Can Melbana Energy's Block 9 Development Propel It from Explorer to Producer?

Melbana Energy Limited (ASX: MAY) has achieved a significant milestone with the formal approval of the initial development phase for Unit 1B in the Block 9 Amistad field, located onshore Cuba. This development is set to transition the company from exploration to production, with the first oil cargo export anticipated by the end of 2024. The project is advancing on multiple fronts, including well remediation, new well drilling, and finalization of export contracts, positioning Melbana for a promising start to 2025.

Development Overview: Laying the Groundwork for Production

Melbana Energy has received formal approval for the initial development of Unit 1B in the Block 9 Amistad field. The construction approval for the next well pad under Unit 1B marks a critical step forward. With all necessary export approvals secured and the arrival of oil trucks and tankers in the country, the company is on track to export its first trial cargo of oil by the end of 2024.

Andrew Purcell, Executive Chairman of Melbana Energy, highlighted the progress: "It’s been a busy few months getting everything organized to meet our goal of exporting our first trial cargo of oil by the end of this year.

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Preparing for Production: Remediation and New Wells

A key focus for Melbana is the remediation of the existing Unit 1B production well, slated for November. The objective is to restore the well's initial production rate of 1,235 barrels per day. The company plans to drill two additional production wells under Unit 1B, with construction set to begin towards the end of the current rainy season, typically around November.

The phased development plan includes the drilling of new wells using existing 2D seismic data, targeting the highest confidence resource estimate of 16 million barrels (100% share, low estimate). The subsequent acquisition of 3D seismic data next year will allow Melbana to refine the positioning of future wells to maximize recovery from the 46 million barrels of Contingent Resource (100% share, best estimate) and potentially tap into the 129 million barrels (100% share, high estimate) of 3C Contingent Resource.

Alameda-2 Remediation: Boosting Production Efficiency

Before drilling new wells, Melbana plans to remediate the existing Unit 1B completion of the Alameda-2 well. The goal is to address near-wellbore formation damage and restore the well to its initial production rates. This remediation includes using a service rig to pull the completion, adding perforations, and conducting an acid wash and squeeze.

The remediation and subsequent drilling efforts are designed to increase the recovery of the estimated 46 million barrels of Contingent Resource in Unit 1B, enabling Melbana to rapidly boost production.

Alameda-3: Insights and Next Steps

Melbana is also progressing with the Alameda-3 appraisal well, with scoping and core analysis underway. The focus is on understanding the causes of poor productivity observed in the Alameda sheet, attributed to formation damage from higher-than-planned mud weight and extended chemical exposure during drilling.

Commercialisation Strategy: Optimizing Oil Export Logistics

Melbana is finalizing its commercial strategy for the oil produced from Block 9. The plan includes a direct trucking route to oil storage tanks at the Matanzas Supertanker port, where the company is negotiating access to 250,000 barrels of storage capacity. This capacity would allow for oil uplifts every other month, assuming a production rate of 5,000 barrels of oil per day.

The company is in advanced negotiations with major international commodity traders for the sale of its crude oil and is also exploring additional partnerships and financing options to support the further development of Block 9.
Moving Forward: From Explorer to Producer

With all the necessary approvals and logistical arrangements in place, Melbana Energy is well-positioned to transition from an exploration-focused company to a producer. The successful implementation of the Unit 1B development plan, alongside the commercial strategies being finalized, will be key to unlocking the potential of the 46 million barrels of Contingent Resource in Block 9.

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