Island spuds Donegal Well

Island Oil and Gas PLC
22 August 2006


PRESS RELEASE


22 August 2006


                ISLAND OIL & GAS COMMENCES DRILLING AT INISHBEG,

                                OFFSHORE IRELAND


Island Oil & Gas plc ('Island' or the 'Company') today announces that Lundin
Petroleum AB ('Lundin'), has spudded well 13/12-1 (the 'well') on the Inishbeg
Prospect in Frontier Exploration Licence 1/05 ('FEL 1/05') in the Donegal Basin,
on the Atlantic margin offshore Ireland. The well is being drilled using the
Petrolia rig (the 'rig'), owned and operated by Petrolia Drilling Limited.

The well, which is operated by Lundin, is the third well this year in Island's
2006 and 2007 drilling programme, which has to date produced two successful gas
wells in the Celtic Sea.

Well 13/12-1, located approximately 75 km. off the coast of Donegal and 55km.
east of the Dooish discovery well, was spudded on 22 August 2006 in a water
depth of 319 feet, and is the first well to test the hydrocarbon potential of 
the South Donegal Basin. Results from the well are expected to make a 
significant contribution to the evaluation of the prospectivity of the remainder
of the basin, which covers an undrilled area of at least 2,500 sq. km.

Island is the largest equity holder in FEL 1/05 with a 31% interest. Lundin is
the operator with a 30% interest. The other partners in FEL 1/05 are Lansdowne
Oil & Gas (19.25%), Petroceltic International (16.25%) and Sunningdale Donegal
Basin Ltd (3.50%).


Enquiries:

Lisa J Newman MCIPR MIRS

Newman Consulting

Tel: [phone]


Notes to editors:

Island was founded in 2003 and listed on AIM in December 2004.  The Company has
interests in nine Irish offshore licences, (four as operator and two as
technical manager). The Company is involved in an active exploration and
appraisal programme with three wells planned in 2006, two of which have been
successful gas discoveries. The Company has also secured the Petrolia rig for
its planned 2007 drilling programme.

Island farmed in to FEL 1/05  in January 2005.  Under the terms of that
agreement, Island then acquired a 26% interest in return for which it will carry
40% of the dry hole costs of Inishbeg for Lansdowne and Sunningdale. In the 
event of a successful well and subject to partner approval,
Island will also carry Lansdowne and Sunningdale's part of the testing costs on
the same basis. Island is fully funded to meet such a commitment.  Island
increased its interest tin FEL 1/05 to 31% when it subsequently exercised an
option to acquire an additional 5% groundfloor participating interest from
Lundin.

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



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