VGAS.L Regulatory News (VGAS)

1 October 2012

VOLGA GAS PLC

Operational update - Dobrinskoye gas plant upgrade

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 announce the completion of the first major phase of the modifications and upgrade to the Dobrinskoye gas processing unit.

Vostochny Makarovskoye production start-up

The project, aimed at increasing processing capacity and enhancing H2S extraction on the operating Dobrinskoye gas plant, has reached the point of completion in respect of the first phasewithin budgeted cost and time frame. Following the successful completion of the pressure testing of the new plant components, gas from the Company's Vostochny Makarovskoye ("VM") field has started flowing through the plant.

Production from VM will gradually build over the first month of operation as a series of tests will be carried out to optimise the process flow. At the end of the one month testing period, it is expected that the plant will operate at its current permitted capacity of 250,000 cubic metres per day (approximately 9 million cubic feet per day). The company has spent approximately US$5.6 million to date for the construction (mainly phase I and some portion of Phase II and III). The company will finance completing Phase II and III and also drilling more producing wells if required from the operating cash flow.

Update on Phases 2 and 3

The second and third phases of the plant upgrade are intended to raise the processing capacity of the plant to 1 million cubic metres per day (35 mmcf/d). The key construction elements for Phase 2 are upgrades to the condensate processing and storage facilities, while the key aim of Phase 3 is to upgrade the safety flaring system in the plant. Following completion of Phase 3, the plant can be certified by the regulatory authorities to operate at full capacity.

All of the equipment required for Phase 2 has been delivered to the plant site and construction and installation is under way. For Phase 3 the major long lead items have been delivered. The physical completion of the work is anticipated to be early in 2013, shortly after which regulatory approval of the increased throughput will be sought.

Mikhail Ivanov, Chief Executive of Volga Gas, commented:

"We are very pleased to have reached this important milestone in the development of our gas production business and to have completed the major part of this key project on time and within budgeted cost.

"Clearly initially the production from our two developed gas fields, VM and Dobrinskoye, will be constrained by the permitted plant throughput. However, we plan to complete phase II and III in 2013 to reach total production capacity of up to 35 mmcf/d of gas plus associated condensate. We may also add two more wells in 2013 apart the five producing wells we currently have on the VM and Dobrinskoye fields."

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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.