DNO International ASA - Arbitration Proceedings

As explained during the presentation given at the Market and Media
Update on 28 September 2009, DNO signed two Production Sharing
Agreements (PSA) in Kurdistan in 2004. DNO was the only participant
to the PSA at the time with a 40 % economic/beneficial interest. On
several occasions DNO communicated to the market that the final terms
of the contracts would be subject to final review and the additional
participants on the PSA's would be reported in due course.

Following implementation of, and in accordance with, the new oil and
gas law in the Kurdistan Region in 2007, all contracts were subject
to review to comply with the new legislation. In all countries,
including Norway, there are certain requirements to be fulfilled for
companies which apply for contracts for exploration and production of
oil and gas. For DNO's contracts in Kurdistan such review was
completed in March 2008.

As reported at the Market and Media Update on 28 September 2009, DNO
is involved in arbitration proceedings related to certain third party
interests in Kurdistan. Such third parties were not approved to be
part of or have any rights in the PSC's following the reviews which
were completed in March 2008.

DNO has rejected the basis for any claims from such third parties,
which relates to up to 10 % beyond DNO's interest in the PSC. The
first part of the arbitration has ruled the right to seek
compensation for damages from DNO Iraq AS, which is a subsidiary of
DNO International ASA. The arbitration proceedings are therefore
continuing and a final award with respect to possible compensation
for damages is expected in the second quarter of 2010.

Accordingly there are no other parties who have any rights to an
interest in the PSC's, beyond what were reported on 6 April 2009.

Ongoing arbitration proceedings are confidential as is any award,
subject of course to any legal obligation on DNO to disclose or
report any future possible award.  DNO is therefore unable to make
any further comments related to the arbitration.

There has been no formal statement of claim specifying the damages
requested in the arbitration to date.  During our ongoing discussions
with KRG we have understood that the arbitration is not part of the
present suspension period in Kurdistan, which DNO is working to
resolve as soon as possible.

DNO has reported the arbitration in the note to the 2008 Annual
report and in the notes to the Second Quarter 2009 Interim Report. No
further information can be given at this stage.

_________________________________________________________________________
Following the review which was completed in March 2008 the definition
of the contracts changed from Production Sharing Agreements (PSA) to
Production Sharing Contracts (PSC) and below is an extract of the
content of a DNO Stock Exchange Notice disclosed to the market on 14
March 2008:

Quote:

DNO today confirms that it has signed revised agreements with the
Kurdistan Regional Government ("KRG") amending the production sharing
contract it holds for the Dohok and Erbil license areas. The Dohok
area has been divided into two license areas, one for the Tawke oil
field and one for the remaining Dohok area.

The Company now holds three Production Sharing Contracts (PSC) in
Kurdistan - Northern Iraq:

Tawke PSC
, with a working interest to DNO of 55 %
Dohuk PSC
, with a working interest to DNO of 40 %
Erbil PSC
, with a working interest to DNO of 40 %

The balance of the working interests in all PSC's is held by the KRG
as a Government Interest and Third Party Interest to be appointed by
the KRG

End Quote:

In April 2009 DNO reported certain assignments which had been
completed in relation to its contracts in Kurdistan. Below is an
extract from this notice:

Quote:

DNO has been advised by the Kurdistan Regional Government (KRG) that
it has completed the assignment of a 25% Third Party Interest in the
Tawke Production Sharing Contract (PSC) to Genel Enerji. This right
of appointing an additional party to the PSC is included in most of
KRG's contracts, and in the case of Tawke, the right was scheduled to
be exercised by the end of 2008.
The assignment process started in the last quarter of 2008, and it
was agreed to by the end of last year, and all remaining formalities
were recently finalized. The assignment is effective from 1st January
2009 for the purposes of paying costs.

DNO has been further advised by the KRG that it has also completed
the assignments of the Third Party Interest in the Duhok PSC, also to
Genel Enerji and the Erbil PSC to another private investor. Duhok and
Erbil are still in the exploration/appraisal phase.

End Quote


DNO International ASA
1 October 2009


Contacts:

Media:
Helge Eide, MD DNO International ASA   Telephone:    [phone]
Ketil Jørgensen, Crux Communication    Telephone     [phone]
(Norway)
Ben Willey, Buchanan Communications    Telephone:    [phone]
(UK)

Investor Relations:
Haakon Sandborg, CFO DNO International Telephone:    [phone]
ASA


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