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Melbana Energy press release
Melbana Energy Limited (ASX: MAY) ("Melbana" or "the Company") is pleased to provide the following update on its activities in relation to the Santa Cruz oil field - an area that has been in production since 2006 and which was initially estimated to have a resource of up to 100 million barrels of recoverable oil.
In March this year, Melbana secured the exclusive rights to assess the Santa Cruz oil field and negotiate a long term binding Incremental Oil Recovery ("IOR") Production Sharing Contract ("PSC") from the national oil company of Cuba, CubaPetroleo (see ASX Release 8 March 2018).
Melbana has completed its initial assessment, yielding a number of promising opportunities to enhance production from the designated area.
Melbana has now finalised a binding contract with CubaPetroleo, which is subject to standard Cuban regulatory approvals. This provides Melbana with a long term right to share in any enhanced production from the Santa Cruz oil field.
Under an IOR contract, additional production above an agreed base production rate is shared as depicted figuratively below in Figure 1. In general, the commercial terms are consistent with exploration PSC terms, such as those that apply to Melbana's Block 9 PSC, with provisions for cost recovery and sharing of profit oil.
The Santa Cruz IOR PSC is split into multiple phases, with an initial study period of desk-based technical work followed by an implementation phase. The initial study period phase will last a maximum of 8 months at which point Melbana may elect to proceed to the next implementation phase, which includes a minimum program of two side-track wells from existing well bores to new geological targets. To accelerate opportunities to enhance oil production as soon as possible, Melbana has already engaged a Canadian consultant with extensive Cuban IOR experience to identify possible debottlenecking opportunities.
The full release is available here