY NOT BE ABLE TO OBTAIN ALL OF THE LICENSES NECESSARY TO OPERATE OUR
BUSINESS.

Our operations require licenses and permits from various governmental
authorities to drill wells, operate the refinery and market our refined
products. We believe that we hold, or will hold, all necessary licenses and
permits under applicable laws and regulations for our operations in PNG and
believe we will be able to comply in all material respects with the terms of
such licenses and permits. However, such licenses and permits are subject to
change in various circumstances. There can be no guarantee that we will be able
to obtain or maintain all necessary licenses and permits that may be required to
commission our oil refinery facilities or to maintain continued operations that
economically justify the cost.

OUR REFINERY, WHICH IS OUR PRINCIPAL ASSET, WILL BE SUBJECT TO OPERATING
RISKS, NOT ALL OF WHICH ARE INSURED.

Our principal asset is our refinery in PNG. Because we own only one
refinery, an investment in our common shares may be may be more risky than an
investment in a company that owns several refineries. Our refining operations
will be subject to various hazards common to the industry, including explosions,
fires, toxic emissions, maritime hazards and uncontrollable flows of oil and
gas. In addition, our refining 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 any of these risks were to occur with respect to our
refinery, because it is our principal asset, it would have a material adverse
effect on our revenues and financial condition.

THE EXPLORATION AND PRODUCTION, AND THE REFINING AND DISTRIBUTION BUSINESSES
ARE COMPETITIVE.

We operate in the highly competitive areas of oil exploration and
production, and refining and distribution of refined products. A number of our
competitors have much 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, the availability of alternate
fuel sources, the costs of our drilling program, the development of
transportation systems to bring future production to the market and
transportation costs of oil are factors that affect our ability to compete in
the marketplace.

The petroleum refining and marketing industry continues to be highly
competitive. Our local competitors include fully-integrated major oil companies
(e.g., Shell, ExxonMobil and BP) as well as smaller refineries. These
competitors may have substantially greater financial and operational resources
than we do, which may provide our competitors with greater flexibility in
responding to or absorbing market changes. All of our feedstocks currently are
purchased from third parties, while some of our competitors have proprietary
sources of crude oil to supply their refineries.

The financial returns in our refining and marketing business depend largely
on refining margins and wholesale fuel margins, both of which fluctuate
significantly. Refining margins are impacted by levels of refined product
inventories, the balance of refined products supply and demand and availability
of refined product imports into PNG. Our wholesale distribution business in PNG
faces competition from major integrated oil companies as well as small
independent marketers of refined products in PNG.

THE VOLATILITY OF OIL PRICES COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

The prices we will receive for the refined products we produce and sell are
likely 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, 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. 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 profit or loss we incur in refining petroleum products; and

- the profit or loss we incur in our oil and gas exploration activities.

OPERATING HAZARDS MAY ADVERSELY IMPACT OUR OIL AND GAS EXPLORATION ACTIVITIES.

Our exploration operations are subject to risks inherent in the exploration
business, such as blowouts, cratering, explosions, uncontrollable flows of oil,
gas or well fluids, fires, 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 PNG operations are subject to a variety
of additional operating risks such as earthquakes, mudslides, tsunamis and other
effects associated with active volcanoes, extensive rainfall or other adverse
weather conditions. Our operations could result in liabilities for personal
injuries, property damage, oil spills, discharge of hazardous materials,
remediation and clean-up costs or other environmental damages. 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.

WE MAY NOT BE ABLE TO GENERATE CASH FLOWS IF WE ARE UNABLE TO RAISE CAPITAL.

We make, and will continue to make, substantial capital expenditures to
explore for oil and gas, to maintain and optimize operations of our refinery and
to acquire, develop and maintain our distribution network. We may need
additional financing to conduct these activities. If we are unable to obtain
debt or equity financing because of lower refining margins, lower oil prices,
politically instability, delays, operating difficulties, construction costs, or
lack of drilling success, we may be required to delay, curtail or abandon

our future activities. There can be no assurance that additional debt or equity
financing or cash generated by operations will be available to meet these
requirements.

OUR SIGNIFICANT DEBT LEVELS AND OUR DEBT COVENANTS MAY LIMIT OUR FUTURE
FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN PURSUING BUSINESS
OPPORTUNITIES.

As of December 31, 2004, we had approximately $87 million in long-term
debt, excluding current maturities. 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 OPIC credit facility and BNP credit facility 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.

IF WE ARE UNABLE TO RECRUIT AND RETAIN QUALIFIED PERSONNEL, IT COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR OPERATING RESULTS AND STOCK PRICE.

Our success depends in large part on the continued services of our
executive officers, our senior managers and other key personnel. The loss of
these people, especially without advance notice, could have a material adverse
impact on our results of operations and our stock price. It is also very
important that we attract and retain highly skilled personnel, including
technical personnel, to accommodate our exploration plans and to 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. 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 impact on our operating results and stock price.

PETROLEUM INDEPENDENT AND EXPLORATION CORPORATION ("PIE") CAN PREVENT US FROM
RAISING CAPITAL THROUGH THE ISSUANCE OF COMMON SHARES OR SECURITIES
CONVERTIBLE INTO COMMON SHARES.

Phil E. Mulacek, President and CEO of our company, controls PIE. PIE owns
433,169 of our common shares, and has a right to exchange its remaining 5,000
shares of SP InterOil, LDC on a one-for-one basis for our common shares. Our
articles of amalgamation contain restrictions on our issuance of common shares
or securities convertible into common shares, except with, among other things,
the consent of PIE. Mr. Mulacek also controls PIE Group, LLC, which, with
Commodities Trading International Corporation, have pre-emptive rights in
respect of issuances of our common shares or securities convertible into common
shares. Therefore, through his control of PIE and PIE Group, LLC, Mr. Mulacek or
any successor to his interest in those companies can prevent us from raising
capital through the issuance of common shares or securities convertible into
common shares.

CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE CAN CAUSE
ADDITIONAL EXPENSES AND FAILURE TO COMPLY MAY ADVERSELY AFFECT OUR REPUTATION
AND THE VALUE OF OUR SECURITIES.

Changing laws, regulations and standards relating to corporate governance
and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC
regulations and new and changing provisions of Canadian securities laws have
added substantial compliance costs to our operations. In addition to the high
cost of compliance, our failure to fully satisfy these new corporate governance
standards may materially adversely affect our reputation and the value of our
securities.

In addition, we are currently a Canadian "foreign private issuer" as
defined in U.S. securities laws. As such, we are allowed to comply with
reporting and disclosure practices in Canada. Certain aspects of the Sarbanes
Oxley Act have different applications to foreign private issuers and several of
the corporate governance rules of the American Stock Exchange do not apply to
foreign private issuers. It is possible that purchases of our shares by persons
in the United States and changes in the composition or residence of our
directors and executive officers could cause us to no longer be a Canadian
foreign private issuer. If

this were to happen, we would incur additional general and administrative costs
to transition from the Canadian to the U.S. disclosure system, which costs may
be material.

IF WE FAIL TO COMPLY WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002, OUR
REPUTATION AND THE VALUE OF OUR SECURITIES MAY BE ADVERSELY AFFECTED.

Beginning with our annual report for the year ending December 31, 2006,
Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include an
internal control report of management with our annual report on Form 40-F, which
is to include management's assessment of the effectiveness of our internal
control over financial reporting as of the end of the fiscal year. That report
will also be required to include a statement that our independent auditors have
issued an attestation report on management's assessment of our internal control
over financial reporting.

In order to achieve compliance with Section 404 within the prescribed
period, management is in the process of adopting a detailed project work plan to
assess the adequacy of our internal control over financial reporting, validate
through testing that controls are functioning as documented, remediate any
control weaknesses that may be identified, and implement a continuous reporting
and improvement process for internal control over financial reporting. Any
failure to comply with Section 404, including issuing the required management
report and obtaining the attestation report on management's assessment from our
independent auditors, may materially adversely affect our reputation and the
value of our securities.

WE HAVE AGREED TO DRILL EIGHT EXPLORATION WELLS IN PNG AND TO PAY ALL COSTS TO
DRILL THESE WELLS TO THEIR TOTAL DEPTH.

In February 2005, we entered into an indirect participation agreement with
institutional and individual accredited investors. Under the agreement, the
investors paid us $125 million, and we agreed to drill eight exploration wells
in PNG. We agreed to drill the eight wells regardless of the cost incurred by us
to drill the wells, and to drill a replacement well if one of the eight wells
cannot be drilled to total depth. While we believe that the $125 million paid by
the investors will be sufficient to pay the costs to drill the eight exploration
wells, we will be required to drill the eight wells regardless of costs. If our
assumptions on the costs to drill the wells are wrong, or if we encounter
unforeseen operational, geological or other problems in drilling a well, we may
be required to expend substantial funds to satisfy our obligations under the
indirect participation agreement.

