The O2Diesel Corporation (AMEX: OTD) has received approval from the government of Paraguay, South America to market and distribute the company's proprietary fuel technology in the country. Initial testing has commenced in conjunction with Copetrol SA, one of the largest fuel distributors in the country. The implementation was secured by O2Diesel Brazil in cooperation with the company's strategic partner Fair Energy SA of Geneva.

The key objectives of the initial 3-month testing period are to test and validate the performance of O2Diesel clean fuel technology in light and heavy duty diesel powered vehicles in the capital city of Asuncion. It is anticipated that a broad commercial scale expansion in the fleet will occur during the second quarter 2008 after the pilot is completed. Following completion of the test period and initial deployment, the final objective will be to initiate widespread regional use by the end of 2008.

Sr. Blas Zapag, Senior Director of Copetrol SA, commented, "We are very excited to embrace O2Diesel's clean fuel technology in Paraguay. We aim to be the leading distributor of O2Diesel(TM) and at the forefront of the use of ecologically friendly fuels in South America moving forward. O2Diesel's clean fuel has demonstrated through vigorous tests to be a viable alternative fuel which can make a significant contribution to cleaner air in the city of Asuncion. The introduction of O2Diesel(TM) fuel in the transit system should have a substantial impact on the reduction in emissions and smoke from the vehicles operated by the various government agencies, which could bring an immediate and much needed improvement in air quality."

Sr. Claudio Hirsch, Director of Fair Energy, said, "The pilot in Paraguay is the first major ethanol-diesel fuel project promoted by Fair Energy in South America. We are convinced that O2Diesel fuel has large potential in the region and Fair Energy is already preparing the product for large scale launch in Colombia."

"The opportunity in Paraguay further enhances our commitment to strengthening our strategic partnerships in developing economies," stated Alan Rae, CEO of O2Diesel Corporation. "As in India and other markets we are developing in Asia, Paraguay has substantial air quality issues that continue to increase as the country rapidly develops and expands economically. They need an immediate solution that will not require a massive capital investment in new infrastructure and equipment and, as we have now proven in several markets, O2Diesel(TM) provides that solution. Additionally, they are net importers of diesel fuel and have access to competitively priced ethanol production from Brazil, which augments this supply. The O2Diesel solution fits their requirement from both an environmental and economic standpoint. Our partner in this region, Fair Energy, shares our belief that these same environmental and economic drivers will open the door to other markets in the Central and South American markets."

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