Company Information for Volga Gas plc

AIM-VGAS

www.volgagas.com

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AIM; VGAS

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Company Statement

Volga Gas plc, which raised $135 million on its April 2007 Admission to London's Alternative Investment Market (AIM), is principally focused on the exploration, development and production of gas and condensate in the Volga region of European Russia. It has three exploration and production licences in the Saratov and Volgograd regions, which it aims to bring into production to take advantage of increasing Russian domestic gas pricing and demand. Each of the licence areas is located close to pipelines and other infrastructure and to major centres of demand in European Russia. Volga Gas aims to become a leading independent gas producer through organic growth and acquisitions.

Operations and Technology

Russian assets with exploration and production potential
The Karpenskiy licence area covers approximately 4,180km² and is situated on the northern edge of the North Caspian Basin in the Saratov region (the “Karpenskiy Licence Area”). As a result of 2-D seismic acquired and wells drilled by LUKoil group companies, Volga Gas has identified the Yuzhny-Ershovskoye sub-salt structure which is estimated to contain best estimate prospective resources, before the application of risk factors, of 34.5bcm of gas (approximately 203.0mmBOE) and 42,394mbbls of condensate. 2D seismic also indicates a second structure, Yuzhny-Mokrousovskoye where 3D seismic is currently being acquired.

The Company has recently completed acquisition of 3-D seismic on the Yuzhny-Ershovskoye structure in the Karpenskiy License Area ('KLA'). The data acquired is of very good quality and will be processed and interpreted by Schlumberger, from which the well location will be derived for the drilling of the first of two deep sub-salt appraisal/exploration wells. It is expected that deep sub-salt well will be spudded in 1Q 2008.

160 sq kms of 3-D seismic are currently being acquired on the Yuzhny-Mokrousovskoye structure to identify the location of the second deep sub-salt well.
Volga Gas expects to announce revisions to its resources on the Yuzhny-Ershovskoye structure and include the newly-identified resources on the Yuzhny Mokrousovskoye in 1Q 2008.
The Company is also drilling the first of an ancillary two-well supra-salt drilling programme that it expects to complete by the end of 2007. It anticipates revenue from pilot production in 4Q 2007.

The Vostochny-Makarovskoye licence area covers 18km² and is situated in the Volgograd region and contains proved and probable reserves of 7.2bcm of gas (approximately 42.4mmBOE) and 18,851mbbls of condensate and also possible reserves of 11.1bcm of gas (approximately 65.3mmBOE) and 33,391mbbls of condensate (the “Vostochny-Makarovskoye Licence Area”).

Volga Gas is currently negotiating a contract to commence drilling one production well in 3Q 2007 and a second in 1Q 2008.
20km2 of 3-D seismic will be acquired over the licence area before the end of 2007.
Detailed planning of the gas processing plant and pipeline connection to UGSS is currently being jointly-planned with Trans Nafta.
First revenue is expected in 4Q 2008.

The Pre-Caspian licence area covers 1,437km² and is located close to the Karpenskiy Licence Area (the “Pre-Caspian Licence Area”). Volga Gas believes that, by analogy with the geology of the Karpenskiy Licence Area, the Pre-Caspian Licence Area may have both sub-salt and supra-salt resources. The Company will start a 1,400km 2-D seismic acquisition programme in the second half of 2007.

Volga Gas has already secured separate gas off-take agreements for the Karpenskiy Licence Area and the Vostochny-Makarovskoye Licence Area;

Karpenskiy Licence Area has a floor price of RUR2,100/mcm (approximately US$80/mcm), with an annual pricing re-negotiation, the agreement covers production of up to 10.0bcm of gas production annually.
Vostochny-Makarovskoye has a flooor price of RUR1,600/mcm (approximately US$60/mcm), and covers the full anticipated production capacity from the Vostochny-Makarovskoye Licence Area.

Volga Gas will be able to sell its gas domestically at unregulated prices. Russian domestic unregulated gas pricing is growing due to domestic demand and a need for non-Gazprom gas producers to supply the domestic market. Domestic demand for gas is expected to rise by 19.0 per cent. by 2015 from 460.0bcm in 2006 to 547.4bcm in 2015. Of this, the share of non-Gazprom Russian producers is expected to grow from 25.0 per cent. to 38.0 per cent.. In November 2006, the Russian government approved a plan which should lead to an increase in regulated gas prices by up to 134.0 per cent. between 2007 and 2011 for domestic industrial customers.

