Operational Update - Vostochny Makarovskoye

4 March 2010

VOLGA GAS PLC

Operational Update - Vostochny Makarovskoye

Volga Gas Plc ("Volga Gas" or the "Company"), the oil and gas exploration and production group operating in the Volga Region of European Russia, is pleased to announce that an agreement has been signed with Trans Nafta ("TN") to purchase a 75% direct interest in gas processing facilities which will be used for the Company's Vostochny Makarovskoye ("VM") gas and condensate field.

As a result of this agreement, Gaznefteservice ("GNS"), a company 100% owned by the Volga Gas group, will have a direct 75% interest in a Gas Processing Unit ("GPU") constructed on a site approximately 7km from the VM field. The plant is to be operated by a company which is 75% owned by GNS. Under the terms of the agreement a sum of RUB 187 million (approximately US$6.2 million) has been paid. In November 2008, a sum of RUB 600 million (approximately US$20 million) was paid as an advance on the purchase of the interest in the GPU.

As reported in the 2009 Interim Results announcement, the two initial wells on the VM field have been connected by intra-field pipelines to the gas plant being constructed by TN on its Dobrinskoye field. Before the GPU can become fully operational, it will be necessary to transfer a sulphur treatment unit from the VM licence area to the GPU. This process, with the required regulatory approvals, is expected to take up to nine months. Meanwhile, it may be possible to commence long term test production from the VM field during 2010.

Mikhail Ivanov, Chief Executive of Volga Gas commented:

"We are pleased to conclude this transaction for the GPU which will enable Volga Gas to realise value in its VM field by bringing it into production and thereby establishing an additional stream of cash flow."

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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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