Volga Gas first production from Uzenskaya well

Volga Gas Plc, the independent gas exploration and production company, which currently holds four subsoil licences in the Volga region of European Russia, declares that oil production has commenced from Uzenskaya £1 and first revenues have been received. The Company has structured an agreement to sell all its oil production at its surface facilities located on the Uzenskaya field at RUR7,550/tonne (approx $42/bbl). As the production is sold locally the Company does not need to pay export taxes, which are currently approximately $35/bbl.

The production from this well has been kept to 100 barrels of oil per day to limit the production of free gas. The well was drilled at the top of the structure and hit a small gas cap as well as the underlying oil. The surface facilities will be upgraded in 2008 to allow the Company to utilize the gas which should lead to increased oil production rates.

The Company has started acquiring 140km2 of 3-D seismic over the Uzenskaya field and 5 other identified supra-salt structures on the Karpenskiy licence area. It is expected that this 3-D will assist the Company in identifying locations of additional wells on the Uzenskaya field which, if successful, would be expected to have higher production rates as they would be located away from the gas cap.

Additional supra-salt fields which are successfully brought in to production may be tied back in to the surface facilities at Uzenskaya.