RISK RELATED TO AN INVESTMENT IN OUR COMMON SHARES

YOU MAY BE UNABLE TO ENFORCE YOUR LEGAL RIGHTS AGAINST US.

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

THE MARKET PRICE OF OUR COMMON SHARES FLUCTUATES.

The price of our common shares on the Toronto Stock Exchange, the American
Stock Exchange, the Australian Stock Exchange and the Port Moresby Stock
Exchange fluctuates. Between January 1, 2003 and May 2, 2005, the price of our
common shares on the TSX Venture Exchange and subsequently on the Toronto Stock
Exchange has fluctuated from a high of C$53.26 to a low of C$11.50. We expect
the future price of our shares to continue to be volatile as we conduct our
exploration drilling operations and report the results of our refining
operations.

WE HAVE AGREED TO ISSUE SHARES TO THE INVESTORS UNDER THE INDIRECT
PARTICIPATION AGREEMENT.

We may be required to issue up to 3,333,334 common shares under the
indirect participation agreement. The issuance of all or a significant portion
of these shares could result in the substantial dilution to the interests of
other shareholders or a decrease in the price of our common shares due to the
additional supply of shares relative to demand in the market.

WE DO NOT INTEND TO PAY, AND HAVE RESTRICTIONS UPON OUR ABILITY TO PAY,
DIVIDENDS ON OUR COMMON SHARES.

We have not paid cash dividends in the past and we do not intend to pay
dividends on our common stock in the foreseeable future. We currently intend to
retain any earnings for the future operation and development of our business.
Our ability to make dividend payments in the future will be dependent on our
future performance and liquidity.

USE OF PROCEEDS

We will not receive any proceeds from the resale of Registrable Securities
by any of the selling shareholders.

TRADING RANGE OF COMMON SHARES

Our common shares trade on the Toronto Stock Exchange under the symbol
"IOL" in Canadian dollars and on the American Stock Exchange under the symbol
"IOC" in U.S. dollars. In May 2005, our common shares will be delisted from the
Australian Stock Exchange. Until that time, our common shares will continue to
trade on the Australian Stock Exchange in CHESS Depositary Interests, which are
the equivalent of 1/10th of a common share. The CHESS Depositary Interests trade
in Australian dollars under the symbol "IOC". On February 18, 2005, we announced
that we will be delisting our common shares from the Australian Stock Exchange
not less than three months from the date of the announcement. We will continue
to list our common shares on the Port Moresby Stock Exchange under the symbol
"IOC" in PNG Kina. The high and low closing prices of our common shares on the
respective exchanges for the periods indicated are set forth in the following
table:

<Table>
<Caption>
TORONTO STOCK
EXCHANGE AND TSX AUSTRALIAN STOCK
VENTURE EXCHANGE(1) AMERICAN STOCK EXCHANGE(2) EXCHANGE(3)
------------------- --------------------------- -----------------
HIGH LOW HIGH LOW HIGH LOW
-------- -------- ---------- -------------- ------- -------

YEAR ENDED DECEMBER 31,
2003
First quarter.............. C$14.50 C$11.50 n/a n/a A$16.50 A$12.50
Second quarter............. C$18.30 C$13.75 n/a n/a A$19.50 A$14.50
Third quarter.............. C$36.00 C$16.75 n/a n/a A$40.50 A$18.30
Fourth quarter............. C$32.80 C$20.00 n/a n/a A$35.40 A$23.00
YEAR ENDED DECEMBER 31,
2004
First quarter.............. C$39.95 C$30.00 n/a n/a A$37.80 A$30.00
Second quarter............. C$36.00 C$28.05 n/a n/a A$36.00 A$30.10
Third quarter.............. C$30.89 C$19.25 U.S.$24.35 U.S.$15.55 A$31.90 A$21.50
Fourth quarter............. C$49.70 C$27.90 U.S.$40.60 U.S.$22.65 A$51.50 A$29.60
YEAR ENDING DECEMBER 31,
2004
First quarter.............. C$53.26 C$38.84 U.S.$43.65 U.S.$31.76 A$54.50 A$41.60
Second quarter (through May
2, 2005)................. C$43.30 C$30.35 U.S.$35.85 U.S.$24.29 A$44.10 A$31.80
</Table>

- ---------------

Notes:

(1) On July 14, 2004, our common shares began trading on the Toronto Stock
Exchange. Prior to that time our common shares were traded on the TSX
Venture Exchange.

(2) On September 8, 2004, our common shares began trading on the American Stock
Exchange.

(3) The Australian Stock Exchange column has been adjusted for a full common
share by multiplying the daily quoted price of a CHESS Depositary Interest
by 10. The Port Moresby Stock Exchange is associated with the Australian
Stock Exchange and has been excluded from this table.

On May 2, 2005, the closing price of our common shares on the Toronto Stock
Exchange was C$36.65 and on the American Stock Exchange was U.S.$29.20.

DIVIDENDS

We have not declared or paid dividends on our common shares in the past two
years and we do not anticipate that we will pay dividends in the near future.
Our anticipated capital requirements are such that we intend to follow a policy
of retaining earnings in order to finance further business development.

DESCRIPTION OF OUR COMMON SHARES

Each common share has one vote on all matters voted on by our shareholders,
including the election of our directors, and entitles the holder thereof to
receive dividends if, as and when declared by our board of directors. Holders of
common shares will participate rateably in any distribution of assets upon
liquidation, dissolution or winding-up. Our common shares are not convertible,
redeemable, assessable or entitled to the benefits of any sinking or repurchase
fund. Our articles contain restrictions on the issuance of common shares or
securities convertible into common shares, except in certain circumstances,
including with the consent of PIE. PIE is controlled by our Chief Executive
Officer, Phil Mulacek. In addition, certain persons have a pre-emptive right
upon the issuance of common shares or securities convertible into common shares.
This pre-emptive right does not apply in cases where the consent of PIE is
obtained for the issuance. Our by-laws also contain a requirement that we must
obtain shareholder approval when we propose to issue common shares that,
together with all other common shares we have issued in the prior 12 months,
equal more than 15% of our common shares outstanding at the beginning of that 12
month period, unless we offer our common shares on a pro rata basis to all
holders of our common shares, but then only if the Port Moresby Stock Exchange
so requires such approval. Holders of common shares will be entitled to
dividends in the amounts and at the times declared by our board of directors in
its discretion out of funds legally available for the payment of dividends.

Under New Brunswick corporate law, shareholders have cumulative voting
rights in the election of directors. Holders of our common shares are permitted
to cast a number of votes equal to the number of common shares held by such
person multiplied by the number of directors elected. Such votes may be cast for
one candidate or distributed among the candidates in any manner.

On March 31, 2005 there were 28,492,761 common shares issued and
outstanding.

OPTIONS

As of March 31, 2005, there were options outstanding to purchase 974,613
common shares.

WARRANTS

As of March 31, 2005, there were warrants outstanding to purchase 340,247
of our common shares at a price of $21.91. The warrants expire August 27, 2009.

OTHER SECURITIES CONVERTIBLE INTO COMMON SHARES

We have entered into an agreement with PIE under which PIE can exchange its
remaining 5,000 shares of SPI on a one-for-one basis for our common shares. This
election may be made by PIE at any time.

We have granted to PNG Drilling Ventures Limited a right to convert its
participating interest in certain wells into a maximum of 628,305 of our common
shares under a drilling participation agreement dated July 21, 2003.

CHANGES IN OUR SHARE AND DEBT CAPITAL

Since December 31, 2004 through March 31, 2005 the following changes have
occurred in our share and loan capital:

- we issued 162,709 of our common shares upon the exercise of previously
granted options, which has increased our share capital by $1,673,377,
increased cash receipts by $1,480,130 and reduced paid in capital by
$193,247; and

- we issued 19,168 of our common shares on the exercise of warrants, which
has increased our share capital by $419,971, and reduced warrants by an
equal amount.

LIST OF SELLING SHAREHOLDERS

On February 25, 2005 we entered into the indirect participation agreement.
The selling shareholders in the table listed below are parties to the indirect
participation agreement. The common shares listed in the following table as
being beneficially owned by a selling shareholder prior to the offering include
common shares that are issuable upon conversion of such selling shareholder's
interest under the agreement. A selling shareholder may elect to convert all or
any part of their interest into a number of common shares equal to the amount
paid by the selling shareholder for its interest divided by $37.50.

If all of the investors converted their interest into common shares, we
would be obligated to issue, 3,333,334 common shares. The selling shareholders
listed below are offering all of the common shares beneficially owned by such
holders that are issuable upon conversion of their interest.

The information in this table is as of May 3, 2005, and is based upon
information provided by the selling shareholders. Information with respect to
selling shareholders in this prospectus will be updated by way of prospectus
supplements. The selling shareholders may from time to time offer and sell
pursuant to this prospectus any or all of the common shares being registered. To
prevent dilution to the selling shareholders, the following numbers may change
because of adjustments to reflect stock splits, stock dividends or similar
events involving our common shares.

