Drilling activity early in the year concentrated
on the delineation of the Pliocene Mansouriya
Channel play and the continuation of the
appraisal of the South Batra Field, Miocene
Abu Madi play. Success on the existing South
Batra area was mixed but the availability of
large contiguous 3-D seismic data is
transforming interpretation of the deeper
Miocene plays and significant exploration
success has been achieved.
During the year Melrose enlarged and extended its concession acreage position in Egypt.
The El Mansoura Concession was extended, adding a further six years in two three-year exploration
periods, commencing on the expiry of the original concession term in June 2006. In addition,
the South East El Mansoura Concession was awarded with an exploration period of eight years.
2005 also saw a resumption of exploration these shales and cementing the casing is Madi channel system with good reservoir
drilling with a number of significant being addressed. quality. The areas in between these
discoveries in the second half of the year. north-south channel sequences have been
The initial interpretation of the final In the Pliocene play outwith the South non-productive in the wells drilled in spite
processed 3-D seismic data over most of Batra field area, four exploration wells of being structurally high. While reserves
the El Mansoura Concession has were drilled in the South Mansoura area. attributed to these intervening highs have
confirmed further significant exploration Three of these wells have been successfully been excluded from this year’s reserve
potential in the area. completed as producers. One further review, it is expected that the intervening
Pliocene well was drilled on the Abu Arida channels can be followed to the north and
Field appraisal and development structure to the north of Mansouriya. to the south. These potential field
Four wells were drilled on the Mansouriya This well is already on production through extensions will be tested in 2006.
trend and all four were put on production the existing South Bilqas facilities.
after good initial flow rates on test. Further South Batra field appraisal and
There have subsequently been production The South Batra Abu Madi appraisal extension drilling will benefit from the
difficulties with two of the wells, with programme produced mixed drilling results experience gained. In total, six wells were
significant reserves remaining behind with some valuable lessons learned drilled over the year of which three were
casing as a result of poor cement. The during the year. The delineation drilling completed as Abu Madi producers and a
zone of interest is set within sensitive programme confirmed that there are three Pliocene interval will be tested in a fourth.
shales and the problem of drilling through separate channel trends within the Abu One of the wells was deepened to the Sidi
6 Melrose Resources plc 2005
EL MANSOURA MEDITERRANEAN
SOUTH EAST EL MANSOURA
Final processing of new 3-D seismic that was Egypt concessions
acquired over the El Mansoura Concession has Development lease
transformed the exploration effort. The West Exploration lease
Khilala discovery was a direct result of this
new seismic interpretation: the well was drilled
on a strong seismic anomaly and encountered
a gross gas column of 122 ft in a high quality
Abu Madi sand. GIIP is estimated at 500 Bcf.
Salim and a pressure kick required expected. Subsequently, the Turbay No.1 30.2 MMcfpd plus 60 bcpd with detailed
installation of a 10,000 psi rated BOP. was drilled to test the same Sidi Salim play well test analysis indicating that the
The hole was open for an extended and the well tested at 110 bopd plus 1 structure could hold considerably more gas
period and, probably as a result of this, MMcfpd after initially flowing only gas. than the pre-spud volumetric GIIP of
no flow from the Sidi Salim zone was The oil rate is expected to rise as the well around 250 Bcf. The current 2P GIIP
achieved on test. This well did, however, is put on production through the El Tamad estimate is 500 Bcf but this number could
suggest the potential of the middle facilities. A fourth well encountered a well be increased further. It is expected
Miocene plays on the eastern side of the residual oil column and was plugged. that further interpretation of the 3-D data
South Batra Field which was later As this play is better understood and will highlight further large anomalies in
confirmed by the West Dikirnis discovery. further 3-D seismic is acquired going into this area over the coming months.
