Re Farm in Agreement

Island Oil and Gas PLC
31 January 2005


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

31 January 2005

                       ISLAND OIL AND GAS plc FARMS INTO
          FRONTIER EXPLORATION LICENCE 1/05 OFFSHORE DONEGAL, IRELAND

Island Oil and Gas plc ('Island'), the technology-led independent oil and gas
exploration company, today announces that, through it's wholly owned subsidiary
Island Assets Porcupine Limited ('IAPL'), it has further expanded its portfolio
of interests offshore Ireland with the execution of a farm in agreement to
acquire a 26% interest in the Frontier Exploration Licence 1/05 over the Donegal
Basin Block 13/7 and part-Blocks 13/11 (NE) and 13/12 (N) ('the Blocks').
Frontier Exploration Licence 1/05 lies off the northwest coast of Ireland
approximately 70kms from shore and the recently constructed Coolkeeragh 400 MW
gas fired power station at Derry.

A number of prospective structures have been identified within the Blocks. The
largest of these, Inishbeg, was first identified by the current Island technical
team in 2000 and resulted in the original partners successfully applying for the
previous Licensing Option. Subsequently, the prospect has been matured to a 
stage where exploration drilling can be justified on the basis of an acceptable
risk-reward scenario. Inishbeg is a large and robust four-way dip-closed
anticlinal structure which lies in a water depth of approximately 320 feet.

The farm in terms involve Island acquiring a 26% interest in the Blocks by
carrying 40% of the dry hole costs of an exploration well to evaluate the
Triassic hydrocarbon potential of Inishbeg for Ramco Donegal Limited ('Ramco'),
a wholly owned subsidiary of Ramco Energy plc, and Sunningdale Donegal Basin
Limited ('Sunningdale'), a wholly owned subsidiary of Sunningdale Oils (Ireland)
Limited. In the event of a successful well, and subject to partner approval,
Island will also carry Ramco's and Sunningdale's part of the testing costs on
the same basis. Island is currently fully funded to meet such a commitment.

Petroceltic International plc, through its wholly owned subsidiary Lerida
Trading Limited, is also farming into the Frontier Exploration Licence 1/05 on
the same pro rata terms.

Following the farm in agreement and the execution of a Joint Operating Agreement
the equity interests in the Frontier Exploration Licence will be as follows:

Lundin Exploration B.V.* 35% (Operator)
Island Assets Porcupine Ltd* 26%
Ramco Donegal Ltd 19.25%
Lerida Trading Ltd 16.25%
Sunningdale Donegal Basin Ltd 3.5%

*  Island announced in December 2004 that it had reached an agreement to acquire 
   a portfolio of offshore oil and gas interests from Lundin Ireland Limited
   ('Lundin'). This transaction is expected to be completed during the first
   quarter of this year, subject to certain conditions including Irish 
   government and partner approvals. As part of  this transaction, Island, upon 
   approval, will be granted an option to acquire  an additional 5% groundfloor 
   participating interest in the Donegal Basin Blocks. If exercised, this would 
   increase Island's participating interest to 31%,  making it the largest 
   equity holder in the Frontier Exploration Licence, and  subsequently reduce 
   Lundin's interest to 30%.

Under the terms of the Frontier Exploration Licence, which runs for 15 years, it
is currently anticipated that, subject to rig availability, an exploration well
will be drilled during 2005 to evaluate the potential of the Triassic Sherwood
Sandstone reservoirs. These reservoirs are gas-bearing in the Corrib Gas Field,
which lies on trend to the southwest in the Slyne Trough.

Commenting on Island's further expansion of its Irish offshore interests, Paul
Griffiths, Chief Executive of Island, said:

'Our execution of this farm-in agreement is consistent with our previously
stated strategy of participating in a more proactive manner in the areas for
which Island acquired a Net Profits Interest entitlement arising out of the sale
of Island Petroleum Developments Limited to DNO ASA in September 2002. We have
had a long association with these particular blocks and believe that, as such,
we are well-placed to participate actively in the future success of this area.
We look forward to working with our partners in the Blocks and with the Irish
authorities.

'The Inishbeg Prospect carries exploration risk, however the risk-reward ratio
is very attractive for us. We are encouraged by the fact that the Inishbeg
structure is potentially larger than and bears certain geological similarities
to the structure of the Corrib Gas Field. Triassic reservoirs are interpreted to
occur at much shallower depths in Inishbeg, which also lies in shallower water
depths compared to Corrib, thereby potentially reducing appraisal and
development costs and creating several development options should the initial
exploration well be successful. We are further encouraged by the potential for
follow-up drilling opportunities on the Blocks should the presence of Triassic
reservoirs in the Inishbeg structure be confirmed by drilling. The presence of 
a newly constructed gas fired power plant at Derry generates an opportunity to
develop a local gas market'

Enquiries:

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

Notes to editors:
Island, which was founded in 2003, was admitted to AIM in December 2004 at which
time it had cash in bank of approximately £9 million and no debt. 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.

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



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