Island Lodges Mandate Letter with EBRD for Moldovan Projects

Island Oil & Gas plc's wholly owned subsidiary, Island Moldova BV, has executed a mandate letter with the European Bank for Reconstruction and Development ("EBRD") to begin the process of carrying out technical and commercial due diligence and environmental studies that are required by the EBRD prior to seeking final approval from the EBRD's Board of Directors for financing the Moldovan projects.

In November 2007, Island announced the execution of a Memorandum Of Understanding with Valiexchimp S.R.L., thereby giving the Company the right to acquire certain upstream and downstream oil and gas assets in Moldova. This move with the EBRD represents a considerable step forward in processing the transaction with Valiexchimp. Island will report further progress on the completion of the transaction in due course.

The Moldovan projects are anticipated to generate a positive operating cash flow in 2009 and to potentially lead to additional oil field rehabilitation opportunities in other FSU countries.

Commenting on the mandate letter with the EBRD, Paul Griffiths, Chief Executive of Island, stated, "This marks a significant step towards delivering the diversification of our portfolio through a strategic entry into Eastern Europe and the Former Soviet Union. We look forward to working closely with our colleagues in the EBRD to progress the studies necessary to deliver the funding required to further develop the Moldovan assets."