South East El Mansoura, we expect this
New discoveries area to provide a number of significant oil The West Dikirnis well, located to the east
A very significant development during the discoveries. of the South Batra Field, tested a series of
year was the discovery of oil in the sand intervals straddling what is
Miocene Sidi Salim formation. The El Following the acquisition of 1,700 km2 of interpreted to be the boundary between
Tamad No.1 well successfully tested black 3-D seismic data over the western and the Miocene Qawasim and Sidi Salim
oil and gas at a rate of 2,000 bopd plus central areas of the Concession, intervals. A gross gas column of 147 ft,
1.5 MMcfpd. A follow-up well, El Tamad exploration efforts were focussed on the with no water contact, was encountered.
No.2, established the water contact and area covered by this 3-D data. There are three separate sand intervals,
was tested at the more modest rate of totalling 101 net ft, with the two upper
1,041 bopd and 780 Mcfpd. Following The West Khilala and West Dikirnis wells units interpreted as very good quality
fast track development, the two wells were drilled on strong seismic anomalies. Qawasim and the lower unit a poorer Sidi
were brought on production in February The West Khilala well encountered a gross Salim reservoir.
2006 at a combined rate of 950 bopd and gas column of 122 ft (95 net ft) in a very
650 Mcfpd with a gradual increase to high quality level II Abu Madi sand with no Only the lower interval was tested
around 1,500 bopd plus 1 MMcfpd water contact. The well was tested at (24 ft gross) and a stabilised flow rate of
Melrose Resources plc 2005 7
The processed data from the final tranche of the
3-D seismic survey, on the El Mansoura Concession
in the area to the east of the Dikirnis well, should
become available by mid-2006 and further large
prospects are expected to be identified in this
eastern area of the Concession. The seismic crew
was released for six months in March but returned
in September to complete the acquisition of 3-D
seismic over the eastern part of the Concession
and the crew has now moved from El Mansoura
down to South East El Mansoura.
21.7 MMcfpd and 894 bcpd was achieved, the obvious potential of this area can only northern half of the Concession and it was
proving much better quality reservoir than be hinted at using the current data set and decided to complete the seismic acquisition
indicated by the logs. The well will be extrapolation of the El Mansoura 3-D data. over the other two Concessions before
brought on to production from this Sidi Exploration potential has been identified in moving the crew to Qantara.
Salim interval and the other sands will be the Pliocene, Abu Madi and Sidi Salim
tested in the proposed appraisal/ plays extending down from El Mansoura. Regional evaluation work suggests that
development wells. Because the main In addition, further potential is seen in the the northern area of the Qantara
reservoir intervals have not yet been Oligocene and Cretaceous levels with the Concession should be more prospective
tested, a volumetric GIIP of 206 Bcfe has area being thought to be generally more than the south and further work on the
been calculated giving a conservative oil prone. old 2-D seismic indicates a large shallow
figure for 2P reserves of 165 Bcfe. Here Pliocene structure as well as deeper
also, analogous seismic anomalies are The first well to be drilled on the Miocene structures with significant
being seen in the area around the West Concession, Al Rawda, targeted the same potential.
Dikirnis structure. Sidi Salim interval encountered in the
Turbay well. Gas and condensate have The deeper Miocene and Oligocene
South East El Mansoura Concession been encountered in this small fault block reservoirs are expected to be better quality
The South East El Mansoura Concession suggesting that black oil, with a gas cap, is north of the major east-west hinge zone
which is located immediately to the south more likely to have been trapped in some that runs through the Concession.
of the El Mansoura Concession, covers an of the bigger structures. The 3-D seismic, Following the planned 3-D acquisition in
area of 3,730 km2. The north-west corner currently being acquired, will allow more mid-year a well will be drilled in early
of the Concession, where it borders on the effective interpretation of this play. 2007. The key goal in Qantara will be to
El Mansoura Concession, is believed to identify and drill a section of good
have most potential. Qantara Concession Qantara sand reservoir on the new seismic
There has only been minor activity on the and then use this example seismic
There is only a small amount of existing Qantara Concession in 2005. Further 3-D response to re-evaluate the old 3-D seismic
2-D seismic, mainly in the northwest, and seismic coverage is required over the in the southern area.