Proximity to markets and infrastructure
The Company’s licences are located in the Volga region of European Russia. Each of the three licence areas are located close to major pipeline infrastructure, with the Central Asian Centre (“SAS”) pipeline running through the Karpenskiy Licence Area. The Company has entered into a framework agreement with ZAO Trans Nafta (“Trans Nafta”) for access to the SAS for agreed annual amounts of gas of up to 10.0bcm per year from the Karpenskiy Licence Area and has access to the Unified Gas Supply System (the “UGSS”) through Trans Nafta’s connection point for all anticipated production from the Vostochny-Makarovskoye Licence Area.

Experienced Russian and western management
Volga Gas has an experienced management team which it believes has the diverse and complementary skills and local market knowledge required to manage and grow an oil and gas exploration and production company in Russia.

Mikhail Ivanov, Chief Executive Officer, has over 14 years of experience in the oil and gas industry, of which ten years were spent working within the Schlumberger group, which includes Schlumberger Limited, together with its direct and indirect subsidiaries, assuming various managerial and engineering responsibilities. Whilst employed by the Schlumberger Group he worked in Russia, other countries of the former Union of Soviet Socialist Republics (the “Soviet Union”) and Iran, where he was country/operations manager. In Iran he worked on deep and complex high pressure gas fields including the South Pars.

Vyacheslav Lepilin, Chief Operating Officer and Exploration Director, has 33 years of experience in the oil and gas industry in the Soviet Union and Russia. He has worked for most of that time in the Volga region in both field operations and seismic processing and interpretation. From 1994 to 2003 he worked for OAO LUKOIL and the predecessor companies to OAO LUKOIL. He was the Chief Geologist at LUKoil-Nizhnevolzhskneft and was a member of the team responsible for discovering the sub-salt structures on the Karpenskiy Licence Area.

Alistair Stobie, Chief Financial Officer, has over 10 years experience working in Russia, principally as a private equity investor in the oil and gas sector and other sectors. He was previously at Baring Asset Management and Baring Vostok Capital Partners (“Baring Vostok”) where he was responsible for the First NIS Regional Fund’s investment in Burren Energy PLC, and where he was a director from 1995 to 1998.

The involvement of Alexey Kalinin and Michael Calvey, co-managing partners of Baring Vostok, as non-executive directors and the involvement of Baring Vostok Private Equity Fund III will be important in the pursuit and implementation of its strategy through, among other things, their in-depth knowledge of the Russian market.

Focus on organic growth and further acquisitions
Volga Gas intends to increase shareholder value through developing and bringing into production the Company’s existing gas and condensate fields and identifying, acquiring and exploiting further gas and condensate fields in Russia. The acquisition of licences will be pursued on an opportunistic basis, whether through government auctions, such as the recently acquired Pre-Caspian Licence, or through corporate acquisitions, where the Company believes such assets are undervalued, create synergies with existing assets or can yield greater value through the application of the latest technology.

Board of Directors and Key Management

Non-Executive Chairman	Alexei Kalinin
Chief Executive Officer	Mikhail Ivanov
Chief Financial Officer	Alistair Stobie
Non-Executive Director	Ronald Freeman
Non-Executive Director	Stephen Ogden
Non-Executive Director	Michael Calvey
Non-Executive Director	Vladimir Koshcheev

Company Address

7th Floor Phoenix House
18 King William Street, London, United Kingdom EC4N 7HE


Telephone:	+7 (495) 721 1233 / 967 1
Facsimile:	+7 (495) 967 1308
Email:	info[at]volgagas.com
Website:	http://www.volgagas.com

Additional Address/Key Contact

IR contact
Financial Dynamics (PR):
Jonathon Brill/Billy Clegg/Alex Beagley
+44 (0) 207 831 3113

Capital

Number of Shares in issue (as of July 14, 2008) 53,755,232

Year End

31st December

Nominated Brokers

KBC Peel Hunt Ltd
111 Old Broad Street
London EC2N 1PH
United Kingdom

Nominated Advisors