Imperial Energy Makes Significant Oil Discovery in Western Siberia

Imperial has made a significant new discovery of oil at Nord Imperial, Block 69, Aikagalskaya Field, Tomsk Region, Western Siberia.

The new discovery of oil is from the Lower Cretaceous section in the re-entry Festivalnaya 252 well on the Aikagalskaya Field in Block 69 in the Tomsk region of Western Siberia. As previously reported this well has already been tested by Imperial, flowing oil to surface from the deeper Palaeozoic/Basal Jurassic section at a rate of 126 bopd. Festivalnaya 252 was drilled in 1970, but the Lower Cretaceous section has been tested for the first time as a result of Imperial's review of old data. The Lower Cretaceous reservoir is a better reservoir than the underlying Jurassic, the main reservoir in the Tomsk region.

As a consequence of poor completion in the Soviet era the condition of the well prevented proper testing of the Lower Cretaceous reservoir section in isolation from other water bearing sections. Nevertheless during testing of 25m from a gross interval of 37m the well flowed to surface (without pumping) at a rate of 155 barrels of fluid per day comprising 32% oil of 43 degrees API and 68 % water which water is thought to originate largely from aquifers above and below the oil bearing zones. During subsequent testing of the upper part of this section by pumping a materially increased rate of 327 barrels of fluid per day was achieved comprising 24% oil and 76% water. In a properly completed well it would be expected that it would be possible to produce clean oil at good commercial rates with little or no water.

Independent expert interpretation of production and other logs indicates at least 10m of net pay and possibly more. Provisionally estimated most likely recoverable reserves are 22 million barrels of oil from this section which is in addition to Imperial's 228 million barrels 2P reported reserves of oil. This discovery not only significantly enhances the production potential and economics of the Aikagalskaya field as well as further increasing Imperial's reported reserves in Block 69, but as importantly also opens up the possibility of additional discoveries within the same interval throughout much of Imperial's acreage in the Tomsk region.

Immediate plans in Block 69, include 386 kms of new seismic, already in the process of being shot during this winter season, and the drilling of two appraisal wells on the Aikagalskaya field which will evaluate both this newly discovered Lower Cretaceous reservoir as well as the proven Palaeozoic/Basal Jurassic reservoir. Winter road construction and site preparation for the first of these appraisal wells is in progress and the well, Festivalnaya 256, is planned to be spudded in March.

The Lower Cretaceous horizon is also a potential target in Imperial's Allianceneftegas Blocks 70, 85 and 86 immediately to the south of Block 69, where Imperial will again be shooting new seismic and drilling three new exploration wells during 2006, one of which specifically includes a Lower Cretaceous target.

As Imperial's focus in Block 69 changes to Aikagalskaya, further work in relation to the North Festivalnaya field also in Block 69 has been deferred till 2007. Accordingly, plans are now being implemented for up to a further five new wells to be drilled on the Aikagalskaya field in H2 2006 by the bringing up in advance of all necessary equipment and raw materials for these on the winter roads presently in place. Such new wells will be in addition to the already announced drilling programme at Aikagalskaya Field for H1 2006.

Peter Levine, Chairman, comments:

"This new discovery is very significant to Imperial's already impressive assets. The importance of this discovery goes beyond its direct impact in that it confirms that there is significant potential for new Imperial discoveries in horizons that have, hitherto, have not been tested.

In the way of Imperial, we are expeditiously moving forward to identify and exploit the additional exciting opportunities now in prospect".