Operational Update-Grafovskaya #1 exploration well

29 April 2010

VOLGA GAS PLC

Operational Update - Grafovskaya #1 exploration well

Volga Gas Plc ("Volga Gas" or the "Company"), the oil and gas exploration and production group operating in the Volga Region of European Russia, provides an update on operations with its Grafovskaya #1 ("G1") sub-salt exploration well currently being drilled in the Karpenskiy Licence Area ("KLA").

As of 29 April 2010, the G1 well reached a total depth of 5,379 metres and a full string of casing has been set.

As reported in the Preliminary Results statement of 29 March, hydrocarbon shows were encountered over a 300 metre interval in Permian aged carbonate formations at depths of between 4,000 and 4,300 metres. Logging, coring and initial open-hole tests have been conducted on these horizons which indicated substantial pay thickness with low estimated permeability. Further evaluation will be undertaken to establish the commercial significance of these reservoirs. Acid treatment and/or acid hydrofracturing will be done in the interval to reduce skin effect and potentially improve the flow.

Within the deeper target zone, in which drilling operations have recently completed, hydrocarbon shows have also been encountered in the Devonian aged carbonate layers between 4932 and 5,016 metres and between 5,200 and 5,300+ metres. Mechanical problems in the deeper interval of the well made it difficult for Schlumberger to undertake wireline and TLC (tough logging conditions) logging. Therefore the decision has been taken to run casing down to target depth and to undertake testing of the intervals in the coming months.

The drilling rig will shortly be demobilized from the current drilling location and the Company intends to mobilise a lower cost workover rig, to commence a series of tests on the well. The intention will be to perforate the casing and test the well in a sequence of horizons starting from the deepest and working up to the shallowest.

The interpretation of wireline and mud logging data will be posted on the Volga Gas website: www.volgagas.com

Mikhail Ivanov, Chief Executive of Volga Gas commented:

"We are pleased to have completed the drilling operations on the G1 well and to have done so within the original 250 day time estimate and within budgeted cost. It is encouraging to have found significant hydrocarbon shows and we look forward to the evaluation of the potential reservoirs."

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Editors' notes:

Volga Gas is an independent oil and gas exploration and production company operating in the Volga region of European Russia. The company has 100% interests in its four licence areas.

The information contained in this announcement has been reviewed and verified by Mr. Mikhail Ivanov, Director and Chief Executive Officer of Volga Gas plc, for the purposes of the Guidance Note for Mining, Oil and Gas companies issued by the London Stock Exchange in March 2006. Mr. Mikhail Ivanov holds a M.S. Degree in Geophysics from Novosibirsk State University. He also has an MBA degree from Kellogg School of Management (Northwestern University). He is a member of the Society of Petroleum Engineers.

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