The term selling shareholders includes the shareholders listed below and
their transferees, pledgees, donees and other successors. Unless otherwise
indicated, each selling shareholder has sole voting and investment power with
respect to the common shares described in this table.

<Table>
<Caption>
NUMBER OF
NUMBER OF SHARES SHARES
BENEFICIALLY NUMBER OF BENEFICIALLY PERCENTAGE
OWNED PRIOR TO SHARES BEING OWNED AFTER OWNED AFTER
NAME OF SELLING SHAREHOLDER OFFERING OFFERED OFFERING OFFERING(1)
- --------------------------- ---------------- ------------ ------------ -----------

Aton Select Fund Ltd.(2).................. 604,163 480,000 604,163 2.1%
Bernard Selz(3)........................... 0 66,666 0 0
Bruce Hendry(4)........................... 213,333 133,333 80,000 *
Capital Ventures International(5)......... 0 53,333 0 0
Cyrus Opportunities Master Fund Ltd.(6)... 0 33,333 0 0
Cyrus Opportunities Master Fund II
Ltd.(7)................................. 0 100,000 0 0
Epic Limited Partnership(8)............... 0 13,333 0 0
Epic Limited Partnership II(9)............ 0 13,333 0 0
IPWI Partners LC(10)...................... 20,000 213,333 20,000 *
John Mack(11)............................. 0 133,333 0 0
Kings Road Investments Limited(12)........ 920,065 666,666 253,399 *
Lasco Developments, Inc. and Lasco Family
Trust(13)............................... 166,666 66,666 100,000 *
Pequot PNG Oil, Inc.(14).................. 0 480,000 0 0
Provident Premier Master Fund Ltd.(15).... 5,684 80,000 5,684 *
Selz Family 1997 Trust(16)................ 0 66,666 0 0
Seneca Capital LP(17)..................... 0 280,733 0 0
Seneca Capital International Ltd.(18)..... 0 319,267 0 0
Smithfield Fiduciary LLC(19).............. 0 133,333 0 0
</Table>

- ---------------

Notes:

* means less than 1%

(1) The percentage of shares beneficially owned after the offering is based on
28,492,761 common shares outstanding as of March 31, 2005. We do not know
when or in what amounts the selling shareholders may offer for sale the
shares of common stock pursuant to this offering. The selling shareholders
may choose not to sell any of the shares offered by this prospectus.
Because the selling shareholders may offer all or some of the common shares
pursuant to this offering, and because there are currently no agreements,
arrangements or undertakings with respect to the sale of any of the common
shares, we cannot estimate the number of common shares that the selling
shareholders will hold after completion of the offering. For purposes of
this table, we have assumed that the selling shareholders will have sold
all of the shares covered by this prospectus upon the completion of the
offering.

(2) The common shares beneficially owned by Aton Select Fund Ltd. include
480,000 common shares issuable upon conversion of all of Aton Select Fund
Ltd.'s interest under the indirect participation agreement. In the 12
months prior to the date of this prospectus, Aton Select Fund Ltd. acquired
43,867 common shares for aggregate consideration of $913,490 or an average
of $20.82 per share.

(3) The common shares beneficially owned by Bernard Selz include 66,666 common
shares issuable upon conversion all of Mr. Selz's interest under the
indirect participation agreement.

(4) The common shares beneficially owned by Bruce Hendry include 133,333 common
shares issuable upon conversion of all of Mr. Hendry's interest under the
indirect participation agreement. In the 12 months prior to the date of
this prospectus, Mr. Hendry acquired 50,000 common shares for

aggregate consideration of $1,506,000 or $30.12 per share and 30,000 common
shares for aggregate consideration of $1,084,800 or $36.16 per share.

(5) The common shares beneficially owned by Capital Ventures International
include 53,333 common shares issuable upon conversion of all of its
interest under the indirect participation agreement.

(6) The common shares beneficially owned by Cyrus Opportunities Master Fund
Ltd. include 33,333 common shares issuable upon conversion of all of its
interest under the indirect participation agreement.

(7) The common shares beneficially owned by Cyrus Opportunities Master Fund II
Ltd. include 100,000 common shares issuable upon conversion of all of its
interest under the indirect participation agreement.

(8) The common shares beneficially owned by Epic Limited Partnership include
13,333 common shares issuable upon conversion of. all of its interest under
the indirect participation agreement. In the 12 months prior to the date of
this prospectus, Epic Limited Partnership acquired 35,000 common shares for
aggregate consideration of $1,266,798 or $36.19 per share. Epic Limited
Partnership currently beneficially owns none of these shares.

(9) The common shares beneficially owned by Epic Limited Partnership II include
13,333 common shares issuable upon conversion of all of its interest under
the indirect participation agreement. In the 12 months prior to the date of
this prospectus, Epic Limited Partnership acquired 4,198 common shares for
aggregate consideration of $140,838.27 or $33.55 per share. Epic Limited
Partnership II currently beneficially owns none of these shares.

(10) The common shares beneficially owned by IPWI Partners LC include 213,333
common shares issuable upon conversion of all of its interest under the
indirect participation agreement.

(11) The common shares beneficially owned by John Mack include 133,333 common
shares issuable upon conversion of all of Mr. Mack's interest under the
indirect participation interest agreement.

(12) The common shares beneficially owned by Kings Road Investments Limited
include 666,666 common shares issuable upon conversion of all of its
interest under the indirect participation agreement. Kings Road Investments
Ltd. is a wholly-owned subsidiary of Polygon Global Opportunities Master
Fund. Polygon Investment Partners LLP and Polygon Investment Partners LP,
the investment advisors of Kings Road Investments Ltd. and Polygon Global
Opportunities Master Fund, and Alexander Jackson, Reade Griffith and Paddy
Dear, share voting and investment power with respect to all of these common
shares with Kings Road Investments Ltd. and Polygon Global Opportunities
Master Fund. Polygon Investment Partners LLP, Polygon Investment Partners
LP, Alexander Jackson, Reade Griffith and Paddy Dear disclaim beneficial
ownership of these common shares. In the 12 months prior to the date of
this prospectus, Kings Road Investments Limited acquired 219,772 common
shares upon conversion $4,100,000 principal amount of our convertible
debentures. The conversion price was $20.16 per share. We also issued
16,400 common shares to induce Kings Road Investments Limited to convert
these debentures.

(13) The common shares beneficially owned jointly by Lasco Developments, Inc.
and Lasco Family Trust include 66,666 common shares issuable upon
conversion of all of its interest under the indirect participation
agreement. In the 12 months prior to the date of this prospectus, Lasco
Developments, Inc. and Lasco Family Trust acquired 191,338 common shares
for aggregate consideration of $5,979,324 or $31.25 per share.

(14) The common shares owned by Pequot PNG Oil, Inc. include 480,000 common
shares issuable upon conversion of all of its interest under the indirect
participation agreement. Pequot Capital Management, Inc. beneficially owns
the interest in the indirect participation agreement held of record by
Pequot PNG Oil, Inc. Arthur J. Samberg shares investment power over this
interest in the indirect participation agreement.

(15) The common shares beneficially owned by Provident Premier Master Fund Ltd.
include 80,000 common shares issuable upon conversion of all of its
interest under the indirect participation agreement. Irv Kessler shares
investment power over this interest in the indirect participation

agreement. In the 12 months prior to the date of this prospectus, Provident
Premier Master Fund Ltd. acquired 280,716 common shares for aggregate
consideration of $10,844,717.57 or $38.63 per share. Provident Premier Master
Fund Ltd. also acquired during this time a total of 268,016 common shares
upon conversion of $5,000,000 amount of our convertible debentures. The
conversion price was $20.16 per share. We also issued 20,000 common shares
to induce Provident Premier Master Fund Ltd. to convert these debentures.

(16) The common shares beneficially owned by Selz Family 1997 Trust include
66,666 common shares issuable upon conversion of all of its interest under
the indirect participation agreement.

(17) The common shares beneficially owned by Seneca Capital LP include 280,733
common shares issuable upon conversion of all of its interest under the
indirect participation agreement. Seneca Capital LP shares investment power
with Doug Hirsch. In the 12 months prior to the date of this prospectus,
Seneca Capital LP purchased and subsequently sold common shares at the then
prevailing market price.

(18) The common shares beneficially owned by Seneca Capital International Ltd.
include 319,267 common shares issuable upon conversion of all of its
interest under the indirect participation agreement. Seneca International
Ltd. shares investment power with Doug Hirsch. In the 12 months prior to
the date of this prospectus, Seneca International Ltd. purchased and
subsequently sold common shares at the then prevailing market price.

