Island Acquires Equity Interest Offshore Albania, Agrees to Farmout Terms

Island Oil & Gas has acquired the remaining 50% equity interest in the Durresi Block offshore Albania from Lundin Albania.

This transfer of interest has now been formally approved by the National Agency of Natural Resources in the Republic of Albania ("AKBN").

IIEBV has, in addition, agreed farm out terms with Australian company Beach Petroleum Limited ("Beach") The farm out terms with Beach involve Beach (or a Beach nominated subsidiary company) acquiring a 25% equity interest in the Durresi Block for back costs.

Island has granted Beach an option to increase its equity to 45% by contributing 55% of the dry hole cost of one well at a location to be mutually agreed between the Operator (IIEBV) and Beach. The completion of the farm in transaction is subject to Beach Board approval and the formal written consent of the AKBN.

On receipt of both of the above approvals, a Petroleum Complementary Agreement will be negotiated with the AKBN to formally confirm IIE and Beach as parties to the Durresi Block Licence. The Petroleum Complementary Agreement will then be subject to the formal written consent of the AKBN on behalf of the Albanian Council of Ministers.

The Durresi Block covers an area of 4,200 square kilometres along the Adriatic coast of Albania. It contains the unappraised A4-1X gas/condensate discovery drilled by Chevron and Agip in 1993 at a time of lower oil and gas prices.

Several undrilled oil and gas prospects and leads exist in the Durresi Block along the northern edge of the Apulia Platform. This trend is currently the focus of renewed exploration and licence activity in the adjacent Italian offshore.

"We are delighted to be joining Island in the Durresi Block in an exciting oil and gas province,” said Beach COO Hector Gordon. “We consider that subsequent exploration at the Block, which will target deeper water prospects, will have the potential to yield reserves in excess of 100 million barrels of oil equivalent, net to Beach, on the basis of the current 25% interest."