NEWARK, DE announced today that it 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(TM) 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."

More about O2Diesel: The Company and Its Fuel Technology

O2Diesel Corporation (AMEX: OTD) and its U.S. subsidiary O2Diesel, Inc. is a pioneer in the commercial development of a cleaner-burning diesel fuel alternative that provides exceptional performance and environmental qualities for centrally fueled fleets and off-road equipment of all kinds. Engineered and designed for universal application, O2Diesel(TM) is an ethanol-diesel blend that substantially reduces harmful emissions without sacrificing power and performance. Extensive independent and government-recognized laboratory and in-use field tests have demonstrated the effectiveness of O2Diesel(TM) -- the introduction of this cost-effective, cleaner-burning diesel fuel is now underway in the United States and other global markets. For more information please refer to www.o2diesel.com.

Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding O2Diesel Corporation's business which are not historical facts are 'forward-looking statements' that involve risks and uncertainties. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, the failure to obtain adequate financing on a timely basis and other risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements, as a result of either the matters set forth or incorporated in this report generally or certain economic and business factors, some of which may be beyond the control of O2Diesel. These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital, unexpected costs, failure to gain product approval in the United States or foreign countries for the commercialization and distribution of our products, failure to capitalize upon access to new markets and failure in obtaining the quality and quantity of ethanol necessary to produce our product at competitive prices. O2Diesel disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. "O2Diesel" and "CityHome" are trademarks of O2Diesel Corporation.

Contact: O2Diesel Corporation Alan Rae +1 (302) 266 6000 Insignia Dan Wuekel +1 (818) 899 0128

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