Canadian Oil

[Arctec]

COSTA Energy Inc.

TSX - V: COE

December 21, 2006



COSTA Announces Alderson Production Restriction



CALGARY  COSTA Energy Inc. announces that it has received notice dated December 20, 2006, from Imperial Oil Resources ("Imperial") that effective February 1, 2007, it intends to cease accepting gas from COSTA for custom processing at Imperial's Redcliff North gas plant.



This would shut in production of approximately 345 mcfd net from COSTA's Alderson field. This represents about 35% of COSTA's current net production of 175 boepd. For the 9 months ended September 30, 2006, the Company's Alderson production averaged about 340 mcfd, equivalent to 57 boepd or 41% of the Company's total average production of 139 boepd. Due to the low operating costs of this shallow gas field, Alderson revenue after royalties and operating costs was approximately $383,000, representing 57% of a total net revenue of $669,000 for the period.



Imperial has committed "to work with (COSTA) to minimize disruptions to (our) Alderson production to the extent reasonably possible" and COSTA hopes that an equitable solution can be found. COSTA has begun to explore alternatives to allow Alderson to continue production. These range from alternate custom processing arrangements to regulatory support to construction of a new COSTA compressor station; however, most of these alternatives would likely still involve a significant shut-in time.



This notice from Imperial has the potential to significantly affect the Company and therefore is a material event that could impact the previously announced and yet to close $1.5 million financing.



COSTA is aCalgary based junior oil and gas company, which explores for, develops, produces, and sells crude oil, natural gas liquids and natural gas in Alberta, British Columbia and Saskatchewan.



The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.



Oil Equivalent Conversion: Barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and natural gas liquids equivalent. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead or point of sale. Barrel of oil equivalents may be misleading, particularly if used in isolation.



Forward Looking Statements: Certain information regarding COSTA in this news release including management's assessment of future plans and operations and the timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, COSTA's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits COSTA will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhausted. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and COSTA does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.



Requests for shareholder information should be directed to:



Mr. Terry D. Brooker

Vice President and Chief Operating Officer

COSTA Energy Inc.

[phone]

Email: [e-mail]