8 Melrose Resources plc 2005
Evaluation of the prospectivity of the Rhône
Maritime Concession is ongoing with a view
to farming out an interest in this concession.
The 2-D seismic lines have been reprocessed
and the acquisition of 3-D seismic is being
considered to further evaluate the two large
structures that have been identified.
The Rhône Maritime Concession is located in the Provençal Basin in the French Mediterranean.
The basin, which is in a deepwater setting of up to 2,600 m and includes the Rhône deep-sea fan,
is completely unexplored, but some very large structures have been mapped on the existing dataset.
Two major play fairways, divided by a thick Evaluation of the prospectivity in the 3-D thermal modelling study has been
Messinian salt sequence, have been Concession is ongoing. The 2-D seismic undertaken to reconstruct the history of
identified from excellent 2-D seismic lines have been reprocessed to remove hydrocarbon maturation, expulsion and
acquired in 2001. The post-salt Pliocene artefacts caused by the variation in migration in the area. On the back of
deposits have undergone significant thickness in the salt layer and thereby these very positive indicators, Melrose will
structuration due to distortion in the improve data quality in the pre-salt seek to farm-out an interest in the
underlying Messinian salt, resulting in large Miocene interval. Concession prior to committing to the 3-D
closures that could accommodate sizeable seismic acquisition programme and with
hydrocarbon accumulations of up to tens The seismic data has been interpreted to the intention of drilling a well in 2007.
of Tcf of gas or a billion barrels of oil. provide a global image of the area and to
Abundant AVO anomalies, suggesting the identify good leads in the pre-salt and
presence of hydrocarbons, have been post-salt layers. A 3-D seismic campaign is
identified in the seismic dataset and the being considered for the second half of
combination of very large structures and 2006 over a 2,000 km2 area in order to
hydrocarbon indicators is very promising. evaluate two leads in the Miocene and the
The second play fairway lies in the pre-salt
turbiditic Miocene deposits and has A review of the regional literature
distinct seismic reflection characteristics published on the western Mediterranean
that could also indicate the presence of has demonstrated potential source rocks
hydrocarbons. in the Oligocene and the Messinian and a
Melrose Resources plc 2005 9
The Galata compression project was tendered to
outside contractors, but ultimately internal project
management resources were utilized.
The compression unit was purchased in California,
ancillary equipment was sourced in Europe and
the piping was undertaken locally. The project
was completed at a cost of $7 million, saving over
$5 million on the original tenders. The project
was completed in 12 months, without
incident and without disruption to gas sales.
During the year, the Galata gas field performed well and the first stage of compression was successfully
installed at the onshore production facilities. Two exploration wells were drilled in the shallow waters
of Block Kaliakra 99. While the results were not commercial discoveries, residual oil and gas were
encountered in the target formations, further confirming the hydrocarbon potential of the area.
The Group’s exploration priorities in Bulgaria production performance, proved reserves Interpretation of the 3-D seismic has been
are currently being formulated in the light recoverable over field life have increased essential in assisting in the evaluation of
of this new well data and a better from 65 to 75 Bcf, while total proved plus the prospectivity of the area as it has
understanding of the geology of the area. probable reserves were revised downwards allowed an enhanced understanding of
An exploration drilling programme using a slightly from 90 to 85 Bcf. the geological setting and petroleum
semi-submersible rig is scheduled to trapping mechanisms.
commence in the fourth quarter of 2006. The compressor has run on demand since it
was commissioned and has allowed The southern area of Block Kaliakra 99 is
Galata Gas Field monthly nominations for both January and still considered to be very prospective.
