Volga Gas Gets Green Light for New Well

Volga Gas announced that the State Committee for Resources has approved new C3 prospective resource estimates for a new supra-salt prospect in the Company's Karpenskiy License Area ("KLA"). The new resources add approximately 153 million barrels ("mmbbl") of recoverable oil and 204 billion cubic feet ("bcf") of recoverable gas to the Company's Russian C3 resources -- in total approximately 187 million barrels of oil equivalent. 

On April 27, 2010, the Company received notification that a well passport has been approved for a new exploration well, called Novaya, within the Yuzhny Mokrousovskoye prospect area in the Northern part of the KLA. The location is approximately 30 km due west of the Yuzhny Ershovskoye prospect on which the Company is operating the sub salt Grafovskaya #1 exploration well. 

The C3 prospective resources in Novaya comprise four separate horizons of Cretaceous and Jurassic age which contain cumulatively unrisked resources of 21 million tonnes (153 mmbbl) of recoverable oil plus 1.7 billion cubic meters (59 bcf) of associated gas. These resources are within a depth of 1,000 meters. 

At a deeper zone of approximately 2,000 meters depth, there is a further horizon with identified gas and condensate potential estimated to contain unrisked resources of 4.1 billion cubic meters (145 bcf). 

Volga Gas has commenced the process of planning for an exploration well to test these potential resources although it is likely that the actual drilling operations are expected to form part of the 2011 work program. An exploration well to test the full set of C3 resources announced today is estimated to cost approximately $2 million. 

Mikhail Ivanov, Chief Executive of Volga Gas commented, "We are delighted to have established a further meaningful exploration target within the KLA which can be tested at low cost. This additional prospective came to light as a result of new 3D seismic data acquired during 2008 over the Yuzhny Mokrousovskoye area."