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OIL & GAS | Melbana Energy
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MELBANA ENERGY
Unlocking reserves in Cuba’s underexplored offshore oil basins
OIL & GAS | Melbana Energy
Melbana Energy is a junior oil & gas company that has been listed on the Australian Securities Exchange for the last 20 years. Traditionally, the Melbourne-headquartered firm has regarded Australia’s offshore industry as the core of its portfolio, but in recent years it has looked to diversify into new markets outside of offshore Australia. “We got interested in Cuba in the early 2010s based on technical reports showing it as hydrocarbon rich, relatively underexplored region. With the US embargo we felt there was a limited application of Western techniques to the geology in Cuba,” says Melbana’s CEO Robert Zammit. giving the firm an early mover advantage in Melbana’s technical team is highly experienced in the type of geology
an underexplored oilfield.
reserves according to Zammit, while the
Cuba - open for investment
current board also possesses a deep
Having upheld a socialist political system
reservoir of industry knowledge from
since 1959, Cuba has long been regarded
previous experience with global companies
as an inward-looking nation with foreign
such as ExxonMobil.
investment opportunities few and far
underpinning Cuba’s existing oil & gas
between, and out of the question altogether But crucially, as a small non-American
for companies from the US due to the
company looking at Cuba as an investment
embargo.
destination, Melbana has been able to pursue opportunities that weren’t accessible
However, things are changing on the
to traditional players North of Key West,
Caribbean island. In 2018, after 42 years of
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Castro-led rule Cuba ushered in a new leader,
“They’ve established a pretty encouraging
and in the early days of his presidency Miguel
framework in terms of tax structure and a
Díaz-Canel began a campaign to attract
legislative framework, and that’s given us
greater foreign investment across several
sufficient comfort to support the investment
sectors, from tourism to infrastructure and
we’ve been making.”
oil & gas. The Cuban government has recognised the “From our perspective, we’ve had quite a
emerging potential of its oil & gas industry
positive experience in Cuba,” reveals Zammit.
and has thrown its weight behind private
“Since we’ve been active in the country, Cuba
investors in the sector by applying an
has been looking for foreign investment.
attractive tax rate of 15-22.5% and an eight-
The general attitude, all the way from
year tax holiday for oil companies.
government to the people that we have been dealing with, has been very positive.
Almost all of Cuba’s current oil production is drilled from a 750 km² strip along the
OIL & GAS | Melbana Energy Northwestern coast which runs from the bustling capital city Havana to the resort town of Varadero, however much of Cuba’s Northern basins remain underexplored. This notion is highlighted by a 2004 US Geological Survey which found that the total undiscovered technically recoverable reserves in the North Cuba Basin stood at 4.6 billion barrels of crude oil, 9.8 Tcf of natural gas and 900 million barrels of natural gas liquids. Melbana’s challenge is to unlock a portion of the reserves that exist in Cuba’s Northern basins, and Zammit believes the company possesses the technical skills required to do just that. “It’s a different type of geology that applies to the Northern part of the Gulf of Mexico, but it’s certainly a hydrocarbon rich area. “We know there is oil in the ground in our acreage. Oil has been produced within the boundary area of our Block 9 project and our other asset - Santa Cruz - is an existing oilfield.”
Block 9
opportunities, the national oil company –
Block 9 is comprised of a 2,380 km² footprint
Cuba Oil Union (CUPET) – presented the
along trend from the multi-billion barrel
company with a number of prospects and
Varadero oil field, with the potential for large,
after a number of screening studies, Melbana
Varadero type structures, which was borne
decided that Block 9 was the most attractive.
out by an independent best estimate oil-inplace resource of 15.7 billion barrels.
“That was probably driven by the fact that Block 9 is part of Cuba’s Northern fold belt
Zammit explains that when Melbana
trend where there are currently multiple
first started scouting the country for
producing offshore fields. The trend
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continues onshore into Block 9 and that gives
More recently, Melbana signed a farmout
us a strategic advantage in terms of cost
agreement with Chinese oil services company
management for drilling.�
Anhui Guangda Mining Investment Co (AGMI) on December 31st 2018, which will see the
After a period of negotiation with CUPET,
latter commit to drilling a minimum of three
Melbana was awarded a 100% participating
wells in Block 9 by July 2020, with the former
interest in the Block 9 area in 2015, on the
retaining a 12.5% share of the profit.
basis of a production sharing contract (PSC) over a +20-year period.
