Shelton Canada and the Ukraine's largest oil and gas company, Ukrnafta, have drilled their first well as partners in the Kashtan Petroleum Joint Venture.

Located in the Lelyaki oil field, east-central Ukraine, well No.304 has tested initially about 142 barrels of oil equivalent per day net to Shelton. The new well is a solid addition to the company's current daily production of 250 barrels of light oil from the Lelyaki concession.

Drilled at relatively low cost to Shelton at CDN$450,000, the well, producing high-quality light oil, should be tied in shortly to the main pipeline. Its close proximity to oil and gas infrastructure and Ukraine's extensive network of pipelines ensures cost-efficient transportation to the huge markets of Europe.

Shelton expects sales at highly favorable pricing to begin early January 2008. Revenues generated will be used to fund development drilling and well re-completions in the Lelyaki Field.

"It's the first well we've drilled since acquiring the Lelyaki concession earlier this year as part of our joint venture agreement with Ukrnafta," says Zenon Potoczny, Shelton's president and CEO. "Our strategic partnerships with leading Ukrainian oil and gas companies like Ukrnafta are a key reason for our success in Ukraine."

Ukraine is important to world energy markets. The country is a critical transit centre for exports of Russian oil and natural gas to Europe. Ukraine is also one of Europe's largest energy consumers, and wants to increase production from its own basins. The country's proven reserves include 53.8 million tonnes of oil and 1.1 trillion cubic meters of gas.