STATEMENT ON VANCO INVESTIGATION AND NEGOTIATIONS BY GOVERNMENT OF UKRAINE

Press release authorized by Mr. Yevgen V. Korniychuk, First Deputy Minister of Justice of Ukraine TD International, Washington, D.C.
CNW, Canada, Friday, August 1, 2008

KYIV, Ukraine - The Government of Ukraine (GoU) continues to pursue an investigation into the circumstances surrounding Vanco International and its affiliates (the "Vanco Companies"), including Vanco Prykerchenska Ltd. The Vanco Companies present a complex network of offshore entities, the owners of which have yet to be fully disclosed.

Through this investigation and possible related legal steps in Ukraine and abroad, the GoU is determined to ensure transparency and the observance of Ukrainian law, and to encourage and protect legitimate foreign and domestic investment. The following points should be clarified in relation to the current dispute with the Vanco Companies:

-- The GoU welcomes foreign and domestic investment, and is committed to creating a stable environment for that investment. This requires transparency and respect for the rule of law.

The GoU has been encouraged by all of its international partners to continue to press for reform in its commercial dealings. This applies equally to foreign and Ukrainian companies, and it applies when foreign and Ukrainian companies act in concert.

-- Given that Vanco Energy Company, one of the original participants in the license tender for the exploration of the Prykerchenska block of the Black Sea continental shelf, is a U.S. corporation and subject to U.S.
jurisdiction, the GoU has kept the U.S. government apprised of the situation as it has developed.

The U.S. authorities are at the vanguard of the global fight against corruption, and the GoU will continue to work with all of its international partners to advance this investigation and pursue necessary legal steps as appropriate.

-- Vanco Prykerchenska Ltd. is not a subsidiary of the U.S. company Vanco Energy. Vanco Energy is simply a minority shareholder in Vanco Prykerchenska Ltd., an offshore company dominated by Ukrainian interests and other offshore entities whose ultimate owners remain undisclosed.

It is Vanco Prykerchenska, and not Vanco Energy or its subsidiary Vanco International, which recently initiated arbitration against the GoU in Stockholm pursuant to the Hydrocarbons Sharing Agreement for the Prykerchenska subsoil block of the Black Sea continental shelf (the HSA).

-- The GoU has consistently pursued good-faith negotiations with the Vanco companies to achieve an amicable solution to the dispute, so long as they are mutually beneficial and carried on in a cooperative atmosphere.

On several occasions, the GoU has proposed to the Vanco Companies an agenda for negotiations, covering all of the circumstances leading to the present dispute, including the circumstances surrounding the initial tender process, the negotiation and execution of the HSA with Vanco International Ltd., and the purported assignment of rights from Vanco International Ltd.
to Vanco Prykerchenska Ltd. The Vanco Companies have not responded to this proposed agenda.

-- The decision of Vanco Prykerchenska Ltd. to initiate arbitration at the Stockholm Chamber of Commerce was inconsistent both with its earlier representations and with the conduct of productive, good-faith negotiations.

For this reason, the GoU has informed the Vanco Companies that negotiations will not take place unless Vanco Prykerchenska Ltd. agrees to suspend the Stockholm arbitration. Should the Stockholm arbitration not be suspended, or if negotiations prove unsuccessful, the GoU is fully prepared to defend the interests of Ukraine by all legal and contractual means available.

-- The Ministry of Justice, duly authorized by the Government of Ukraine, has retained Freshfields Bruckhaus Deringer as legal counsel to defend Ukraine's interests in all negotiations related to the Vanco dispute. No other legal counsel has authority to make statements on Ukraine's behalf in this regard. All inquiries in relation to this matter should be directed to Mr. Peter Turner of Freshfields Bruckhaus Deringer, Paris.
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