Volga Gas Plc, the oil and gas exploration and production group operating in the Volga Region of European Russia, provides the following general operational update.

Grafovskaya #1 ("G#1") sub-salt exploration well on Karpenskiy licence area Having successfully set casing at a depth of 3,950 metres and installed a high pressure blow-out preventer, the G#1 well has reached a depth of 4,108 metres and has begun drilling through the first of two thick dolomite carbonate sequences which are the main exploration objectives. Mud logs and initial core samples indicate the presence of hydrocarbons, though it is too early to be able to determine the significance of the well data.

The well is still to be drilled to a planned target depth of 5,400 metres with coring, logging and testing operations being undertaken as considered necessary. Further updates will be provided as appropriate.

Uzenskoye supra-salt production on Karpenskiy licence area The Uzenskaya #8 well has recently been brought into production, making a total of six productive wells on the field. Overall field production has been below original expectations as a result of a decline in reservoir pressure. During September, production reached 1,900 bopd and in October averaged 1,543 bopd as the wells were choked back.

An analysis of recent field data suggests that the principal mechanism for flow was from pressure in the gas cap rather than underlying water drive. It is expected that bringing forward a water injection to the field, which had been planned later in the field life, will restore production to the original planned levels of approximately 2,000 barrels of oil per day. Water injection is now to be implemented during 1H 2010.

Vostochny-Uzenskaya #10 exploration well on Karpenskiy licence area The Vostochny-Uzenskaya #10 supra salt exploration well, located approximately 7km east of the Uzenskoye oil field facilities, has been drilled to a total depth of 893.4 metres. There were shows of oil and gas found in a thin cretaceous Aptian reservoir, the principal exploration target for the well. This is considered to be non-economic and the well is to be plugged and abandoned.

Completion of this well fulfils the last drilling commitment on the Karpenskiy licence area ("KLA"), which contains the two major sub-salt prospect areas, Yuzhny Ershovskoye (being tested with the G#1 well) and Yuzhny Mokrousovskoye, which also contains a material intra-salt exploration target. The KLA also contains the producing Uzenskoye oil field and the small Starshinovskoye gas field.

Vostochny Makarovskoye (VM) gas field development As reported in the Interim Results announcement, the two initial wells on the VM field have been connected by intra-field pipelines to the gas plant being constructed by Trans Nafta ("TN") on TN's Dobrinskoye field. Negotiations are continuing between Volga Gas and TN on transferring ownership of the gas plant, to enable the construction and commissioning of the plant to be completed and to allow full time production of the VM field to commence.

Mikhail Ivanov, Chief Executive of Volga Gas commented, "The presence of hydrocarbons in the sub-salt Grafovskaya #1 well is encouraging, although there will be a substantial amount of further data to be collected and assessed with some 1,400 metres of drilling to follow. Having successfully drilled through the salt and into the dolomite sequence, the drilling operation remains ahead of schedule.

"As we drill on, further tests will then be made to understand the reservoir properties, thickness and consequently commerciality of the prospect."

Tags: Volga Gas Plc