(19) The common shares beneficially owned by Smithfield Fiduciary LLC include
133,333 common shares issuable upon conversion of. all of its interest
under the indirect participation agreement. Highridge Capital Management,
LLC is the trading manager of Smithfield Fiduciary LLC and consequently has
voting control and investment discretion over securities held by Smithfield
Fiduciary LLC. Glenn Dubin and Henry Swieca control Highridge Capital
Management, LLC. Each of Highridge Capital Management, LLC, Glenn Dubin and
Henry Swieca control, disclaim beneficial ownership of the securities held
by Smithfield Fiduciary LLC.

PLAN OF DISTRIBUTION

THIS PROSPECTUS HAS NOT BEEN FILED IN RESPECT OF, AND WILL NOT QUALIFY, ANY
RESALE OF REGISTRABLE SECURITIES IN ONTARIO OR IN ANY OTHER PROVINCE OR
TERRITORY OF CANADA AT ANY TIME. Our outstanding common shares are listed on
the, Port Moresby Stock Exchange, American Stock Exchange, the Toronto Stock
Exchange and until on or after June 14, 2005, the Australian Stock Exchange,
each of which has approved the listing of the common shares.

In February 2005 we entered into an indirect participation agreement under
which institutional and accredited investors agreed to finance a portion of our
oil and gas exploration program in PNG in exchange for an interest in any fields
discovered by successful exploration wells. We also entered into a registration
rights agreement (the "Registration Rights Agreement"), with the parties to the
indirect participation agreement, in which we agreed to register the common
shares that the parties to the indirect participation agreement may elect to
receive. Pursuant to this agreement, we have agreed, at our expense:

(a) to file with the SEC a registration statement on such form as we
deem appropriate covering resales by holders of all Registrable Securities;

(b) to use our best efforts to cause such registration statement to
become effective as promptly as is practicable, but in no event later than
120 days after February 25, 2005; and

(i) the selling shareholders have completed the sales or
distributions of all of the common shares.; or

(ii) until all Registrable Securities may be sold by the holders
under Rule 144(k).

Pursuant to the Registrations Rights Agreement, we are registering our
Registrable Securities covered by this prospectus under the United States
Securities Act to permit any of the selling shareholders to conduct public
secondary trading of these securities from time to time after the date of this
prospectus in accordance with the federal securities laws of the United States.
This prospectus has not been filed in respect of, and will not qualify, any
distribution of Registrable Securities in Ontario or in any other province or
territory of Canada at any time. There can be no assurance that any of the
selling shareholders will sell any or all of the shares offered hereby.

The selling shareholders will be responsible for any fees, disbursements
and expenses of any counsel for the selling shareholders in excess of $10,000.
All other expenses incurred in connection with the registration and sale of the
Registrable Securities, including printers and accounting fees and the fees,
disbursements and expenses of counsel for the Company will be borne by us.
Additionally, we have agreed to indemnify the selling shareholders against
certain liabilities that they may incur in connection with the sale of the
Registrable Securities registered hereunder, including liabilities under the
United States Securities Act, and each selling shareholder has agreed to
indemnify us, other selling shareholders and any persons who control us, as
defined in the federal securities laws of the United States, against any
liability with respect to any information furnished by such holder in writing to
us (including the selling shareholder's questionnaire) expressly for use in this
shelf registration statement. Agents, underwriters, brokers and dealers may be
entitled under agreements entered into by the selling shareholders or us to
indemnification against certain civil liabilities, including liabilities under
the United States Securities Act.

The selling shareholders may sell all or any portion of the Registrable
Securities beneficially owned by them and offered hereby from time to time
directly, to or through underwriters or agents designated from time to time, to
or through brokers or dealers, or through any combination of these methods of
sale. The sales may be effected from time to time in one or more transactions:

- on the American Stock Exchange;

- in the over-the-counter market;

- on any other U.S. national securities exchange or quotation service on
which the common shares may be listed or quoted at the time of the sale;

- in transactions otherwise than on such exchanges or systems or in the
over-the-counter market;

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

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

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

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

- privately negotiated transactions;

- short sales;

- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;

- pledges of our common shares as security for any loan or obligation,
including pledges of brokers or dealers;

- firm commitment or best efforts underwriting;

- in a combination of any such methods of sale; and

- any other method permitted pursuant to applicable law.

The Registrable Securities may be sold at:

- fixed prices that may be changed;

- market prices prevailing at the time of sale;

- prices related to the prevailing market prices at the time of sale; or

- negotiated prices.

Any underwriter, agent, broker or dealer may receive compensation in the
form of discounts, commissions or concessions from the selling shareholders or
the purchasers of the shares for whom such broker-dealers may act as agents or
to whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). A member firm of an
exchange on which our common shares are traded may be engaged to act as a
selling shareholder's agent in the sale of Registrable Securities by such
selling shareholder.

In connection with distributions of the Registrable Securities offered by
this prospectus or otherwise, the selling shareholders may enter into hedging
transactions with brokers or dealers or other financial institutions with
respect to our common shares. In connection with such transactions, such brokers
or dealers or other financial institutions may engage in short sales of our
common shares in the course of hedging the positions they assume with the
selling shareholders. Such hedging transactions may require or permit the
selling shareholders to deliver the Registrable Securities to such brokers or
dealers or other financial institutions to settle such hedging transactions. The
selling shareholders may also sell our common shares short and deliver the
Registrable Securities to close out such short positions. If so required by
applicable law, this prospectus, as amended or supplemented, may be used to
effect:

- the short sales of our common shares referred to above;

- the sale or other disposition by the brokers or dealers or other
financial institutions of any Registrable Securities they receive
pursuant to the hedging transactions referred to above; or

- the delivery by the selling shareholders of Registrable Securities to
close out short positions.

The selling shareholders may also pledge or grant a security interest in
the Registrable Securities registered hereunder to a broker or dealer or other
financial institution and, upon a default, such broker or dealer or other
financial institution may effect sales of the pledged shares pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling
shareholders may also transfer the Registrable Securities registered hereunder
to a third party and such transferee may effect sales of the Registrable
Securities pursuant to this prospectus (as supplemented or amended to reflect
such transaction). In addition, any Registrable Securities covered by this
prospectus that qualify for resale in the United States pursuant to Rule 144
under the United States Securities Act, may be sold under Rule 144 rather than
pursuant to this prospectus. Any Registrable Securities covered by this
prospectus that qualify for resale outside the United States, including Canada,
pursuant to Regulation S may be sold under Regulation S rather than under this
prospectus.

Once sold under the registration statement, of which this prospectus forms
a part, the common shares will be freely tradable in the hands of persons other
than our affiliates.

The selling shareholders and any underwriters, brokers, dealers, agents or
others that participate with the selling shareholders in the distribution of the
Registrable Securities offered by this prospectus may be deemed to be
"underwriters" within the meaning of the United States Securities Act and any
underwriting discounts, commissions, concessions or fees received by such
persons and any profit on the resale of the Registrable Securities purchased by
such persons may be deemed to be underwriting commissions or discounts under the
United States Securities Act. To the extent the selling shareholders may be
deemed to be underwriters, the selling shareholders may be subject to certain
statutory liabilities of the United States Securities Act, including, but not
limited to, Sections 11, 12 and 17 of the United States Securities Act and Rule
10b-5 under the United States Securities Exchange Act of 1934. In addition and
without limiting the foregoing, the selling shareholders will be subject to
applicable provisions of the United States Securities Exchange Act of 1934, and
the rules and regulations thereunder.

CERTAIN INCOME TAX CONSIDERATIONS

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

MATERIAL CONTRACTS

<Table>
<Caption>
DATE DESCRIPTION PARTIES
- ---- ----------- -------

February 25, 2005............ Indirect Participation InterOil Corporation and the
Interest Agreement parties signatory thereto

February 25, 2005............ Registration Rights Agreement InterOil Corporation and the
parties signatory thereto

July 31, 2004................ Purchase and Sale Agreement InterOil Corporation and
Shell Overseas Holdings
Limited

March 10, 2004............... Share Sale Agreement InterOil Corporation, SPI
Distribution Limited, Gas
Tank Nederland B.V. and BP
Papua New Guinea Limited

November 9, 2003............. Facilities Management InterOil Limited and Petrofac
Contract Niugini Limited

March 26, 2002............... Engineering Procurement and InterOil Limited and Clough
Construction Contract Niugini Limited

December 21, 2001............ Crude Supply Agency and Sales EP InterOil, Ltd. and BP
Agreement Singapore Pte Limited

April 9, 2001................ Domestic Sales Agreement InterOil Limited and Shell
Papua New Guinea Limited

March 26, 2001............... Export Marketing and Shipping EP InterOil, Ltd. and Shell
Agreement International Eastern Trading
Company

February 8, 2001............. Agreement for the Sale and EP InterOil, Ltd. and Shell
Purchase of Naphtha International Eastern Trading
Company

May 29, 1997................. Refinery State Project InterOil Limited and EP
Agreement InterOil, Ltd. and The
Independent State of Papua
New Guinea
</Table>

INDIRECT PARTICIPATION INTEREST AGREEMENT

In February 2005, we entered into an indirect participation agreement with
institutional and accredited investors. Under the agreement, the investors paid
us $125 million and we agreed to drill eight exploration wells on our
concessions in PNG. We will select the location of the first six wells to be
drilled and we will propose the last two wells, which the investors may agree
with or propose alternative locations. We are obligated to pay all costs to
drill the eight wells, even if these costs exceed $125 million. If any of the
exploration wells appears to discover oil or gas, we will propose completion
operations. An investor may elect to participate in the completion operations if
the investor agrees to pay its share of the costs of completion. If the well
discovers a commercial field, each investor who participated in the completion
of the well may elect to participate in development of the field by agreeing to
pay (subject to non-consent penalties) its share of costs of the development. In
the aggregate, the investors may elect to pay 25% of all costs of completion and
development and receive 25% of all revenues from the sale of oil or gas
attributable to a discovery.

