CanArgo Energy Corporation: Well N78z Tests Oil.

Business Editors

CALGARY, Alberta--(BUSINESS WIRE)--Jan. 3, 2001

CanArgo Energy Corporation (OTCBB:GUSH) (Oslo Stock Exchange:CNR.) today announced the successful test of well N78z in the Oligocene / Upper Eocene reservoir of the Ninotsminda area.

Well N78z tested some 740 barrels of oil per day through a restricted 5.8 mm (15/64") choke with a flowing tubing head pressure of 125 atmospheres (1,800 p.s.i.). The well was a sidetrack from an existing wellbore to the Oligocene / Upper Eocene reservoir at approximately 2,400m (7,870 ft). Two test intervals were identified from open hole logs and an initial interval of 41 metres (135 ft) of sandstone was perforated. Following clean-up the well was tested on a range of choke settings, the testing being restricted by the surface equipment and downhole configuration. Multi-rate testing and downhole pressure surveys are continuing to determine reservoir parameters and optimum operating conditions prior to designing an appropriate mechanical completion and placing the well on long term production.

Following on from the successful discovery of oil in the shallow Sarmatian reservoir on well N97, this test further demonstrates the potential of the upper section in the Ninotsminda area, above the Middle Eocene sequence which is currently being developed for oil and gas. A study programme of these upper reservoir intervals has commenced with the objectives of evaluating reserves and establishing an on-going appraisal and development programme for 2001.

Murray Chancellor, Chief Operating Officer, commenting on the successful well test said, "We are very encouraged by the initial performance of this well and the implications for longer term production from this largely untested Oligocene / Upper Eocene reservoir. This is CanArgo's first investigation into this interval. The tubing pressure is relatively high supporting the potential for good production rates from this interval. We intend to further evaluate this zone in the near future and continue work on assessing new targets and potential reserves from this formation. We are very pleased to be adding production from this additional reservoir."

CanArgo Energy Corporation is an independent oil and gas exploration and production company operating in Eastern Europe. CanArgo's principal oil and gas operations are located in the republic of Georgia.

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. The Company cannot give assurance that the results anticipated herein will be attained.