Tethys Inks Exploration, Production Agreement with Tajikistan

Tethys announced that following meetings with the Prime Minister of the Republic of Tajikistan it has signed a Protocol of Intent ("POI") with the Ministry of Energy and Industry concerning the negotiation of a Production Sharing Contract ("PSC") for exploration and production in certain prospective areas in the north of the country.

In the POI it is agreed that the Parties shall work towards negotiating a PSC for the Asht District and Khodja Bokirghon area of the Konibodom District in the Soghd (Sogdiana) Region of Northern Tajikistan (the "Asht PSC"), and that the POI will provide a framework for their intentions and commercial objectives to negotiate and finalise the Asht PSC. Tethys' work in bringing substantial amounts of oilfield equipment to Tajikistan, achievement of gas production from the Khoja Sartez field and the seismic survey (which is currently underway) are recognised and this is the basis on which the POI has been signed. However finalisation of the Asht PSC is conditional upon Tethys continuing its work in the south of Tajikistan, particularly in the Dushanbe area, including continuation of the seismic survey and drilling and testing of natural gas in the eastern part of the Komsomolsk field under the city of Dushanbe for supply of gas to the Dushanbe area for this coming winter.

Tethys' seismic program has been under way for some time with lines being shot in the area around Dushanbe. Tethys is also mobilizing its new ZJ30 drilling rig "Tykhe" to the Komsomolsk field to drill the KOM200 directional well designed to prove up gas in the eastern part of the field which lies under the city of Dushanbe. The final parts of this rig are expected in Tajikistan before the end of this month.

Julian Hammond, Chief Commercial Officer commented, "We are extremely pleased that the government of Tajikistan appreciates our hard work under our current PSC and has agreed to our proposals to work in other parts of Tajikistan. Obviously we must continue our work on our current PSC which covers a large part of the south of the country and achieve our targets . We believe that the Asht PSC area has substantial potential and gives us an even greater incentive to accelerate our activities in the south, particularly around Dushanbe with the East Komsomolsk gas field drilling."

The Asht PSC area includes the Asht District, which covers an area of some 2,700 square kilometres (667 thousand acres), and the Khodja Bokirghon area of the Konibodom District to the south. These areas lie within the Fergana Basin, a well established oil and gas province which spans three republics, namely Tajikistan, Uzbekistan and Kyrgyzstan. Oil production began in the basin in 1901 and many fields have been developed, primarily around the edges of the basin. The United States Geological Survey's 1991 estimate for the modal value of undiscovered recoverable oil and gas in the Fergana basin was 3 billion barrels of oil and 3 trillion cubic feet of gas mainly in the deep central part of the basin.

The Asht PSC area lies in the central part of the basin and on trend with other discoveries such as the Mingbulak field in Uzbekistan where in 1991 an appraisal well suffered a blow out at reported rates of up to 150,000 barrels of oil per day (as reported by GSM of Amarillo, Texas, a member of the well control team). This field is now being developed jointly by the Uzbek national oil company Uzbekneftegas and the Chinese national oil company CNPC. Prospects at similar structural levels to Mingbulak have already been mapped by Tajik specialists in the Asht PSC area, including the Sopetau prospect, and some wells have been drilled, some with oil and gas indications, but none have reached the primary target zone; a thick salt interval has caused drilling problems in the area when using outdated mud systems. The Khodja Bokirghon area in Konibodom District has at least one mapped structure in the area and an exploration well was drilled which is reported to have encountered oil and gas shows in several horizons but did not reach its primary target. There may be potential to re-enter this well and recalibrate the seismic data with downhole seismic prior to further drilling. The Konibodom District has an established oil and gas production history and borders the Isfara District where the majority of the current North Tajikistan oil production occurs.

The estimates noted above have not be prepared in accordance with Canadian disclosure standards nor reviewed by a qualified reserve evaluator or other independent party, and are presented solely for the purposes of presenting comparisons to the Asht District and the Khodja Bokirghon area.