Operational Update - Vostochny Makarovskoye Field

18 May 2012

VOLGA GAS PLC

Operational update - Vostochny Makarovskoye field

Volga Gas plc ("Volga Gas" or the "Company"), the oil and gas exploration and production group operating in the Volga Region of Russia, is pleased to provide an update on test production from well #30 on its Vostochny Makarovskoye ("VM") field and to update on related operations.

Well #30 production test

A series of production tests have been concluded on well #30 on the VM field. The well flowed at a rate of 161,890 cubic metres per day (approximately 5.7 million cubic feet per day) through a 10 mm choke. Management estimates that when placed on permanent operation, the production rates for the well will exceed 100,000 cubic metres per day (3.5 mmcf/d) with condensate of approximately 20 cubic metres (125 barrels) per day.

The well was drilled by a previous licencee as an exploration well, and recently re-completed as a production well by Volga Gas. The well has been perforated at two intervals, both in the Bobrikovskiy sandstone formation at depths of approximately 1,900 metres.

The Bobrikovskiy sandstone formation is a secondary reservoir in the VM field, lying above the main Evlansko-Livenskiy carbonate reservoir. No C1 recoverable reserves are currently attributed to this reservoir, although the potential reserve additions are expected to be modest. However, the workover of the #30 well provides Volga Gas with a low cost addition to production capacity when full time production from VM commences.

Dobrinskoye gas field

Drilling operations on a sidetrack of the Dobrinskoye #22 production well have commenced. This well, which was producing during early 2011, was shut in during July 2011 having been found to have suffered damage. Completion of these operations are expected to add significantly to current production on the Dobrinskoye gas/condensate field which has recently been producing approximately 5.0 mmcg/d of gas and 300 bpd of condensate from a single well, Dobrinskoye #26.

Update on plant upgrade

The project aimed at increasing capacity and enhancing H2S extraction on the operating Dobrinskoye gas processing plant is progressing in line with expectations. Conclusion of this project, expected during Q3 2012, will also enable the commencement of full time production from the VM field.

Mikhail Ivanov, Chief Executive of Volga Gas commented:

"We are pleased to have successfully tested our recently worked over well #30 which will provide additional gas production capacity at low cost.

"We look forward to bringing the VM field into full time production on completion of the ongoing upgrade to the gas plant in Q3 2012. By the end of 2012, we expect to have five active production wells on the VM and Dobrinskoye fields with total production capacity of up to 35 mmcf/d of gas plus associated condensate."

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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 five 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 June 2009. 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.