Island Wraps Up Agreement for Exploration Prospects Offshore Ireland

Island Oil & Gas has announced that it has completed the Agreement, first announced on July 17, 2007, with Supernova Ireland Resources B.V., a member of the Bluewater Group of the Netherlands, covering Frontier Exploration License 1/04 located in the Porcupine Basin in the prospective Atlantic Margin off the west coast of Ireland.

The License includes the Connemara oil field and several significant exploration prospects. Supernova has exercised its exclusive option to farm in for 10% equity in the Island operated License, thereby reducing the Company's net equity interest from 61.5% to 51.5%.

Supernova has purchased 3,750,000 ordinary shares in Island for Stg0.60 per share in a private placing (total value Stg2.25m), representing 3.22% of the increased issued share capital. The Company has applied for these new shares to be admitted to trading on the AIM market of the London Stock Exchange and it is expected that trading will commence on Jan. 4, 2008. The new ordinary shares will rank pari passu with the existing issued ordinary shares of the Company and will increase the number of shares in issue to 116,456,990.

Island is also pleased to announce that Horizon Energy Partners BV has completed a Reservoir Engineering Report for the Connemara Field. Island and its joint venture partners, Valhalla Oil and Gas Limited and Supernova, are currently reviewing the results of this study.

One option under consideration is for a pilot field development to target two specific areas of the Connemara field: 26/28-2-East, which is unappraised, and the 26/28-A1 area, which was intersected by Statoil's 26/28-A1 horizontal well but which failed to penetrate the primary reservoir objective. Horizon has indicated that these two areas contain 63.6 mm barrels of oil in place relative to a mid-Case estimate of 134.9mm barrels for the entire field.

The pilot development project may provide valuable information on the performance of the reservoirs and the effectiveness of water injection over time which can then be used to recalibrate, if necessary, the geological model for the Connemara Field to assist with planning a full-field development program.

Supernova retains a second option to farm in for an additional 10% equity in the License in return for a cash only consideration of a further StgĀ£2.25m, exercisable up to 31 March 2008.

Supernova, Valhalla and Island will work closely on progressing development options for the Connemara Field and in accelerating farmout activity in respect of the joint venture's Atlantic Margin portfolio of exploration prospects.

"Island has broadened and strengthened its shareholder base with the addition of the Bluewater Group as a substantial shareholder in Island," said Island Chief Executive Paul Griffiths. "As a specialist in the operation of Floating Production Systems, Bluewater is an ideal partner in the Porcupine Basin and advances one of Island's objectives of being the first company to develop and produce indigenous Irish oil resources."