Optimism grows as another oil column revealed on Cuba exploration well

[El Presidente]

 

 

Melbana Energy Limited is an Australian ASX listed, independent oil and gas company that has a portfolio of exploration, appraisal and development stage ...

https://www.upstreamonline.com/exploration/optimism-grows-as-another-oil-column-revealed-on-cuba-exploration-well/2-1-1160382

Optimism grows as another oil column revealed on Cuba exploration well

The Alameda-1 well is drilling on toward the second primary target

The joint venture of Melbana Energy and Sonangol are eyeing up a potential material oil discovery in Cuba based on the size of the structures seen so far at the ongoing Alameda-1 exploration well.

The first of the primarry reservoir targets - the N interval - has just been drilled through, and strong oil shows with elevated gas readings were seen over a gross interval of 145 metres.

The high-quality shows also revealed zones with good indications of fracturing , which is likely to provide enhanced deliverability from the reservoir, said the operator Melbana.

The well is now drilling on to the second - and largest - of the primary reservoir targets at about 3500 metres depth.

The significance of all the oil shows - including from the unexpected shallow interval discovery - need to be determined by logging.

Melbana Energy’s executive chairman Andrew Purcell said: “We are very encouraged by what this well has told us to date, particularly given we have encountered oil shows now over two significant intervals with this latest area also having significant gas influx, which is a good sign that any reservoir may be well charged. Subsequent logs and studies will tell us the significance of what we’re encountered but given the size of these structures it allows for the possibility of a material accumulation of oil.”

Following the completion of the Alameda-1 well, the rig will be moved to the well pad that has been constructed nearby to commence drilling of the Zapato-1 well.

[LordAnubis]

THe carbon credits would probably be worth more than the oil the way thigns are going in the ESG space at the moment.

[Corylax18]

I wonder what kind of deal Cuba worked out with an Aussie/Angolan Joint Venture. The Angola angle makes sense and you'd hope the Cuban government would be able to swing a pretty sweet deal from them.  

[El Presidente]

29 minutes ago, Corylax18 said:

I wonder what kind of deal Cuba worked out with an Aussie/Angolan Joint Venture. The Angola angle makes sense and you'd hope the Cuban government would be able to swing a pretty sweet deal from them.  

But why would a A$50 million Australian oil and gas explorer go hunting for such vast prospects in Cuba? Purcell said operating in such a low-cost environment meant it could aim higher than what it could if it stayed in locales closer to home.

"Melbana chases elephants for our shareholders," he said. "We like to leverage our good international connections and our strong geoscience capabilities by going into a prolific hydrocarbon zone like the Gulf of Mexico via Cuba, which hasn't had as much investment and capital, we can get exposure to potentially massive plays that would otherwise be difficult for an Australian company of our size."

Purcell said that this strategy had allowed Melbana to be awarded a very large acreage, very prospective for oil, delivering a golden opportunity for shareholders to participate in. "If successful, these wells could produce hundreds of millions of barrels," he said.

He also noted logistical costs were comparatively lower than what it would face in Australia, highlighting that its prospect was only 50km away from an oil terminal.

The company plans to spud its first well, Alameda-1, in the coming months.

Alameda-1 is a conventional stacked play targeting three structures - the primary Alameda prospect, the shallower N structure as well as the Amistad prospect.

The company plans to drill down to around 4000 metres saying all three prospects combined could hold 141 million barrels of oil on a best estimate resource basis.

Zapato-1, its second well, is an even bigger prospect, which could hold as much as 95 million barrels of crude on a best estimate basis, however on a high estimate could host as much as 214 million barrels. Purcell noted that traditionally Cuba has produced oil from shallower formations delivering a much heavier crude. What intrigued Melbana to the permits it was granted was that the previous deeper drilled vertical wells had produced a much lighter crude, which has far more uses and is far more valuable as a result.

"What we are doing with that is we are going back in and we are twinning, drilling right next to one of those previous wells that recovered oil from those deeper formations of a lighter crude. This will be a game changer for Cuba if this is successful."