Each investor has the right, beginning June 15, 2006 and ending on the
later of December 15, 2006 and 90 days after the drilling of eight exploration
wells, to convert rights under the indirect participation agreement into our
common shares. Pursuant to this conversion right, an investor may elect to
receive a number of common shares equal to all or a portion of the amount paid
by the investor under the indirect participation agreement divided by $37.50. An
investor's election to receive common shares will proportionally reduce the
percentage of the development and operating costs an investor will be required
to pay, and the percentage of revenue the investor would be entitled to receive,
if we drill a successful exploration well. If all of the investors elect to
convert their interests under the indirect participation agreement into our
common shares, we would be required to issue 3,333,334 common shares, and the
investors would not have any right to participate in development of successful
exploration wells.

REGISTRATION RIGHTS AGREEMENT

On February 25, 2005, we entered into a registration rights agreement with
the parties to the indirect participation agreement. This agreement obligates us
to register for resale the shares the investors under the indirect participation
agreement may receive.

PURCHASE AND SALE AGREEMENT

On July 31, 2004, we entered into an agreement with Shell to purchase
Shell's PNG subsidiary, together with its retail and wholesale distribution
assets in PNG upon satisfaction of conditions precedent including receiving
statutory approvals. The agreement includes the following key components:

(a) Shell will lease the distribution assets back from us to continue
to operate its product distribution business unabated.

(b) The leaseback agreement terminates on the tenth anniversary of its
commencement, unless terminated earlier by Shell upon giving 6 months'
notice.

SHARE SALE AGREEMENT

On April 28, 2004, we acquired BP's distribution assets and commercial and
retail operations in PNG, comprising BP PNG's distribution company holdings, 40
service stations and 10 terminals and depots, for a purchase price of $12.2
million for the company and its assets and inventory. BP agreed to fund the
working capital of the distribution assets for one year after the effective
date, whereupon we repaid to BP a working capital adjustment and certain
dividend amounts, as well as the balance of the purchase price.

FACILITIES MANAGEMENT CONTRACT

On November 9, 2003, we entered into a facilities management contract with
Petrofac Niugini Limited. This agreement provides for the management of the
day-to-day operation and maintenance of our refinery and includes the following
key components:

(a) The initial term of the agreement is for 5 years from "practical
completion" of the refinery;

(b) The agreement can be terminated by either party upon six months
prior notice;

(c) Petrofac's remuneration is by way of a fixed management fee, which
is subject to adjustment based upon achievement of performance goals; and

(d) Petrofac Facilities Management Limited has provided a parent
company guarantee of Petrofac Niugini Limited's performance.

ENGINEERING PROCUREMENT AND CONSTRUCTION CONTRACT

On March 26, 2002, we entered into an engineering procurement and
construction contract with Clough Niugini Limited, which provides for the
design, procurement, and construction of our refinery. The agreement includes
the following key components:

(a) This is a lump-sum, turnkey contract providing for a
construction/commissioning period of 26 months.

(b) Except for the defect liability provisions, this construction
contract terminates upon "practical completion" of the refinery. In
general, practical completion occurs when the refinery is physically
complete and testing and commissioning has been carried out satisfactorily.

CRUDE SUPPLY AGENCY AND SALES AGREEMENT

On December 21, 2001, we entered into a crude supply agency and sales
agreement with BP. Under this agreement, BP will be the exclusive supplier of
crude feedstock to the refinery for an initial period of five years from their
first supplying crude to the refinery in June 2004. We have agreed to pay the
market price for this feedstock, which is the same as the purchase price for
Kutubu Blend feedstock set forth in our project agreements with PNG. In
addition, we have agreed to pay BP a nominal marketing fee per barrel.

BP has agreed to supply Kutubu Blend feedstock or, with our approval,
alternative crude feedstocks. If BP is able to supply other less expensive
feedstock to the refinery, we will share in the profit of marketing this oil. In
operating the refinery, we will attempt to optimize the costs of refining
different blends of crude under our marketing agreement with BP when choosing
our feedstock. This agreement terminates in June 2009. However, either party may
terminate the agreement earlier by providing 30 days' notice.

DOMESTIC SALES AGREEMENT

On April 9, 2001, we entered into a domestic sales agreement with Shell.
Commencing with our purchase of the Shell's retail and wholesale distribution
assets, Shell has agreed to purchase from us all of the refined products that
Shell requires for retail and wholesale distribution in PNG. The domestic sales
agreement provides that the purchase price for refined product is to be
essentially the same as the IPP. The domestic sales agreement terminates 10
years following our purchase of the domestic retail and distribution assets from
Shell.

EXPORT MARKETING AND SHIPPING AGREEMENT AND AGREEMENT FOR THE SALE AND PURCHASE
OF NAPHTHA

We entered into agreements with Shell with respect to the export of refined
product produced at the refinery that is not sold domestically. These agreements
include the following key components:

(a) The term of the agreements is three years from the first bill of
lading date for Naphtha, except for the export marketing agreement, which
has a term of three years from the date of practical completion of our
refinery in respect of the export marketing agreement.

(b) The purchase price of refined products is based upon market price
of such product in the export market.

(c) Shell agrees to take 100% of any excess volumes, after domestic
sales, of all products available for export including unleaded mogas,
Jet-A1, kerosene and diesel. In addition, Shell agrees to take 100% of the
refinery's naphtha production.

REFINERY STATE PROJECT AGREEMENT

On May 29, 1997, we entered into a project agreement with the government of
PNG under which we have agreed to construct a refinery and to operate that
refinery in Port Moresby.

In the project agreement, the government of PNG has agreed to propose
legislation and issue executive orders or policy directives to enable us to
purchase sufficient oil produced in PNG for the refinery to run at full
capacity. In addition, the government of PNG has agreed that future agreements
between PNG and producers of oil in PNG will contain provisions requiring such
producers to sell oil produced in PNG to local refineries to meet PNG'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 project agreement provides that the government of PNG will take all actions
necessary such that any refinery constructed in PNG (including ours) will have
the exclusive right to sell refined products prior to any imports into PNG at
the IPP. The term of the project agreement is 30 years from the date the
refinery construction is completed. In addition, for five years from the
commencement of refinery operations, the project agreement provides that income
from the refinery will not be taxed.

The project agreement can be terminated by the government of PNG if:

- we cease operations for 90 days without government approval;

- our refinery subsidiary terminates doing business or goes into
liquidation;

- we do not remedy a material breach of the project agreement within 60
days after receiving notice of such breach; or

- events beyond our reasonable control, including weather conditions,
events associated with active volcanoes or war, terrorism, civil unrest
or expropriation prevent us from operating the refinery for 12 months.

We can terminate the project agreement if:

- the government of PNG expropriates or nationalizes the refinery;

- the government of PNG does not remedy a material breach of this agreement
within 60 days after receiving notice of such breach;

- material provisions of any of our agreements become unenforceable or
unlawful;

- any restrictions on our ability to convert PNG currency into U.S. dollars
or restrictions on our use of foreign currency outside PNG last for more
than 180 days; or

- events beyond our reasonable control, including weather conditions,
events associated with active volcanoes or war, terrorism, civil unrest
or expropriation, prevent us from operating the refinery for 12 months.

CORPORATE STRUCTURE

We have six wholly- or majority-owned principal subsidiaries: S.P.
InterOil, LDC ("SPI"); EP InterOil, Ltd. ("EPI"); InterOil Limited ("IOL"); SPI
Exploration and Production Corporation ("SPI E&P"); SPI Distribution Limited
("SPID") and InterOil Products Limited ("IPL"). Other than IPL, all companies
have integrated, shared management.

INTEROIL CORPORATION

We were formed under the Business Corporations Act (New Brunswick) by
articles of amalgamation dated May 29, 1997. Our registered office is located at
Brunswick House, 10th Floor, 44 Chipman Hill, Saint John, New Brunswick E2L 4S6.

