Island and OMV Agreement

Island Oil and Gas PLC
17 April 2007


17 April 2007


    ISLAND OIL & GAS CONCLUDES STRATEGIC ATLANTIC MARGIN AGREEMENT WITH OMV


Island Oil & Gas plc ('Island') (LSE:IOG) today announces that, in line with its
current strategy of forming strategic industry relationships capable of
accelerating the development and value of its portfolio of exploration and
near-development projects, it has concluded an asset swap agreement ('the
Agreement') with OMV, the leading oil and gas group in Central Europe. The
Agreement will see Island assign OMV a 50% interest in deepwater Frontier
Exploration Licence 3/05 ('FEL 3/05'), which contains the Killala Prospect, in
return for OMV's 50% interest in the Durresi Block, offshore Albania. The
assignment of the Durresi Block interest is subject to approval from the
competent authorities in Albania and the assignment of the interest in FEL 3/05
is subject to approval from the Minister for Communications, Marine and Natural
Resources of Ireland.


The Agreement is between Island Rockall JV Limited, a wholly-owned subsidiary of
Island, and OMV (Albanien) Adriatic Sea Exploration GMBH ('OMV'), a wholly-owned
subsidiary of OMV Exploration & Production GmbH. Under the terms of the
Agreement, Island, will retain a 50% interest in FEL 3/05 and will continue to
act as the Operator. In addition, and subject to the approval of the other
partner in the Durresi Block (Lundin Netherlands BV), Island will also take over
operatorship of the Durresi Block.


Island is currently finalising plans to acquire a 3D seismic survey in 2008 in
FEL 3/05 in order to prepare the large Killala prospect for a drilling decision.
OMV has a strong track record on the Atlantic Margin, with significant
exploration success in both Irish and UK waters.


FEL 3/05 covers an area of approximately 715 square kilometres and is located in
the Northeast Rockall Basin on the Atlantic Margin approximately 70 kilometres
off the west coast of Ireland and approximately 35 kilometres north of the
Corrib gas field.    The Licence area contains one very significant exploration
prospect covering an area of up to 80 square kilometres (the 'Killala
Prospect'), together with a number of other prospects and leads.


The Durresi Block in Albania covers an area of 4,200 sq. km. along the Adriatic
coastline of Western Albania. Discoveries made in similar play types in Southern
Italy (the Aquila Field and the Falco and Rovesti discovery wells) indicate the
high potential of the southern Adriatic Sea for both oil and gas. Its location
puts it in an ideal position to meet the region's fast growing energy demand and
to successfully develop even modest size discoveries.


The Durresi Block contains the A4-1X gas/condensate discovery drilled by Agip in
1993 at a time of lower oil price. The Chevron/Agip group quoted potential gross
resources of 35 mm barrels of condensate and 151 bcf of gas. Several undrilled
oil and gas prospects exist on the Durresi Block with potential mean gross
recoverable oil and gas of 35 million barrels and 410 to 540 bcf respectively
(OMV's unrisked estimates).


Paul Griffiths, Chief Executive of Island, commented:


'We are delighted to announce the forging of a new strategic partnership for
Island on the highly prospective Atlantic Margin that will significantly advance
the development of our high risk:high reward exploration portfolio. OMV has a
successful track record in exploring for and finding oil and gas in this area.
OMV's participation in FEL 3/05 is further confirmation of the potential of the
Killala Prospect and we look forward to working together to develop and evaluate
other opportunities that may exist in this area.


Acquisition of the interest in the Durresi Block offshore Albania allows Island
to acquire a potentially significant hydrocarbon discovery that fits our
strategy of acquiring proven hydrocarbon discoveries with the potential for near
and medium term development, at a reasonable entry cost and in a favourable
investment environment, through trading equity in our extensive portfolio of
high quality exploration and near-development projects.'

Enquiries:


Lisa J Newman MCIPR MIRS
Newman Consulting

Tel: [phone]


Notes to Editors:


About Island


Island was founded in 2003 and listed on AIM in December 2004 (LSE:IOG).  The
Company has interests in eleven Irish offshore licences, as well as licences in
the Netherlands and Morocco.   Island is involved in an exploration and
appraisal programme which in 2006 saw successful Celtic Sea gas wells at the Old
Head of Kinsale and the Seven Heads Sub-Area.  The drilling programme is due to
commence in the second quarter of 2007 with an appraisal well at the Old Head of
Kinsale gas field, followed by an appraisal well at the Schull gas field.


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





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