Together with its recently announced licensing agreement with KL ProcessDesign Group for second generation ethanol process technology, thisacquisition is another important step in the Company's diversification andexpansion strategy and will provide O2Diesel with a significant foothold inone of Europe's largest markets for biofuels. The Company plans to leverageYellTec's infrastructure, customer base, proprietary technology andmanagement resources to become a leading provider of innovative biofuelssupply and services in the German truck fleet market. YellTec will become awholly owned subsidiary of O2Diesel Europe and will target small to mediumsize truck fleet operators providing a variety of fuel blends according tocustomer needs, while taking advantage of the constantly changing pricedifferentials between mineral diesel and renewable fuel components.

Major benefits and assets in the transaction include:

--  200 active small and medium sized fleet customers using in excess of    45 million liters of fuel per year.--  Network of 22 fueling points across Germany, with the expansion    potential of 8 additional sites by year end 2008.--  Centrally located bulk storage and distribution.--  OEM approved proprietary biofuel conversion technology.--  Experienced management and support team.    

Alan Rae, CEO of O2Diesel Corporation stated, "This acquisition is a keyelement of our strategy towards becoming a diversified renewable fuelscompany. By building on our experience and knowledge gained during thelast 10 years in the global renewable fuels market, we believe we are in astrong position to identify other expansion opportunities for the YellTecbusiness model while developing new markets for our proprietary ethanoldiesel blended fuel in Europe. With the consolidated company we willaccelerate and diversify O2Diesel's revenues while generating significantcash-flow from operations."

O2Diesel is acquiring all the outstanding shares of YellTec for EUR 3million ($4.7 million at current exchange rates) and 5.3 million shares ofO2Diesel common stock. The final price is subject to a purchase priceadjustment as described in the agreement. O2Diesel expects the transactionto close during the second quarter.

Mr. Rae continued, "This established, national German network of fuelingsites provides O2Diesel with a competitive edge in distribution. Workingtogether with our supply partners, we will seek to provide a greaterincentive to diesel fleet operators who may have resisted the change tocleaner burning renewable fuels because of price and availability. Bycontrolling a larger percentage of the value chain for sales of diesel fueland its cleaner alternatives, we become a vital link in helping small tomedium size fleets gain access to the best price of their fuel, whichaccounts for as much as 40% of the overall operating costs of our targetcustomers. We expect the strategy will create a stronger, more diversifiedcompany that is positioned for long-term future growth in other Europeancountries as we expand this model. We are currently engaged in positioningthe Company to take advantage of its emerging status as a leading innovatorin the renewable fuels market."

More About O2Diesel: The Company and Its Fuel Technology

O2Diesel Corporation (AMEX: OTD) and its U.S. subsidiary O2Diesel, Inc., isa pioneer in the commercial development of a cleaner-burning diesel fuelalternative that provides exceptional performance and environmentalqualities for centrally fueled fleets and off-road equipment of all kinds.Engineered and designed for universal application, O2Diesel(TM) is anethanol-diesel blend that substantially reduces harmful emissions withoutsacrificing power and performance. Extensive independent andgovernment-recognized laboratory and in-use field tests have demonstratedthe effectiveness of O2Diesel(TM) -- the introduction of thiscost-effective, cleaner-burning diesel fuel is now underway in the UnitedStates and other global markets. For more information, please refer towww.o2diesel.com.

Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Actof 1995: Statements in this press release regarding O2Diesel Corporation'sbusiness, which are not historical facts, are 'forward-looking statements'that involve risks and uncertainties. Forward-looking statements aresubject to a variety of risks and uncertainties, which could cause actualevents or results to differ from those, reflected in the forward-lookingstatements, including, without limitation, the failure to obtain adequatefinancing on a timely basis and other risks and uncertainties. Actualresults could differ materially from those projected in the forward-lookingstatements, as a result of either the matters set forth or incorporated inthis report generally or certain economic and business factors, some ofwhich may be beyond the control of O2Diesel. These factors include adverseeconomic conditions, entry of new and stronger competitors, inadequatecapital, unexpected costs, failure to gain product approval in the UnitedStates or foreign countries for the commercialization and distribution ofour products, failure to capitalize upon access to new markets and failurein obtaining the quality and quantity of ethanol necessary to produce ourproduct at competitive prices. O2Diesel disclaims any obligationsubsequently to revise any forward-looking statements to reflect events orcircumstances after the date of such statements or to reflect theoccurrence of anticipated or unanticipated events. "O2Diesel" and"CityHome" are trademarks of O2Diesel Corporation.