Arawak Discovers Oil at Besbolek Block in Kazakhstan

Arawak Energy has made a discovery on its 100% owned Besbolek block in Kazakhstan. Exploration well No. 50 has discovered oil in a previously untested structure in the south of the block. The drilling and testing of the exploration well confirmed the exploratory concept of the extension of the Upper Triassic paleo-flows into the down-faulted southern Besbolek block.

Open hole logs establish three hydrocarbon-bearing intervals. The primary oil accumulation was encountered in the upper Triassic sediments within the lower interval of 347 - 379 meters with gross sand thickness of 33 meters and effective net pay of about 30 meters. On July 19, 2007, the well was perforated in the Upper Triassic interval, which resulted in a strong natural flow rate of 90 barrels of oil per day ("bopd") on a 3 mm choke with 7 atm FTP. After the installation of artificial lift we expect the production rate to increase to 250-400 bopd. Extended production testing is still in progress. The oil is of 30 degree API gravity, which is lighter than the main Triassic pool.

The other two hydrocarbon accumulations were penetrated in the Middle Jurassic intervals of 205-213 and 220-230 meters. The exact saturation content will be established after perforating and production testing of the pay intervals. It can be presumed that the oils within these intervals will also be lighter with a higher gas factor than typical Besbolek crude.

The Company's preliminary assessment of reserves discovered indicates likely additions of between 3 to 6 million barrels of proved and probable reserves. These figures will be confirmed after further follow-up wells and updates to the Company's reserves to be undertaken by reserve auditors at year-end. Proved and probable reserves attributed to the Besbolek block as of the date of the last audited reserve report, 31 December 2006, were 5.8 million barrels. 28.2 million barrels of proved and probable reserves have been attributed to all of the Company's properties in Kazakhstan.

The 3D seismic model of South Besbolek reveals a complex faulted structure with up to five separate multi-level tectonic blocks. The first appraisal well, No. 51, has already been spudded and is presently drilling at 250 meters and has encountered encouraging hydrocarbon shows in the Jurassic sediments. A further appraisal-drilling program of three to four additional wells is planned for this year to delineate the southern block.

In second half of 2007, Arawak plans a balanced drilling program of exploration, appraisal and development drilling at Besbolek. The Company's drilling program at Besbolek has just been stepped up with the program to the year-end increased to 18 wells from the previous 14. All of these wells have been permitted and presently, a 2-rig program is underway. Well No. 50 is the first of 4 exploration leads generated through the 21 square km. 3D seismic shoot acquired, processed and interpreted in 2006.

Alastair McBain, CEO said, "We are delighted by the results of the well 50 flow test, which is our first Kazakhstani well with natural flow. Together with the follow up results from well 51 this suggests a significant increase in our reserves on the Besbolek block. This is the perfect start to our ambitious 2007 Kazakhstan drilling program, where we now have 2 rigs running in each of the Besbolek and Akzhar blocks, and demonstrates the excellent technical capabilities of our in house G&G group. We have 3 other new leads identified in the Besbolek block, which will be drilled this year, as well as numerous leads at Akzhar and we look forward to further good news. The shallow nature of the plays is ideal for our low cost multi well drilling program."