Volga Gas Provides Russian Operational Update

Volga Gas Plc provided an operational update on its activities which include the Yuzhny-Ershovskoye structure on Karpenskiy licence area delineated, well location identified and the completed processing of 3-D seismic on the sub-salt Yuzhny-Mokrousovskoye structure on the KLA. Well VM#2 was spudded on May 29, 2008 and also well VM#1 was cased and is undergoing production testing. The construction of the Vostochny-Makarovskoye gas processing plant was commenced and interpretation and processing of 3-D seismic data on 2 of 5 supra-salt structures on KLA complete. The drilling program is to commence in H2 2008.

Schlumberger has completed the processing and interpretation of the 3-D seismic data on the Yuzhny-Ershovskoye structure. The structure has been delineated and the location of the first well identified.

Schlumberger has completed processing of the Yuzhny-Mokrousovsky Structure (Y-M) structure and has started interpretation. It is expected that interpretation will be completed during Q3 2008.

Volga Gas is preparing well documentation and has entered in to detailed negotiations for the first well on Y-E now that parameters are known. The Company will provide an update once a contract has been entered in to.

Supra-Salt has completed interpretation and processing of 3-D seismic data of over 2 of the 5 structures in the southern block of the KLA. The Company has entered in to a 9 well contract, at least 4 of which are expected to be completed during 2008.

Volga Gas spudded well VM#2 at the northern end of the Vostochny-Makarovskoye license area. The well is being drilled as a production well and is expected to be completed in early Q4 2008. The Company has contracted the BK Eurasia rig for a further well with an option for two more.

Well VM#1 has been cased and is currently being hooked up to the gas processing plant. Initial cased hole testing has yielded commercial rates of gas and condensate and the well will be put on long term production testing in June.

Installation of the gas processing plant has commenced and is running to plan. It is anticipated that the plant should be capable of selling pipeline standard gas by year end, enabling first revenue to commence.

"With the delineation of the sub-salt Y-E structure complete and the location for the first well identified, the Company is now well-placed to commence drilling operations on this high potential structure. Work on the equally important Y-M structure is progressing well." Mikhail Ivanov, Chief Executive of Volga Gas stated. "The Vostochny-Makarovskoye development schedule is on track to produce first revenue before year-end. Well VM#2 is essential to enhance our understanding of the Evlano-Livenskiy reservoir. Following the completion of VM#2, we will incorporate the data in to the reservoir model and will subsequently publish updated reserve calculations during 4Q 2008."