ALNAFT Approves Algerian Development Plan

SONATRACH and partner Gulf Keystone Petroleum Ltd are pleased to announce the approval by ALNAFT (the Hydrocarbon National Agency), of the proposed Development Plan for the GKN and GKS oil fields (60% Working Interest, 30% Net Revenue Entitlement) located in North Algeria, South East Constantine basin, Block 126a.

On 25 June 2007, prior to receiving ALNAFT'S approval, the SONATRACH / Gulf Keystone joint Management Committee for the 126a block unanimously approved the declaration of commerciality for the GKN and GKS fields.

SONATRACH and Gulf Keystone will work together to manage this field development. The field Development Plan envisages producing oil from the GKN-1 well (currently producing at approximately 1,200 bopd gross) and bringing the GKS-2 well on stream as soon as practicable.

As part of the Development Plan, SONATRACH and Gulf Keystone intend to build a pipeline to connect GKS-2 to the existing evacuation pipeline so that this well can begin production. The GKS-2 well produced at a rate equivalent to 4,586 bopd and 4.61 mmcfgd when it was tested in 2005. The two fields will then be developed in a staged process through the acquisition of a 3-D seismic survey and a development drilling program jointly conducted by SONATRACH and Gulf Keystone.

The plateau production rate is expected to be c3,000 gross bopd which is presently constrained by available facilities.

The GKN-GKS oil field is presently the only partnership project in development phase in northern Algeria.

Todd Kozel, Executive Chairman and Chief Executive of Gulf Keystone said, "The Declaration of Commerciality by SONATRACH in June of last year and today's announcement of Approval by ALNAFT of the GKN and GKS field Development Plan are significant milestones for Gulf Keystone. Gaining a share of production revenues from the GKN and GKS fields, Gulf Keystone's first, evolves and balances Gulf Keystone's asset base by adding production to an already exciting Algerian exploration portfolio.

"We look forward to working with SONATRACH to jointly develop and produce the GKN and GKS fields."