Volga Gas Plc provides an update on well VM1 on the Vostochny-Makarovskoye license area in the Volga Region of European Russia.

Highlights

• More than 200m of gross pay in the Bobrikovsky and Evlano-Livenskiy horizons
• Good production rates in both horizons

VM1 was spudded on 30 September 2007, targeting the Bobrikovsky sandstone and Evlano-Livensky carbonate formations.

The Bobrikovsky horizon was cored and tested between 1587m and 1623m (TVD MSL). The gross pay zone is confirmed at approximately 40m. The open hole test yielded 40-70 mcm/day (1413-2472mcf/day) of gas.

The Evlano-Livenskiy horizon has proved to be considerably more promising than had originally been anticipated at the time of the IPO in April 2007. The original discovery well drilled in 1989-90, by LUKoil-Nizhnevolzhskneft encountered a 47m gross pay zone with gas down to 2,322m (TVD MSL) in the Evlano-Livenskiy horizon. The gas-water contact was not established. The gross pay zone has now been confirmed to exceed 160m, in the Evlano-Livenskiy horizon. Due to the absence of impermeable shale zones in the reservoir, gross and net pay are almost identical.

The well has been cased and is about to be perforated. Cased hole testing is expected to be conducted over a number of months.

Volga Gas also identified the Eletsky layer at 2091-2107m (TVD MSL) which is gas bearing. During open hole testing it flowed at 2mcm/day (71mcf/day). However, further testing will be required to identify the potential of this layer after acid stimulation.

The current BK Eurasia rig is contracted to drill a further four more production wells once it has finished with completion on VM£1.

Mikhail Ivanov, Chief Executive of Volga Gas said,"We are delighted with the results of drilling on the Evlano-Livenskiy horizon. The tested pay zone has more than tripled and production rates indicate a productive field with more condensate than initially anticipated.

"The results are clearly more positive than we expected and will have a material impact on our reserve estimates. We will recalculate the reserves after completion of the second well on this field later this year.

"With construction of the gas processing plant due to commence shortly we are confident that Vostochny-Makarovskoye will commence initial production on plan by the end 2008."

Tags: Volga Gas Plc