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In this interview, Melbana Energy discusses the strategic importance of Cuba's Block 9, a region rich in oil resources that could significantly impact the country's energy future. With the support of Sonangol and a focus on accelerated production, Melbana Energy reveals its development plans, key findings from the Alameda-1 well, and opportunities for potential investors in this promising project. Additionally, they address regulatory challenges and outline the milestones they aim to achieve in the coming years.
Could you provide an overview of the Block 9 PSC and its strategic importance for Melbana Energy?
Melbana Energy is an Australian oil and gas company with assets in Australia and Cuba. We have been active in Cuba for more than a decade and are grateful to have been given an opportunity like Block 9.
Block 9 holds enormous oil resources, with one structure alone estimated to hold up to 12 billion barrels of oil in the ground. This makes it potentially enormously important to Melbana as well as to Cuba.
Block 9 is close to the 11-billion-barrel Varadero oil field that has to date produced 200 million barrels of oil. Our understanding of the geology made us interesting in testing Block 9 for a similar sized oil field.
Given the size of the block and the number of interesting structures in it we found that required testing, we were very grateful to have attracted Sonangol, the National Oil Company of Angola, as a partner to help us do our exploration more quickly.
Independent experts estimate that we have so far found 46 million barrels of oil in just one of the structures we have tested (and it has the potential to hold an additional 100+ million barrels). The oil we have found is of a higher commercial value, too, than what is typically found in Cuba.
This is a very pleasing result and a more than adequate return on the USD 100+ million Sonangol and we have invested to date exploring Block 9.
The most exciting thing is that there are many more structures like this to test in Block 9.
What are the key findings from the Alameda-1 well, and how do they influence Melbana’s future exploration and development plans in Block 9?
Alameda-1 was our first exploration well and it discovered three vertically stacked and geologically independent oil-bearing reservoirs (which we called Amistad, Alameda and Marti). The shallowest reservoir alone was shown to have a 1,439-metre oil column.
Based on the results of Alameda-1, a Canadian independent expert familiar with Cuban oil production estimated that these three reservoirs might contain 267 million barrels of recoverable oil.
We have just finished drilling two appraisal wells to test these discoveries and based on their results our independent expert has estimated (with higher confidence) that just one section of the shallowest reservoir might contain 46 million barrels of oil (with the potential for a further 100 million barrels). We are therefore going to start by producing this oil, as it will be the cheapest and quickest to extract plus it contains a relatively higher quality oil than is typically found in Cuba.
Given the significant resource potential in Block 9, how does Melbana plan to develop these resources, and what opportunities does this represent for potential investors and partners?
Our plan is to keep drilling production wells in this upper reservoir and to use the revenues from the sale of the oil produced to accelerate the drilling of even more production wells. At a certain scale, we will then be able to develop better infrastructure to make moving this volume of oil to market more efficient as well as look to start producing from the lower reservoirs we discovered and conduct more exploration in Block 9 generally.
Given the size and nature of this project, we are interested in talking to potential partners with the capital and experience developing oil fields so we can pursue our goals more quickly. We have appointed advisors to help us identify and negotiate with suitable parties.
The potential scale of this project and the fact it’s onshore and close to existing oilfield infrastructure has attracted international interest from oil companies, investors as well as oil traders.
How does Melbana Energy ensure compliance with Cuban regulatory requirements while developing oil and gas projects in the region?
Our people have decades of experience working for some of the world’s largest oil companies and investment banks before joining Melbana, hence they know what international best practice is. Melbana has a proud history over more than 25 years, therefore, of always being fully compliant with all regulatory requirements in all of the countries it has operated in.
Melbana has brought this discipline to its operations in Cuba and has developed a close working relationship with the Cuban government and its regulators, particularly CUPET. We are grateful for the support and advice we receive from them as to how we might benefit from their experience operating in Cuba but also to adapt our methods and systems to better satisfy their requirements.
What are the anticipated timelines for the upcoming appraisal wells in Block 9, and what challenges do you foresee in this process?
We are past the appraisal stage. It’s now time to start producing oil! Having said that, it’s not an exact science and every new production well brings with it an exploration component given the new information it delivers about what lies below the surface.
We are currently seeking permission to build new several new drill pads that will allow us to drill many new production wells. Construction of the first of these is expected to be completed before the end of this year and the first new production well to be drilled shortly thereafter.
Looking ahead, what are the key milestones you aim to achieve in the next 2-3 years regarding exploration and development in Cuba?
The next few years will be busy for Melbana. The short-term goal is to export our first cargo of oil before the end of this year.
In parallel, we will continue to drill additional production wells in order to grow production as quickly as possible.
The revenues that will be generated from this production will be a valuable contribution to the Cuban economy, provide many new jobs and training opportunities for Cubans as well as provide the funding for the infrastructure we need to more efficiently exploit this discovery as well as continue exploring the rest of Block 9.
In 2 – 3 years we hope to be producing tens of thousands of barrels of oil per day and have discovered many more tens of millions of barrels of oil in Block 9.
