BONTAN CORPORATION INC.

NEWS RELEASE:

BONTAN CORPORATION INC. ANNOUNCES COMMENCEMENT OF DRILLING ON ITS LOUISIANA GAS PROJECT

TORONTO, ON – August 23, 2005, Bontan Oil & Gas Corporation, a wholly owned subsidiary of Bontan Corporation Inc. (OTCBB: BNTNF) (“Bontan”), is pleased to announce that drilling began on its initial test well, Placide Richard No. 1 on August 21, 2005 and has reached a depth of 740’ to date.

The initial well should reach the proposed total depth of 15,300’ within 60 days. The zones to be tested by the initial well have possible reserves of up to 50 billion cubic feet equivalent of gas (BCFE).

Brammer Engineering, Inc. of Shreveport, La. is the engineering manager of the gas exploration project in eastern Calcasieu Parish, Louisiana and has signed a turnkey drilling contract with Grey Wolf, Inc  (AMEX: GW) of Houston, TX for the initial test well.

Bontan hopes to release weekly reports during the drilling period, with other announcements as operational activities dictate and upon achieving target depth.

About Bontan Corporation Inc.:

Bontan Corporation Inc. [OTCBB: BNTNF] is an international diversified natural resource company that operates and invests in major exploration prospects. Bontan currently has a 49% working interest in a gas exploration project in eastern Calcasieu Parish, Louisiana.

Through its wholly owned subsidiaries, Bontan seeks highly visible opportunities in countries around the globe with a history of natural resource production that offer exciting and attractive propositions. Bontan will seek to minimize risk by bringing in either joint venture, carried or working interest partners, depending on the size and scale of the project.

For further information, please contact Kam Shah, CEO and CFO, at 416-860-0175.   

For Media Relations, contact John Robinson at Current Capital Corp. at 416-860-0211 or 1-877-859-5200

No regulatory authority has approved nor disapproved the content of this release.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "plans", "confident that", "believe", "expect", or "intend to", and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act. Such statements are subject to certain risks and uncertainties and actual results could differ materially from those expressed in any of the forward-looking statements.