2007-10-16

New Gas Discovery (AKK11)

Tuesday, October 16, 2007 – Bozoi, Kazakhstan – Tethys Petroleum Limited (“Tethys”) (TSX:TPL) today announced a new gas discovery with the results of the Akkulka AKK11 exploration well in Kazakhstan, and provided an update on future drilling plans.

The AKK11 exploration well was drilled in the central part of the Akkulka block, south of the successful AKK09 well and to the south-west of the Central Akkulka AKK04 discovery well. AKK11, which was drilled to a total depth of 1,969 feet (600 metres) tested dry gas at a stabilised rate of 7.9 million cubic feet per day (MMcf/d), 223 thousand cubic metres per day (Mcm/d) from a 23 feet (7 metre) interval of Paleogene sandstones from 1,686 to 1,709 feet (514 to 521 metres) RKB through a 100/64 inch (40 mm) choke with a flowing tubing head pressure of 204 psig (13.9 atmospheres). The well is now undergoing final draw-down and pressure build-up tests prior to being suspended for future production.

The AKK11 exploration well is the first well to be drilled in a 10-well shallow exploration program using funds raised in the IPO in June 2007; this program is expected to be completed by June 2008. The A80 rig which drilled AKK11 is now being moved to the AKK12 location where drilling is expected to commence shortly. AKK12 is located in an area determined by the newly acquired seismic data and is situated some 1.4 miles (2.3 km) to the east-south-east of the AKK11 well with the objective to explore for further gas potential along the AKK11 ridge.

During the testing of AKK11 no pressure response was observed in the AKK09 well, confirming that the AKK11 and AKK09 structures are separate gas pools. The new seismic has further enhanced the prospectivity of the Central Akkulka area and, based on these data, a further exploration drilling location has been selected some 2.1 miles (3.4 km) north-west of AKK09. This location (named AKK13) will be drilled by the A80 drilling unit after completion of the AKK12 well which is anticipated to be in November 2007. Dependent on the results of this drilling the rig will either remain in the Central Akkulka area or will be moved to commence drilling the first well on the Kul-Bas block (KB01) which is planned to be drilled on the large “Kokbulak” exploration prospect in the north west of the block. The Central Akkulka discoveries will be tied-in to the Kyzyloi export pipeline as part of the Greater Kyzyloi Phase II development which is planned to commence production in the middle of 2008. Additional compression capacity will be required and engineering and procurement work is currently underway to meet this target.

Work is continuing on the Kyzyloi development itself, with the pipeline and compressor plant now fully completed and pressure tested. All that remains to commence gas exports from the field is for the final cut-in to be made to the trunkline and the approval of a senior governmental commission which is expected to visit the field within the next few weeks. Following this, space will be allocated in the Bukhara-Urals pipeline by the pipeline owners, Intergas Central Asia, and gas sales will commence. Initial gas sales will be sold under the Kyzyloi base load contract which it is understood will be sold domestically. Tethys is currently carrying out additional work on the Kyzyloi field itself to ensure sustained gas production at the maximum level possible through the currently installed compressor capacity.

Evaluation work is also now complete on the AKK07 exploration well. This well was drilled to the south of the Kyzyloi field as a commitment exploration well on the Akkulka Exploration Contract, just south of the boundary of the Kyzyloi Production Contract area with the objective of assessing gas potential in this area and in the southern part of the Kyzyloi Production Contract area itself. Mapping, based on available seismic data, shows a significant prospective area just to the south west of the Kyzyloi field within the Production Contract area with the edge of this prospective area just extending into the Akkulka exploration block. AKK07 was not drilled at the optimal location to test this prospect as it had to be drilled outside the Kyzyloi Production Contract Area, but did encounter sands with gas indications on the edge of this prospect in the interval 1,980 – 2,001 feet (604-610 metres) RKB, and although the well did not test commercial gas, gas was observed at surface with gas pressure on the wellhead. These data enhance the prospectivity of the south west Kyzyloi area which will be properly tested by future drilling within the Kyzyloi Production Contract area as part of the Kyzyloi development.

Tethys also announced that it has placed an order for a new 2,000 horsepower (1,470 kN) ZJ70/4500L drilling rig from a Chinese supplier. This rig, which has a nominal drilling depth of 23,000 feet (7,000 metres) will be completed within 6 months, and will be transported to Akkulka for use on the Akkulka deep exploration program which is planned to commence in May 2008. It is planned that the rig would be operated by Tethys’ current Kazakh drilling contractor under a management agreement. The rig would also be suitable for drilling on the potentially large prospects Tethys has identified in the Kulob area of Tajikistan over which Tethys is currently finalising a Production Sharing Agreement and where work is commencing under its recently signed Investment Operating Agreement.

Dr David Robson, Chairman, President and Chief Executive Officer of Tethys, commented, “We are very pleased with a further high productivity gas discovery in the central part of the Akkulka block. To date we have tested approximately 25 MMscf/d (707 Mcm/d) from the Central Akkulka area, and together with our other discoveries should enable the planned Greater Kyzyloi development Phase II target of 38 MMscf/d (1,069 Mcm/d) by June 2008 to be achieved. The new seismic has opened up additional potential in the area and indeed the presence of gas in AKK07 adds further to the upside in the Kyzyloi Production Contract area itself. We also believe that there is substantial potential in the deeper horizons and our decision to purchase a deep drilling unit should reduce our ultimate drilling costs whilst guaranteeing rig availability in this competitive market, as well as giving us the equipment to explore the significant deep potential in Tajikistan. This will be one of the largest rigs available in Central Asia, and although Tethys does not wish to become a drilling service company, ownership of equipment such as this gives us considerable flexibility and advantages both on current and future projects.”

TPL is focused on oil and gas exploration and production activities in Central Asia with activities currently in the Republic of Kazakhstan and more recently the Republic of Tajikistan. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.

This press release contains “forward-looking information” which may include, but is not limited to, statements with respect to our operations. Such forward looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, the risks and uncertainties outlined under the section titles “Risk Factors and Uncertainties” in our prospectus (available at www.sedar.com). Should one or more of these risks materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. Additional information in respect of the Kyzyloi shallow gas field and Akkulka area (also referred to as the Akkulka Block), including location, area, geologic age and lithology, depth, estimated costs and gas marketing information, appears in Tethys’ prospectus dated June 18, 2007.

For more information please contact:

Sabin Rossi
Investor Relations Manager
Tethys Petroleum Limited
TD Canada Trust Tower
161 Bay Street, 27th Floor
Toronto N5J 2S1
Canada

Office: 1-416-572-2065
Fax: 1-416-572-2201
Cell: 1-617-669-1841
e-mail: info@tethys.gg
website: www.tethyspetroleum.com