CanArgo Energy Corporation: New Production Sharing Contract Signed.

Business Editors

OSLO, Norway--(BUSINESS WIRE)--July 3, 2003

CanArgo Energy Corporation (OTCBB:GUSH) (OSE:CNR) today announced that its subsidiary, CanArgo Norio Limited (CanArgo Norio), has signed a Production Sharing Contract for Blocks XIG and XIH in the Republic of Georgia.

The Contract was signed between CanArgo Norio Limited (in which CanArgo has a 64.2% interest) and the Georgian State, represented by the State Agency for the Regulation of Oil and Gas Resources and the Georgian State oil company, Saknavtobi. CanArgo Norio views these blocks as having good potential, being adjacent to productive acreage.

The Production Sharing Contract ("PSC") gives CanArgo Norio the right to explore and produce hydrocarbons from the Blocks XIG and XIH in the eastern part of Georgia. These areas are located adjacent to CanArgo's existing acreage close to Tbilisi and cover in total some 485 km2. The main hydrocarbon potential in Block XIG is a gas play within Cretaceous and Palaeocene fractured limestones. Wells drilled on separate structures along the same structural trend, but outside the block, have tested gas at significant rates of up to 250,000 m3/d. In Block XIH gas condensate has been tested in the past from the Middle Eocene. Potential for oil accumulations may exist in Upper Eocene and Oligocene sandstone units which have been proven to exist from earlier exploratory drilling. CanArgo currently produces oil from these horizons in the main Ninotsminda area to the north-east where current production is approximately 2,000 bopd.

Under the terms of the PSC, CanArgo Norio will evaluate existing seismic and geological data during the first year and acquire additional seismic data within four years of the effective date of the Contract. The total commitment over the next four years is $350,000. This Contract is expected to become effective before the end of the year following necessary bureaucratic procedures. The commercial terms of the PSC are similar to those governing CanArgo Norio's other exploration areas.

CanArgo Chairman & CEO Dr. David Robson commented, "The signing of this new Production Sharing Contract consolidates our position in eastern Georgia with only a minimal financial commitment. These blocks strengthen our existing portfolio, being adjacent to our Norio and Nazvrevi acreage, and reconfirms CanArgo's dominant position in this area. Our funds are currently being invested in enhancing production through our horizontal programme at the nearby Ninotsminda field, which remains our priority with the next horizontal due to commence shortly, but we look forward to exploring this promising new area once we have achieved our existing production goals."

CanArgo is an independent oil and gas exploration and production company with its oil and gas operations currently located in the Republic of Georgia, Ukraine and the Caspian Sea. Further information on the Company is available at www.canargo.com and at http://www.sec.gov.

The matters discussed in this press release include forward looking statements, which are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated in such forward looking statements. Such risks, uncertainties and other factors include the uncertainties inherent in oil and gas development and production activities, the effect of actions by third parties including government officials, fluctuations in world oil prices and other risks detailed in the Company's reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission. The forward looking statements are intended to help shareholders and others assess the Company's business prospects and should be considered together with all information available. They are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.