S.P. INTEROIL, LDC

SPI was incorporated under the International Business Companies Act, 1989,
of the Commonwealth of the Bahamas on November 22, 1996. The registered office
of SPI is located in Nassau, the Bahamas. SPI was formed under the laws of the
Bahamas to facilitate investment and to maximise the tax advantages available to
its investors. The General Manager of SPI is Petroleum Independent and
Exploration Corporation ("PIE"), a privately held company registered in Texas,
USA and incorporated in 1981. The management fee paid to PIE in 2002 was
U.S.$150,000. Mr. Phil E. Mulacek, our president and chief executive officer, is
the president and majority shareholder of PIE.

SPI negotiated the purchase of the refinery assets, which included a
modular crude unit, a reformer and two ocean-going American-flagged steel deck
barges. After acquiring the equipment, SPI directed the dismantling, loading and
transportation of the equipment off the Texas Gulf coast.

We entered into an agreement with PIE under which PIE can exchange its
remaining 5,000 shares of SPI on a one-for-one basis for fully paid and validly
issued shares in InterOil. This election may be made by PIE at any time.

EP INTEROIL, LTD.

EPI was incorporated under the Companies Law of the Cayman Islands in 1996
to form a joint venture with Enron Papua New Guinea Limited. Its registered
office is located in Grand Cayman. Currently, SPI controls EPI, with 100% of the
voting stock.

EPI acquired the crude distillation and reformer units from SPI and
arranged for this equipment to be refurbished in Texas by Gulf Copper
Manufacturing Corp. It also acquired two PGT-5 gas turbine generators from GM
Services of Italy. This equipment has been transferred to IOL in PNG for the
construction of the refinery.

INTEROIL LIMITED

IOL is incorporated in PNG, and was formed in 1994 to construct, own and
operate the refinery once the refinery is completed. Its registered office is in
Port Moresby, PNG. IOL has played a very active role in working with the PNG
government to obtain the permits, authorizations and certificates required under
the State Project Agreement and has also obtained a 99-year lease of the
refinery site. IOL has received "Pioneer status" in PNG, which grants a
five-year income tax holiday to IOL in PNG.

SPI EXPLORATION AND PRODUCTION CORPORATION

SPI E&P was incorporated under the International Business Companies Act,
1989, of the Commonwealth of the Bahamas on September 3, 1998. The registered
office of SPI E&P is located in Nassau, the Bahamas. SPI E&P was formed under
the laws of the Bahamas to facilitate investment and to maximise the tax
advantages available to its investors.

SPI E&P owns all of the specific purpose exploration companies holding and
operating exploration rights in PNG, including SPI (208) Limited SPI (210)
Limited and SPI (220) Limited, which are undertaking drilling programs in their
petroleum prospecting licences in PNG.

SPI DISTRIBUTION LIMITED

SPID was incorporated under the International Business Companies Act, 1989,
of the Commonwealth of the Bahamas on February 13, 2001. The registered office
of SPID is located in Nassau, the Bahamas. SPID was formed under the laws of the
Bahamas to facilitate investment and to maximise the tax advantages available to
its investors. SPID owns our specific purpose product distribution assets in
PNG, including InterOil Products Limited.

INTEROIL PRODUCTS LIMITED

IPL is incorporated in PNG and was formed in October 1969 as BP Papua New
Guinea. IPL changed its name in April 2004 after its acquisition by our wholly
owned Bahamas subsidiary SPI Distribution Limited. The acquisition of IPL was a
significant acquisition as regards the Company. The registered office of IPL is
in Lae, Morobe Province, PNG. IPL owns and operates a petroleum products
distribution, wholesale and retail business in PNG and has approximately 20% of
the wholesale product market in PNG based on total volume of sales for such
products, in competition with Shell, ExxonMobil and Nuigini Oil Company.

CORPORATE CHART

(CORPORATE CHART)

PRINCIPAL OPERATIONAL OFFICES

Our principal operational offices are located at Suite 2, Level 2, Orchid
Plaza 79-88 Abbott Street, Cairns, QLD 4870, Australia, our telephone number is
(61) 7 4046 4600 and our website address is www.interoil.com. The reference to
our Internet website address in this prospectus does not constitute the
incorporation by reference of the information contained at this site in this
prospectus.

WITHHOLDING TAX AND CURRENCY EXCHANGE CONTROLS IN PNG

The current rate of dividend withholding tax stipulated by the Income Tax
Act 1959 (PNG) is 17%.

The Central Banking (Foreign Exchange & Gold) Regulation (Ch138) (PNG)
regulates the flow of currency into and out of PNG. A PNG company can only send
PNG Kina or a foreign currency (other than that which was the subject of a
previously approved exchange) out of PNG with the Central Bank's prior approval.
These authorities or approvals are delegated to certain commercial banks as
authorised dealers up to certain limits. The limits to exchanging and remitting
foreign currency overseas from PNG are K50,000 per transaction without further
tax clearance from the Internal Revenue Commission and K500,000 in aggregate per
annum without further Central Bank approval.

LEGAL MATTERS

Certain Canadian legal matters relating to the issue and sale of common
shares offered hereby will be passed upon on behalf of us by Stikeman Elliott
LLP. Certain United States legal matters will be passed upon on behalf of us by
Haynes and Boone LLP.

EXPERTS

Our consolidated annual financial statements as at and for the years ended
December 31, 2004, 2003 and 2002 incorporated by reference herein, have been
audited by KPMG. The financial statements of InterOil Products Limited as of
December 31, 2003, 2002 and 2001 and for each of the years in the three year
period ended December 31, 2003 incorporated by reference in this prospectus have
been so included in reliance on the audit report of PricewaterhouseCoopers,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

AVAILABLE INFORMATION

Information has been incorporated by reference in this base shelf
prospectus from documents filed with the SEC and the securities commissions or
similar regulatory authorities in Canada. Copies of the documents incorporated
herein by reference and of the permanent information record may be obtained on
request without charge from our Vice-President, Corporate Development, Gary M.
Duvall (telephone: (281-292-1800)), or by accessing the disclosure documents
available through the Internet on the Canadian System for Electronic Document
Analysis and Retrieval ("SEDAR") which can be accessed as www.sedar.com, for
Canadian filings, and the SEC's Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system, which can be accessed at www.sec.gov.

We are subject to the informational requirements of the Exchange Act, and
in accordance therewith file reports and other information with the SEC. Such
reports and other information filed by the company can be inspected and copied
at the public reference facilities maintained by the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and at the following
regional offices of the SEC: 175 West Jackson Blvd., Suite 900 Chicago, IL
60604; and 233 Broadway New York, NY 10279.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents of ours filed with the SEC and/or securities
commissions or similar authorities in Canada are incorporated by reference in
this prospectus for purposes of sales by the selling shareholders in the United
States:

(a) Annual Information Form dated March 31, 2005;

(b) Comparative consolidated financial statements for the years ended
December 31, 2004 and December 31, 2003, together with the auditors' report
thereon and notes thereto;

(d) Annual financial statements of InterOil Products Limited (formerly
BP PNG) for the years ended December 31, 2003, 2002 and 2001 and the
auditor's report thereon contained at pages 61 to 73 of our (final) base
shelf prospectus dated December 13, 2004 as filed on SEDAR;

(e) Interim financial statements of InterOil Products Limited
(formerly BP PNG) for the three month periods ended March 31, 2004 and 2003
contained at pages 74 to 79 of our (final) base shelf prospectus dated
December 13, 2004 as filed on SEDAR;

(f) Management information circular for the annual and special meeting
of shareholders held on June 29, 2004 (excluding those portions, which, in
accordance with National Instrument 44-101, need not be incorporated by
reference);

(g) Material change report dated January 7, 2005 in respect of the
conversion of all of our issued and outstanding convertible debentures into
common shares;

(h) Material change report dated February 1, 2005 in respect of the
practical completion of our refinery; and

(i) Material change report dated March 3, 2005 in respect of the
U.S.$125 million third-party investment in our exploration program in PNG
pursuant to the IPI Agreement.

Any document of the type referred to in the preceding paragraph filed by us
after the date of this prospectus with the SEC or with a securities commission
or similar authority in Canada shall be deemed to be incorporated by reference
into this base shelf prospectus for purposes of any sale of Registrable
Securities in the United States pursuant to this prospectus.

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

LIST OF DOCUMENTS FILED WITH THE SEC

The following documents have been filed with the SEC as part of the
Registration Statement of which the prospectus forms a part: the documents
referred to under the heading "Documents Incorporated by Reference"; U.S. GAAP
Reconciliations; documents referred to under the heading "Material Contracts";
and the consents of KPMG and PricewaterhouseCoopers.

AUDITORS, TRANSFER AGENT AND REGISTRAR

Our auditors are KPMG, Sydney, Australia.

The transfer agent and registrar for our common shares is Computershare
Trust Company of Canada at its principal transfer office in Toronto, Ontario.

