Old Head and Schull Contract

Island Oil and Gas PLC
20 September 2007



20 September 2007


           ISLAND AWARDS FRONT-END ENGINEERING STUDY CONTRACT FOR THE

              OLD HEAD OF KINSALE AND SCHULL GAS FIELD DEVELOPMENT


Island Oil & Gas plc (LSE:IOG) today announces that it has awarded a contract to
Pegasus International UK Ltd, for front-end engineering work ahead of the joint
development of the Old Head of Kinsale and Schull Gas Fields in the Celtic Sea,
offshore Ireland. The Studies, which will focus on field development options,
including subsea tiebacks, will commence immediately ahead of plans to bring the
Fields onstream during 2009.

Pegasus are specialist subsea engineering consultants, with offices in the UK
and the USA, who support operators in the definition of field development
options and the associated detailed design works. The Phase 1 works for the
front-end engineering studies will establish a technical definition for the
subsea tie back options and the operational and functional requirements for the
subsea facilities. They will also generate production profiles and gas
composition and condensate recovery volumes.

This work, in conjunction with other studies that are currently being
undertaken, will provide a basis for the updating of field development cost
estimates and schedules.  It is anticipated that the subsequent planned Phase 2
works, in the end of the 4th Qtr 2007, will enable an active dialogue with
suppliers and offshore service contractors in order to establish field
development plans. These plans will form the basis for a Declaration of
Commerciality. Following this an application for a Petroleum Lease covering the
two gas fields, together with a Plan of Development, will then be submitted to
the Minister for Communications, Energy and Natural Resources for approval.

Following technical evaluation of the drilling results from the recent Old Head
of Kinsale and Schull pre-development wells this summer, Island believes the two
fields potentially contain in the range of 80 to 120 bcf of recoverable gas,
subject to confirmation and verification as part of an updated reserves report
that is currently underway. Preliminary discussions with Parties that could
potentially market any future gas produced from Old Head and Schull have been
initiated.

In addition to plans for the joint development of the two fields, Island
continues to investigate gas storage opportunities and the potential partnership
advantages to Island, its co-venturers and the Irish government in offering a
possible strategic gas reserve for the country.

Commenting on the award of the contract, Paul Griffiths, Chief Executive of
Island, said:

'Our pre-development drilling results this year have exceeded the pre-drill
expectations, as a consequence of which we can now consider the joint
development of the gas fields. This could result in a significant cost saving
and a greater flexibility to market the gas in a way that exploits the potential
uplift in Winter gas prices. Island has initiated the process of confirming the
commercial potential of the Old Head and Schull gas fields prior to a
Declaration of Commerciality'

Enquiries:

Lisa J Newman MCIPR MIRS
Newman Consulting
Tel: [phone]


Paul Griffiths
Chief Executive
Island Oil & Gas plc
Tel: [phone]


Notes to Editors:

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, Morocco and Albania.

This announcement has been reviewed and approved by Paul Griffiths, Chief
Executive of Island.  Paul Griffiths is a geology graduate of the Royal School
of Mines, Imperial College London, and is a member of the Petroleum Exploration
Society of Great Britain. He has 30 years experience in the oil and gas
exploration sector and is a qualified person as defined in the guidance note for
Mining Oil & Gas Companies, March 2006 of the London Stock Exchange.


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



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