Acquisition

Island Oil and Gas PLC
23 December 2004


                                                        Island Oil and Gas plc
                                                                  'Curdarragh'
                                                                      Annamult
                                                                Bennettsbridge
                                                                  Co. Kilkenny
                                                           Republic of Ireland
PRESS RELEASE

23 December 2004

            ISLAND OIL AND GAS PLC EXPANDS IRISH OFFSHORE INTERESTS
                 THROUGH ACQUISITION OF LUNDIN PETROLEUM ASSETS

Island Oil and Gas plc ('Island'), the technology-led independent oil and gas
exploration company, today announces that it has entered into an agreement to
acquire a portfolio of offshore Irish oil and gas assets from Lundin Petroleum
AB ('Lundin'). As consideration for the sale of its interest in the Seven Heads
Gas Petroleum Lease, Lundin will receive four million shares of Island, which
are listed on AIM. Under the terms of the transaction, these shares may not be
sold or transferred by Lundin, except to an affiliate, within 12 months from the
completion of the transaction. The transaction is expected to be completed in
early 2005, subject to certain conditions, including Irish government and
partner approvals.

At Island's current share price, this transaction is valued at approximately
stg£2.0 million, and, upon completion, will give Lundin an 8.45% shareholding in
Island. The oil and gas interests being acquired by Island from Lundin in the
transaction include:

  * 12.5% participating interest in the Seven Heads Gas Petroleum Lease in the
    North Celtic Sea;

  * 12.5% participating interest in the Licensing Option 03/5, covering Seven
    Heads Oil, in which Island already has an option agreement with Ramco Oil
    and Gas Limited to acquire a 44.4% equity interest in the project in return
    for paying 74% of the cost of a well to test the oil-bearing reservoirs, and
    which is currently the subject of negotiations between the Operator and the
    Petroleum Affairs Division of the Department of Communications, Marine and
    Natural Resources of Ireland (PAD) for a Successor Authorisation;

  * 22% participating interest in the Licensing Option 03/6 covering the
    Roscarberry area, in the North Celtic Sea, which is currently the subject of
    negotiations between the Operator and the PAD for a Successor Authorisation

  * An option to acquire a 5% groundfloor participating interest in any future
    licence granted to Lundin Petroleum covering the Donegal Basin Block 13/7
    and part-blocks 13/11 and 13/12.

  * In addition to the above licence interests, the agreement also provides
    for Island and Lundin to enter into an Area of Mutual Interest Agreement
    covering offshore Ireland, whereby the two companies could jointly pursue
    other opportunities offshore Ireland.

Island Oil and Gas holds a 10% net profit interest (NPI) in the portfolio of
Irish licences held by Lundin. As a consideration for the transfer of the
licence interests described above from Lundin to Island, apart from the Seven
Heads Petroleum Lease as indicated above, the NPI will be cancelled. The
acquisition of these interests enables Island to participate more pro-actively
in the potential future success of the projects.

Commenting upon the agreement with Lundin, Paul Griffiths, Chief Executive of
Island, said:

'The acquisition of these interests from Lundin marks another stage in Island's
development as a major player in Irish offshore exploration. The interest in the
Seven Heads gas project provides us with access to a major gas gathering
infrastructure. With our existing Seven Heads Oil interest, we will also gain
exposure to any upside potential presented by the Seven Heads gas project whilst
undertaking our planned exploration activities on the underlying oil prospects
and surrounding gas prospects. The transaction with Lundin is consistent with
our strategy to create synergies in our portfolio of Celtic Sea oil and gas
interests in order to reduce costs and potentially accelerate cash flow through
utilizing existing infrastructure.

'The Board of Directors of Island are pleased to welcome Lundin as a significant
shareholder in Island. We are excited by the opportunities that this transaction
presents and look forward to seeking out and actively pursuing these and other
new exploration opportunities offshore Ireland in the future. We look forward to
working closely with Lundin under our proposed Area of Mutual Interest Agreement
to develop any such opportunities to the mutual benefit of both companies.'

Enquiries:

Lisa J Newman                         Tel: [phone]
Newman Consulting                     Email: [e-mail]

Notes to editors:

Island, which was founded in 2003, listed on AIM in December 2004. The Company
aims to capitalise upon its technical knowledge and expertise to become a
regionally focused international oil and gas exploration company, whilst
continuing to develop its existing Irish projects. The Company's management team
has extensive experience in oil and gas exploration as well as in business and
finance. Island currently has interests in a number of licences and options off
the west coast of Ireland and off the southeast of Ireland in the Celtic Sea. In
addition, Island is actively pursuing other potential opportunities to broaden
its geographic exposure. The Company has cash in bank of approximately £9
million and no debt.

Lundin Petroleum is a Swedish independent oil and gas exploration and production
company with a portfolio of assets in Albania, France, Indonesia, Ireland, the
Netherlands, Norway, Sudan, Tunisia, the United Kingdom and Venezuela. It is
listed on the Attract 40 list of the Stockholm Stock Exchange and has a current
market capitalization of approximately 10.6 billion Swedish Krona

     Further information on Island can be found on the Company's website at
                            www.islandoilandgas.com



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