Island and OMV Conclude Asset Swap

Island Oil & Gas has concluded the previously announced asset swap agreement with OMV and has received all relevant governmental and partner approvals have been received for the agreement.

The assignment of the 50% interest in the Durresi Block, offshore Albania from OMV to Island has been approved by the competent authorities in Albania and the assignment of the 50% interest in Frontier Exploration License 3/05 ("FEL 3/05") offshore the west of Ireland in the Rockall Basin, which includes the Killala Prospect, from Island to OMV has been approved by the Minister for Communications, Marine and Natural Resources of Ireland, subject to receipt of a Deed of Assignment.

The Agreement is between Island Rockall JV Limited, a wholly-owned subsidiary of Island, and OMV (Albanien) Adriatic Sea Exploration GMBH ("OMV"), a wholly-owned subsidiary of OMV Exploration & Production GmbH. Under the terms of the Agreement, Island will retain a 50% interest in FEL 3/05. In addition, Island will take over operatorship of the Durresi Block.

Island plans to acquire a 3D seismic survey in 2008 in FEL 3/05 in order to prepare the large Killala prospect for a drilling decision. OMV has a strong track record on the Atlantic Margin, with significant exploration success in both Irish and UK waters.

FEL 3/05 covers an area of approximately 715 square kilometers and is located in the Northeast Rockall Basin on the Atlantic Margin approximately 70 kilometers off the west coast of Ireland and approximately 35 kilometers north of the Corrib gas field. The License area contains one very significant exploration prospect covering an area of up to 80 square kilometers (the "Killala Prospect"), together with a number of other prospects and leads.

The Durresi Block in Albania covers an area of 4,200 sq. km. along the Adriatic coastline of Western Albania. Discoveries made in similar play types in Southern Italy (the Aquila Field and the Falco and Rovesti discovery wells) indicate the high potential of the southern Adriatic Sea for both oil and gas. Its location puts it in an ideal position to meet the region's fast growing energy demand and to successfully develop even modest size discoveries.

The Durresi Block contains the A4-1X gas/condensate discovery drilled by Agip in 1993 at a time of lower oil price. The Chevron/Agip group quoted potential gross resources of 35 mm barrels of condensate and 151 bcf of gas. Several undrilled oil and gas prospects exist on the Durresi Block with potential mean gross recoverable oil and gas of 35 million barrels and 410 to 540 bcf respectively (OMV's unrisked estimates).

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