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Dragon Oil: Blocks 25, 48 & R2, Republic of Yemen

Dubai

17 December 2007

Dragon Oil Plc has agreed, (subject to certain required approvals), to acquire interests in Blocks 35 (10%), 49 (up to 10%) and R2 (10%) in the Republic of Yemen from Virgin Resources Limited.

This is a significant step forward in the company's strategy to achieve greater portfolio diversification. Management firmly believes that Dragon Oil will be able to utilise this valuable new foothold in Yemen as a platform from which to accelerate growth and to expand further within the region.

A drilling programme for Blocks 49 and R2 is under way, with up to 6 prospects being drilled as part of the first phase of development.

Yemen has an extensive and stable oil and gas infrastructure, which will enable early low cost production and cost effective drilling. In addition, the country has proven remaining reserves of over 1 billion barrels of oil with facilities to load super tankers through modern pipelines.

Mr. Hussain M. Sultan, Chairman & Chief Executive, commented, "This farm-in agreement emphasises our continued commitment to securing future growth and value for Dragon Oil's shareholders. We look forward to working with Virgin Resources Limited and developing what we see as a first step towards greater diversification and geographic expansion. The management team will continue to actively pursue acquiring new assets which will enhance and further diversify Dragon Oil's portfolio."

Stellar acted as advisors to Dragon Oil.