Volga Gas Plc provides an operational update on its activities.

Highlights

• Yuzhny-Ershovskoye structure ('Y-E') on Karpenskiy licence area ('KLA') delineated, well location identified
• Processing of 3-D seismic on the sub-salt Yuzhny-Mokrousovskoye ('Y-M') structure on the KLA complete
• Well VM2 spudded 29 May 2008
• Well VM1 cased and is undergoing production testing
• Construction of Vostochny-Makarovskoye gas processing plant ('GPP') commenced
• Interpretation and processing of 3-D seismic data on 2 of 5 supra-salt structures on KLA complete. Drilling programme to commence in H2 2008

Karpenskiy Licence Area

Sub-salt Yuzhny-Ershovskoye Structure - Schlumberger has completed the processing and interpretation of the 3-D seismic data. The structure has been delineated and the location of the first well identified.

Schlumberger has completed processing of the Y-M structure and has started interpretation. It is expected that interpretation will be completed during Q3 2008.

Drilling Volga Gas is preparing well documentation and has entered in to detailed negotiations for the first well on Y-E now that parameters are known. The Company will provide an update once a contract has been entered in to.

Supra-Salt Interpretation and processing of 3-D seismic data has been completed over 2 of the 5 structures in the southern block of the KLA. The Company has entered in to a 9 well contract, at least 4 of which are expected to be completed during 2008.

Vostochny-Makarovskoye - On 29 May 2008, Volga Gas spudded well VM2 at the northern end of the Vostochny-Makarovskoye licence area. The well is being drilled as a production well and is expected to be completed in early Q4 2008. The Company has contracted the BK Eurasia rig for a further well with an option for two more.

Well VM1 has been cased and is currently being hooked up to the gas processing plant. Initial cased hole testing has yielded commercial rates of gas and condensate and the well will be put on long term production testing in June.

Installation of the gas processing plant has commenced and is running to plan. We anticipate the plant to be capable of selling pipeline standard gas by year end, enabling first revenue to commence as previously announced.

Mikhail Ivanov, Chief Executive of Volga Gas commented, "With the delineation of the sub-salt Y-E structure complete and the location for the first well identified, the Company is now well-placed to commence drilling operations on this high potential structure. Work on the equally important Y-M structure is progressing well.

"The Vostochny-Makarovskoye development schedule is on track to produce first revenue before year-end. Well VM2 is essential to enhance our understanding of the Evlano-Livenskiy reservoir. Following the completion of VM2, we will incorporate the data in to the reservoir model and will subsequently publish updated reserve calculations during 4Q 2008."

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