Teikoku Oil Acquires Stake in Two Blocks in Ecuador

Teikoku Oil has entered an agreement with Petrobras Energia and Eduadortlc to acquire a 40% participating interest in Blocks 18 and 31 in Ecuador. This Agreement will officially take effect upon the approval by the Ecuadorian government.

These Blocks are located in the OrienteBasin in the Eastern part of Ecuador. In Block 18, 20 thousand barrels of oil per day (BOPD) is being produced and it is expected to reach 50 thousand BOPD in peak year in 2009, through the additional development works... In Block 31, four oil fields have been discovered and the development operations are soon to commence within this year. We expect the first oil at around 30 thousand BOPD in 2006 and there is potentials increase in the production capacity through the future development and exploratory drilling in the promising prospects.

PESA is one of the most active and leading oil companies in Latin America.Teikoku has through its subsidiaries, joint operations with PESA group companies for two gas exploration projects, San Carlos and Tinaco blocks in Venezuela and Cuervito and Fronterizo blocks in Mexico. . Accordingly, this is the third joint operation for Teikoku. We expect to further strengthen our cooperative business relations with PESA hereafter for the benefit of two companies.

Teikoku is operating oil and gas production in Venezuela and in Mexico. We expect this new deal will play a key role in overseas operations as it will help enhance the presence in Latin America and may lead to new projects and chance to expand the Teikoku’s business in the area.