Volga Gas Plc, the independent gas exploration and production company, which currently holds three subsoil licences in the Volga region of European Russia, announces a drilling report for Uzenskaya £2 on the Karpenskiy licence area and an operational update.

Karpenskiy License Area - Supra-Salt

Uzenskaya Well #2 reached TVD of 1098m. Two potential reservoirs were tested in the Jurassic (962.5-975.0 meters) and Triassic (1048.0-1058.0 meters) layers. Both tested high rates of water, confirming the layers have good collector properties. The structure, however, was not closed and the well is now being liquidated.

Uzenskaya Well #1 has completed testing and will be brought into production by the calendar year-end. Reserves, according to SPE standards, will be released during the first half of next year along with the resource updates from Karpenskiy 3-D operations. Six potential near term shallow supra-salt structures have been identified on the Karpenskiy license area. Saratovneftegeophysika will acquire 140km2 of 3-D seismic in winter 2007 and the drilling program will continue in 2008 once this data has been processed and interpreted.

Karpenskiy License Area - Sub-Salt

Saratovneftegeophysika has completed the acquisition of 160 km2 of 3-D seismic on the Yuzhny-Mokrousovsky structure as per plan. Schlumberger is now processing and interpreting that data. Field operations will recommence in H1 2008 with the commencement of drilling operations on Yuzhno-Ershovsky and Yuzhno-Mokrousovsky structures.

Vostochny-Makarovskoye

BK Eurasia has started constructing a rig on Vostochny-Makarovskoye for the drilling of the first production well. Drilling operations will commence once 20 km2 of 3-D seismic has been acquired. This seismic is required to design the most efficient production drilling program.

The Company has entered in to a Memorandum of Understanding with Trans Nafta for the construction of gas-condensate processing facilities and connection to Gazprom's pipeline. Design work is mostly complete for Phase 1 facilities and the plant is expected to be operational in time for first production at the end of 2008.

Pre-Caspian

Saratovneftegeophysika have been contracted to acquire 1,500km of 2-D seismic over potential sub-salt and supra-salt structures. Work will commence in 4Q 2007.

Mikhail Ivanov, CEO of the Company, commented, "The supra-salt work we are undertaking on the Karpenskiy License Area is proving fruitful. We can expect first production from Uzenskaya #1 by the end of the calendar year and the Uzenskaya #2 well confirms good collector properties in the Jurassic and Triassic formations. The 3-D seismic we plan to acquire this winter will allow us to delineate structures accurately and to develop a near term, rapid and sustained supra-salt drilling program to complement the work we are doing on the larger Karpenskiy sub-salt structures and at Vostochny-Makarovskoye, which is progressing to plan."