PURCHASER'S STATUTORY RIGHTS

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

AUDITORS' CONSENT

To the Board of Directors of InterOil Corporation

We have read the preliminary base shelf prospectus dated May 3, 2005
relating to the distribution of certain common shares of the Company. We have
complied with Canadian generally accepted standards for an auditors' involvement
with offering documents.

We consent to the incorporation by reference in the above-mentioned
prospectus of our auditor's report to the shareholders of the Company on the
consolidated balance sheets of the Company as at December 31, 2004 and 2003 and
the consolidated statements of operations, shareholders' equity and cash flows
for each of the years in the three year period ended December 31, 2004 and to
the reference to our firm under the heading "Experts" in the prospectus. Our
report is dated March 4, 2005.

(signed) KPMG

Sydney, Australia
May 3, 2005

INDEX TO FINANCIAL INFORMATION

<Table>
<Caption>
PAGE
----

PRO FORMA FINANCIAL STATEMENTS
Compilation Report........................................ F-2
Statement of Operations for the year ended December 31,
2004................................................... F-3
Notes..................................................... F-4
</Table>

F-1

COMPILATION REPORT

The Board of Directors of InterOil Corporation

We have read the accompanying unaudited pro forma consolidated statements
of operations for the year ended December 31, 2004 and have performed the
following procedures:

1. Compared the figures in the columns captioned "InterOil
Corporation" to the audited financial statements of the Company for the
year ended December 31, 2004, and found them to be in agreement.

2. Compared the figures in the columns captioned "BP Papua New Guinea
Limited" to the unaudited financial statements of BP Papua New Guinea
Limited (now renamed InterOil Products Limited) for the three months ended
March 31, 2004 and found them to be in agreement.

3. Made enquiries of certain officials of the Company who have
responsibility for financial and accounting matters about:

(a) The basis for determination of the pro forma adjustments; and

(b) Whether the unaudited pro forma consolidated statements of
operations comply as to form in all material respects with the Ontario
Securities Act and the related regulations.

The officials:

(d) stated that the unaudited pro forma consolidated statements of
operations comply as to form in all material respects with the Ontario
Securities Act and the related regulations.

4. Read the notes to the unaudited pro forma consolidated statements
of operations, and found them to be consistent with the basis described to
us for determination of the pro forma adjustments.

5. Recalculated the application of the pro forma adjustments to the
aggregate of the amounts in the columns captioned "InterOil Corporation"
for the year ended December 31, 2004 and "BP Papua New Guinea Limited" for
the three months ended March 31, 2004, and found the amounts in the column
captioned "Pro forma" to be arithmetically correct.

A pro forma financial statement is based on management assumptions and
adjustments which are inherently subjective. The foregoing procedures are
substantially less than either an audit or a review. The objective of an audit
or a review is the expression of assurance with respect to management's
assumptions, the pro forma adjustments, and the application of the adjustments
to the historical financial information. Accordingly, we express no such
assurance. The foregoing procedures would not necessarily reveal matters of
significance to the unaudited pro forma consolidated statements of operations,
and we therefore make no representation about the sufficiency of the procedures
for the purposes of a reader of such statements.

(signed) KPMG

Sydney, Australia
May 3, 2005

COMMENTS FOR UNITED STATES READERS ON DIFFERENCES BETWEEN CANADIAN AND UNITED
STATES REPORTING STANDARDS

The above report, provided solely pursuant to Canadian requirements, is
expressed in accordance with standards of reporting generally accepted in
Canada. To report in conformity with United States standards on the
reasonableness of the pro forma adjustments and their application to the
unaudited pro forma consolidated statements of operations requires an
examination or review substantially greater in scope than the review we have
conducted. Consequently, we are unable to express any opinion in accordance with
standards of reporting generally accepted in the United States with respect to
the compilation of the accompanying unaudited pro forma consolidated statements
of operations.

(signed) KPMG

Sydney, Australia
May 3, 2005
F-2

INTEROIL CORPORATION

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
(EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

<Table>
<Caption>
CANADIAN GAAP U.S. GAAP
----------------------------------------------------------------- -------------------------
BP PAPUA
NEW GUINEA
LIMITED
(UNAUDITED)
(3 MONTHS
INTEROIL ENDED PRO FORMA GAAP
CORPORATION MARCH 31, ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
(AUDITED) 2004) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
($'000S) ($'000S) NOTE ($'000S) ($'000S) ($'000S) ($'000S)
----------- ----------- ---- ----------- ----------- ----------- -----------

REVENUE
Sales and operating revenues...... 70,644 18,698 4(a) 8,619 97,961 51,330 149,291
Interest.......................... 383 32 4(a) 36 451 -- 451
Rent.............................. -- 31 4(a) 8 39 -- 39
Other............................. 196 69 -- 265 -- 265
---------- ------ ----- ---------- ------- ----------
71,223 18,830 8,663 98,716 51,330 150,046
---------- ------ ----- ---------- ------- ----------
EXPENSES
Cost of sales and operating
expenses........................ 63,836 14,853 4(b) 6,701 85,390 64,527 149,917
Inventory revaluation............. 1,508 -- 1,508 1,508
Administrative and general
expenses........................ 8,471 1,962 4(c)(d)(e) 1,721 12,154 1,570 13,724
Debt conversion expense........... -- -- -- 6,977 6,977
Exploration costs................. 38,470 -- -- 38,470 -- 38,470
Legal and professional fees....... 3,574 -- -- 3,574 82 3,656
Borrowing costs................... 6,106 -- -- 6,106 -- 6,106
Foreign exchange loss (gain)...... 393 141 4(f) (450) 84 -- 84
---------- ------ ----- ---------- ------- ----------
122,358 16,956 7,972 147,286 73,156 220,442
---------- ------ ----- ---------- ------- ----------
Profit (loss) before income taxes
and non-controlling interest.... (51,135) 1,874 691 (48,570) (21,826) (70,396)
Income tax benefit (expense)...... (1,875) (554) 4(g) 49 (2,380) -- (2,380)
---------- ------ ----- ---------- ------- ----------
Profit (loss) before
non-controlling interest........ (53,010) 1,320 740 (50,950) (21,826) (72,776)
Non-controlling interest.......... 70 -- -- 70 196 266
---------- ------ ----- ---------- ------- ----------
Net profit (loss) before
cumulative effect of accounting
change.......................... (52,940) 1,320 740 (50,880) (21,630) (72,510)
---------- ------ ----- ---------- ------- ----------
Cumulative effect of accounting
change.......................... -- -- -- -- (738) (738)
---------- ------ ----- ---------- ------- ----------
NET PROFIT (LOSS)................. (52,940) 1,320 740 (50,880) (22,368) (73,248)
---------- ------ ----- ---------- ------- ----------
BASIC LOSS ($ PER SHARE).......... (2.09) (2.01) (2.89)
DILUTED LOSS ($ PER SHARE)........ (2.09) (2.01) (2.89)
SHARES USED IN PER SHARE
CALCULATION -- BASIC............ 25,373,575 25,373,575 25,373,575
SHARES USED IN PER SHARE
CALCULATION -- DILUTED.......... 25,373,575 25,373,575 25,373,575
</Table>

See accompanying notes to the unaudited pro forma consolidated statements of
operations
F-3

INTEROIL CORPORATION

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
(EXPRESSED IN UNITED STATES DOLLARS, UNLESS OTHERWISE STATED)

1. BASIS OF PRESENTATION

(a) Actual historic financial information

On March 10, 2004, InterOil Corporation ("the Company") signed an agreement
to acquire 100% of BP Papua New Guinea Limited (renamed InterOil Products
Limited or "IPL"). IPL is a distributor of refined petroleum products in Papua
New Guinea.

Under the acquisition agreement, InterOil Corporation was entitled to the
profit of IPL from March 1, 2004. However, control of IPL's shares was not
transferred to InterOil Corporation until April 28, 2004. Accordingly, the
profit earned after tax between March 1, 2004 and April 28, 2004 was recognized
as a reduction in the Company's acquisition cost. The results of IPL's
operations from April 29, 2004 have been included in the Company's actual
historic consolidated statement of operations.

(b) Pro forma consolidated financial information

The unaudited pro forma consolidated statement of operations have been
prepared to illustrate the notional operations of the consolidated group as it
was structured at December 31, 2004 as if that group had existed at January 1,
2004.

Accordingly, the pro forma assumptions are as follows:

(i) InterOil Corporation obtained 100% control of IPL on January 1,
2004 and was entitled to 100% of IPL's results of operations for the year
ended December 31, 2004.

(ii) Imputed interest is recognized on the basis that the amounts
payable to the vendor were repaid one year after control of IPL was assumed
to have passed to InterOil Corporation.

(iii) The pro forma consolidated financial information disclosed in
the consolidated statements of operations is based on:

- The audited statement of operations of InterOil Corporation for the year
ended December 31, 2004, which includes the results of IPL for the eight
months from April 29, 2004.