Each well in the upcoming drill programme is expected to cost around US$15 million.

"It's an expensive drilling campaign, but we're going after a big prize, so the risk-return is very much worth it," he said.

Emphasising that point, Purcell highlighted that the chance of success for its deepest target at Alameda-1 is 32% - more than double the global average, thanks to the historical wells drilled. Zapato-1 meanwhile has around a 23% chance of success.

Noting the various diplomatic spats between Cuba and the neighbouring US, Purcell allayed concerns, noting that the deal it has with Cuba's National Oil Company is that any oil it finds it can sell internationally at international prices.

"Cuba has a right to purchase that oil for themselves; but at international prices," he said.

Meanwhile Canadian drill contractor Sherritt, which has significant presence in Cuba, is primed to commence operations for the upcoming spud and has been providing Melbana's project management team with local administrative, relationship and logistics support.

Melbana has now taken care of all the required contracts and equipment orders for the project and is in the process of finalising a few remaining key elements.

"We're very pleased and very fortunate to have engaged a seasoned operator with decades of experience drilling in Cuba, such as Sherritt," Purcell said.

Starting with the western, most[1]studied part of Block Nine, Purcell said a successful discovery at its two wells could help fund exploration and development of the entire block.

"Cuba produces around 45,000 barrels of oil per day, but it needs twice that. If we find a much lighter crude than what they're used to, it might be attractive to them to sell their share for foreign currency" he said.

Purcell did note that the COVID-19 pandemic had caused a few delays to its original planned spud date, in terms of getting equipment and personnel in country, but otherwise had not been affected with the company maintaining a high level of discipline in following COVID-safe procedures, and the continuous support of its JV partner.

"My thanks and respect to Sonangol has gone up tremendously," he said. "They quite reasonably could have found any excuse to say ‘in this current environment let's not go ahead with this project now' and they didn't. We are now where we want to be to drill these wells because of Sonangol, because of their faith and commitment to our agreement so a big tick to them."

[Corylax18]

10 minutes ago, El Presidente said:

"Cuba has a right to purchase that oil for themselves; but at international prices," he said.

This seems like a pretty bad deal for Cuba and one they historically wont honor if past investment deals are used as an indicator. 

15 minutes ago, El Presidente said:

"Cuba produces around 45,000 barrels of oil per day, but it needs twice that. If we find a much lighter crude than what they're used to, it might be attractive to them to sell their share for foreign currency" he said.

I was really looking for an answer to this question. I completely understand why the other two parties are interested. What's Cuba's share? Is it of a type of crude that they can refine on the island? Not all that long ago Cuba was receiving far more crude than they needed from Venezuela and selling off the refined products they didn't use. So theoretically, the refinery capacity is there if this claim hits. 

But and this is a big but. 141 million barrels is nothing, the US has between 600-700 million barrels just in the strategic reserve. At Cuba's max consumption rate, (90,000 barrels a day if the article is right) thats 4 years and about 3 months worth of oil, if they get every drop, of the high estimate. Lets be generous and say they get 20%, free of charge. That's less than a years worth of consumption, if these guys can get every drop out of the ground.  

[El Presidente]

8 minutes ago, Corylax18 said:

This seems like a pretty bad deal for Cuba and one they historically wont honor if past investment deals are used as an indicator. 

 

No doubt the Aussies are likely to be screwed if successful. The only cause for confidence is  that they are working with Sherritt who is Cuba's 50% partner in the Moa Nickel mine. 

[Kaptain Karl]

Man that's the last thing the people of Cuba need...it'll only keep the oppressive government in power. 

[JohnnyO]

When they hit the 3500 meters they will find a lake of oil filled with Spanish galleons loaded with gold doubloons that perished in the 1500's. Raul and his cronies will buy apartment buildings in Miami and finish out their lives guzzling Miller Lite, running spring break contests at the beach. Their blind joy prevented them from ever getting a drop out of Alameda. John