“Farming out is not 100% mandatory, but its almost something we needed to do as
OIL & GAS | Melbana Energy
“Since we’ve been active in the country, Cuba has been looking for foreign investment. The general attitude, all the way from government to the people that we have been dealing with, has been very positive” Robert Zammit, CEO Melbana Energy
ResourceGlobal GlobalNetwork Network Resource we don’t have a huge balance sheet and the
“Our geoscience team have been working
opportunities we are seeking are really quite
full-time on the structural interpretation for
large for a company of our size,” Zammit
Santa Cruz, based on the data that already
adds.
exists. We have formed a view that this
Santa Cruz Meanwhile, the Santa Cruz project - located approximately 150 km West of Block 9 - is
is an area with most promise in terms of incremental production potential,” Zammit claims.
a different type of asset for Melbana to
The Beehive prospect
manage, being an existing oilfield that
Returning to Australia, the company’s
currently produces in the region of 1,500
Beehive prospect is the largest undrilled
barrels per day.
offshore oil prospect in Australia, and so success there would dwarf any success in
Melbana finalised an incremental oil recovery
Cuba, according to Zammit.
(IOR) contract with CUPET for Santa Cruz in December 2018, which will see the parties
The prospect, located near Darwin off the
share any increase in production that can be
coast of the Northern Territory, is a very
generated above an agreed baseline level.
large isolated carbonate reef that is highly analogous to the Tengiz oil field in the
Additional production will be pursued
Caspian Sea – a huge field with somewhere
by Melbana from surface or downhole
in the region of 6 to 9 billion barrels
equipment or facility upgrades, from re-
recoverable.
working existing wells, side tracking from existing wells and from drilling new wells to
Melbana has partnered with two giants of
access new oil pools.
the global oil & gas sector at the Beehive prospect, in the shape of French major Total
The contract is currently moving through
and Australia’s Santos, who have fully funded
the Cuban ratification process for regulatory
a 3D seismic survey, in return for a further
approval, but this hasn’t stopped Melbana
option to fully fund the Beehive-1 exploration
commencing two optimisation studies at
well.
Santa Cruz. If either company exercises its option, “One of the studies is based on facility
Melbana would retain a 20% participating
optimisation, looking at what we can do with
interest and be fully carried for the first well
the equipment and any de-bottlenecking we
drilled in WA-488-P.
can do. The other is more geoscience-based, which is where there is more upside for us,
“The independent assessment provided
from what we’ve seen so far.
a best estimate of 388 million barrels of
OIL & GAS | Melbana Energy
Cuban Block 9 PSC Meeting - Havana 2018
oil equivalent at a 100% basis. From our
towards it being gas. Whatever it is, oil is
perspective, it’s got enormous upside and
upside and we are surrounded by LNG
it’s very exciting for our shareholders to
infrastructure in that area and domestic gas
have that opportunity.
infrastructure, so we think we’ve got a pretty good opportunity to commercialise it.”
“We actually think it has an 80% chance to be oil, but our partners are more leaning
Melbana is also assessing an interesting
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“The independent assessment provided a best estimate of 388 million barrels of oil equivalent at a 100% basis. The Beehive prospect has got enormous upside and its very exciting for our shareholders to have that opportunity.” Tassie Shoal projects, although patience is the name of the game here after the company attained licences through to 2052. With assets based in two disparate regions of the world in Cuba and Australia, Melbana has a difficult task ahead balancing progress between both jurisdictions. However, the company’s new Havana office - led by Cuban oil & gas industry veteran Dr. Rafael Tenreyro - will help the company pursue its goals in the North Cuba Basin, while the Melbourne HQ continues to drive the general direction of the business. After a busy end to 2018, Melbana is well positioned for an even more active next 12 months, which will include drilling at Block 9 in Cuba and preparations for the drilling opportunity to build a shallow offshore
of the Beehive prospect in Australia, if Total
infrastructure hub encompassing one LNG
and/or Santos exercise their option to do so.
plant and two methanol plants through the
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Published by Anderson Murray Media Ltd
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