Cuban affair getting serious for Melbana as spud date nears
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Special Report: Anticipation is building around the start of Melbana Energy’s high-impact onshore oil exploration program in northern Cuba with field activities beginning at the site of the first of two wells to be drilled in its Block 9 acreage.
Melbana (ASX: MAY), which bought in Angolan national oil company Sonangol as a partner on Block 9 late last year, advised on Thursday that civil works for the construction of the drill pad for the Alameda-1 well was now underway.
The company added that negotiations with its preferred drilling contractor were well advanced with contract award imminent and that an international tender for long lead items had also been completed.
Scheduled to spud in the first quarter of next year, Alameda-1 is the highest ranked prospect in Block 9 and lies in a similar structural position to the largest oil field in Cuba, Varadero, approximately 35km away.
The well will test three targets – Amistad/U1, N and Alameda – that have been independently assessed to have a total Prospective Resource of 141 million barrels of oil and has been ascribed a 32% chance of success.
The probability is higher than usual in oil and gas exploration as Alameda-1 is targeting the same structure drilled in the 1980s by CUPET, Cuba’s national oil company, with a well called Marti-5.
Marti-5 recorded oil shows over an 850-metre gross interval and recovered a lighter oil than typically found in Cuba.
“Cuba has a prolific hydrocarbon zone and we have invested considerable time and money into better understanding the opportunity offered by Block 9,” Melbana executive chairman Andrew Purcell said.
“Success would be transformative for our company almost regardless of the oil price given Cuba’s historically low cost of production, and development of any discovery would be greatly simplified by proximate access to good and existing oil sector infrastructure.”
Alameda-1 will be followed up by the drilling of Zapato-1, which also carries a relatively high chance of success at 23% as it is seeking the source of Cuba’s oldest oil field, Motembo.
Zapato has been independently assessed to have a total Prospective Resource of 95 million barrels of oil.
Under the farm-in agreement signed with Sonangol in December, the Angolan company is acquiring a 70% interest in the Block 9 Production Sharing Contract by funding 85% of the costs of drilling Alameda-1 and Zapato-1.
Sonangol also agreed to pay $5 million for past costs incurred in Cuba, an amount that was expected to largely cover Melbana’s 15% funding commitment for the two wells.
Melbana said on Thursday it had received $2.4 million from Sonangol and would call for the outstanding “past costs” amount and additional partner contributions in early October to meet the projected payments schedule.
Melbana will remain operator of Block 9 until at least the completion of the two-well drilling program, at which point Sonangol will have the option to assume operatorship.
This story was developed in collaboration with Melbana Energy, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.