- The unaudited statement of operations of IPL for the three months ended
March 31, 2004. The average Kina to United States Dollar exchange rate
for the three months ended March 31, 2004 is 0.3093.

- The pro forma adjustments set out in Note 4.

It is management's opinion that these unaudited pro forma consolidated
statements of operations include all adjustments necessary for the fair
presentation, in all material respects, of the transaction described in Note 3
in accordance with the pro forma assumptions on a basis consistent with InterOil
Corporation's accounting policies.

The unaudited pro forma consolidated statements of operations are not
intended to reflect the results of operations of InterOil Corporation which
would have actually resulted had the proposed transaction been effected on the
date indicated. Further, the pro forma consolidated financial information is not
necessarily indicative of the results of operations that may be obtained in the
future.

The unaudited pro forma consolidated statements of operations should be
read in conjunction with the historical financial statements and notes thereto
of InterOil Corporation and IPL described above.

F-4

INTEROIL CORPORATION

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited pro forma consolidated statements of operations have been
compiled using the significant accounting policies as set out in the audited
financial statements of InterOil Corporation for the year ended December 31,
2004 which are incorporated by reference in this prospectus. The generally
accepted accounting principles ("GAAP") applied by InterOil Corporation in its
financial statements are those applicable to Canadian public enterprises. The
significant accounting policies of IPL after adjustment to Canadian GAAP conform
in all material respects to those of InterOil Corporation.

The unaudited pro forma consolidated statements of operations have also
been restated in conformity with United States GAAP.

3. BUSINESS ACQUISITION

As indicated in Note 1, on March 1, 2004, the Company, through its wholly
owned subsidiary, S.P.I. Distribution Limited, acquired 100% of the outstanding
common shares of BP Papua New Guinea Limited which was subsequently renamed
InterOil Products Limited.

This acquisition has been accounted for using the purchase method and
results from IPL's operations have been included in InterOil Corporation's
results of operations from April 28, 2004. The allocation of the purchase price
is summarised in the table below:

<Table>
<Caption>
$
----------

PURCHASE PRICE:
Cash paid................................................... 1,000,000
Payable to vendor on March 1, 2005 (net of imputed interest
of $559,118).............................................. 10,667,736
Payable to vendor on March 1, 2005 under related service
agreement................................................. 1,000,000
Acquisition costs........................................... 227,613
----------
12,895,349
----------
NET ASSETS ACQUIRED:
Cash........................................................ 5,859,517
Non-cash working capital.................................... 3,215,018
Property, plant and equipment............................... 3,180,530
Future income tax benefits.................................. 640,284
----------
12,895,349
----------
</Table>

4. PRO FORMA ADJUSTMENTS

The unaudited pro forma consolidated statements of operations include the
following adjustments which reflect the pro forma assumptions described in Note
1(b):

(a) To record the revenues earned by IPL during the period April 1,
2004 to April 28, 2004.

(b) To record the cost of sales and operating expenses incurred by IPL
during the period April 1, 2004 to April 28, 2004.

(d) To record changes in depreciation expense resulting from
adjustments to the property, plant and equipment carrying values made on
the consolidation of IPL into IOC.

F-5

INTEROIL CORPORATION

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)

(e) To include the imputed interest expense relating to the purchase
price payable by InterOil Corporation for the two months from January 1,
2004 to February 28, 2004, which is not included in the InterOil
Corporation statement of operations. This amount was assumed to have been
paid by December 31, 2004, which is one year from the date of pro forma
control.

(f) To record the foreign exchange gain incurred by IPL during the
period April 1, 2004 to April 28, 2004.

(g) To record the income tax expense incurred by IPL during the period
April 1, 2004 to April 28, 2004.

5. US GAAP ADJUSTMENTS

The US GAAP adjustments are the same as those included in Note 24 to the
Company's audited consolidated financial statements for the year ended December
31, 2004.

F-6

CERTIFICATE OF THE COMPANY

May 3, 2005

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

(Signed) PHIL E. MULACEK (Signed) TOM S. DONOVAN
Chief Executive Officer Chief Financial Officer
</Table>

On behalf of the Board of Directors

(Signed) CHRISTIAN VINSON (Signed) G. MICHAEL FOLIE
Director Director
</Table>

C-1

PART II

INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

INDEMNIFICATION

Section 22 of the Bylaws of the Company provides, with regard to indemnity
and insurance under the Business Corporations Act (New Brunswick) (the "Act"),
in part as follows:

"Subject to Section 81 of the Act, except in respect of an action by
or on behalf of the Corporation or Another Body Corporate (as hereinafter
defined) to procure a judgement in its favour, the Corporation shall
indemnify each director and officer of the Corporation and each former
director and officer of the Corporation and each person who acts or acted
at the Corporation's request as a director or officer of Another Body
Corporate, and his heirs and legal representatives, against all costs,
charges and expenses, including any amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which he is made a party
by reason of being or having been a director or officer of the Corporation
or Another Body Corporate, as the case may be, if

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

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

"Another Body Corporate" as used herein means a body corporate of
which the Corporation is or was a shareholder or creditor."

The Act provides that no officer or director of the Company may be
indemnified in connection with the defense of any civil, criminal or
administrative action or proceeding to which such person is made a party by
reason of being or having been a director or officer of the corporation or body
corporate, unless a court of competent jurisdiction has approved the terms of
such indemnification. However, the Act further provides that notwithstanding any
provision to the contrary therein, any officer or director is entitled to
indemnification if such person (i) was substantially successful on the merits of
the defense of the action or proceeding; (ii) acted honestly and in good faith
with a view to the best interests of the corporation; and (iii) where a criminal
or administrative action or monetary penalty is involved, such person had
reasonable grounds for believing that his or her conduct was lawful.

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

II-1

PART III

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

ITEM 1. UNDERTAKING.

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

ITEM 2. CONSENT TO SERVICE OF PROCESS.

Concurrently with the filing of this Registration Statement on Form F-10,
the Company is filing with the Commission a written irrevocable consent and
power of attorney on Form F-X.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on this Form F-10 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada, on the 4th day
of May, 2005.

INTEROIL CORPORATION

By: /s/ PHIL E. MULACEK
------------------------------------
Phil E. Mulacek
Chairman of the Board,
Chief Executive Officer and
President

POWER OF ATTORNEY

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

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated, on the 4th day of May, 2005.

/s/ PHIL E. MULACEK Chairman of the Board, Chief Executive Officer and
------------------------------------------------ President (Principal Executive Officer)
Phil E. Mulacek

/s/ TOM S. DONOVAN General Manager-Finance/Accounts and Chief
------------------------------------------------ Financial Officer (Principal Financial Officer and
Tom S. Donovan Principal Accounting Officer)

/s/ CHRISTIAN M. VINSON Director; Chief Operating Officer and Vice
------------------------------------------------ President
Christian M. Vinson

/s/ GEOFFREY M. FOLIE Deputy Chairman of the Board
------------------------------------------------
Geoffrey M. Folie

/s/ ROGER N. GRUNDY Director
------------------------------------------------
Roger N. Grundy

/s/ GAYLEN J. BYKER Director
------------------------------------------------
Gaylen J. Byker

/s/ EDWARD N. SPEAL Director
------------------------------------------------
Edward N. Speal
</Table>

II-3

EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------

1 Preliminary Base Shelf Prospectus (included herein as Part I
of this Registration Statement)

2 Annual Information Form for the year ended December 31, 2004
(incorporated herein by reference to Exhibit 1 of the
Company's Report on Form 40-F filed March 31, 2005)

3 Comparative consolidated financial statements for the years
ended December 31, 2004, 2003 and 2002 and cumulative,
together with the notes and the auditors' report thereon
(incorporated herein by reference to Exhibit 2 of the
Company's Report on Form 40-F filed March 31, 2005)

4 Management's Discussion and Analysis for the years ended
December 31, 2004, 2003 and 2002 (incorporated herein by
reference to Exhibit 3 of the Company's Report on Form 40-F
filed March 31, 2005)

5 Annual financial statements of InterOil Products Limited
(formerly BP PNG) for the years ended December 31, 2003,
2002 and 2001 and the auditor's report thereon contained on
pages 57 to 73 of the Company's (final) base shelf
prospectus dated December 13, 2004 (incorporated herein by
reference to Part I of the Company's Registration Statement
on Form F-10/A, Registration No. 333-120383, filed December
15, 2004)

6 Management Information Circular for the annual and special
meeting of shareholders held on June 29, 2004 (excluding
those portions, which, in accordance with National
Instrument 44-101, need not be incorporated by reference)*

7 Consent of KPMG*

8 Consent of Pricewaterhouse Coopers*

9 Power of Attorney (included on the signature page of this
Registration Statement)
</Table>

- ---------------

* Filed herewith