Production from the Galata field during February 2006 despite local temperatures During the year Melrose undertook a field
2005 totalled 18.5 Bcf, meeting 16% of falling as low as -21° C. The compressor trip to the onshore area in conjunction with
Bulgaria’s domestic gas consumption during turbine is fitted with SoLoNox technology the Universities of Sofia and Edinburgh to
the year. Contract sales volumes in place to ensure that the exhaust gases meet evaluate the onshore outcrop of reservoir
for 2006 are for a similar production level. stringent environmental emission limits. formations. All data gathered during drilling
In order to maximise field recovery a second and the field trip is now being evaluated
An appraisal well drilled in the Galata East compressor will be installed during 2007. and will be incorporated into future seismic
fault block in 2005 enhanced mapping and prospect evaluation.
understanding of, and confidence in, the Block Kaliakra 99
deliverability of the reservoir. Analysis of Block Kaliakra 99 covers an area of 2,601 The northern area of Block Kaliakra 99 is
the results showed that there is connection km2 in water depths mostly less than geologically different from the southern
across the fault and it is, therefore, 500 m. In 2004 Melrose acquired 600 km 2
area and to date has been evaluated with
expected that the reserves can be produced of 3-D seismic in the southern area of the 2-D seismic only. A 3-D survey to cover the
from the present wells and process facilities. block and in 2005 the final processed current leads and prospects is being
In the light of the well result and seismic from this survey was received. considered. The plays here are both
10 Melrose Resources plc 2005
At the end of 2005 two exploration wells, Bulgaria concessions
Samotino Nos.1 and 2, were drilled in the Gas field
southern area of the block targeting stratigraphic Prospects and leads
plays. Both wells encountered hydrocarbon shows
in good potential reservoir sand sections, although
they were not considered commercial and
subsequently plugged and abandoned.
structural and stratigraphic. The area lies will be considered for later in the year. close to many of the recognised prospects.
directly adjacent to the onshore 150 MMbbl This strongly suggests that generation and
Tulenovo oil field and the current Blocks Emine and Rezovska migration of hydrocarbons has taken place
understanding suggests that the northern Block Emine is located directly south of in the basin and therefore increases the
area of Block Kaliakra 99 lies on the most Block Kaliakra 99 and extends to the likelihood that traps have been charged
likely migration pathway for oil to this field. southern Bulgarian border, covering an area with hydrocarbons. Further evidence for the
of 4,495 km2. Block Rezovska covers 574 presence of hydrocarbons has come from
Current plans for 2006 are to drill two or km and is located at the south-eastern
seismic interpretation where bright
three wells in the deeper water of Block corner of Emine. Water depths within the amplitude anomalies have been identified
Kaliakra 99 and the adjacent Blocks Emine two blocks range from less than 20 m to at the crests of many structural closures.
and Rezovska. A semi-submersible rig, just over 750 m. Applications for licence AVO modelling of seismic data is being
the Atwood “Southern Cross”, has been extensions to both blocks are currently carried out to try and determine whether or
chartered to drill these wells (with two being considered by the Ministry of Energy. not these anomalies are direct indicators of
further optional wells). In addition, further trapped hydrocarbons.
wells in the shallow shelf area are being Original and re-processed 2-D seismic data
considered. Evaluation and prospect risking exists across both Concessions and one The planned exploration programme in
will be completed by mid-year when final well was drilled in 1994 in the north-eastern Blocks Emine and Rezovska includes the
well locations will be selected. Several of corner of Block Emine. The well encountered acquisition of 3-D seismic data and a sea
the play types identified on the 3-D seismic gas shows but was never properly floor coring programme. Both surveys will
have never been tested and the acreage completed. Over the last year a technical help reduce the exploration risk in the
remains very prospective. analysis of all of the available data has blocks; the former with improved
outlined considerable prospectivity in the subsurface definition and the latter with
Block Galata two blocks with both structural and geochemical sampling for micro-seepage of
The area covered by the former Block 91-III, stratigraphic plays being recognised. migrating hydrocarbons. A large structural
which was relinquished at the end of 2004, feature, the Ropotamo prospect, in Block
was reapplied for during 2005 as Block Most of the prospects exist due to Rezovska is a possible target for the 2006
Galata. It is hoped that a decision on the structures formed by compression of the drilling campaign. Interpretation of this
award of this Block will be announced by rocks in this region of the Black Sea. prospect, which could contain reserves of
the Ministry of Energy before mid-year. Encouraging results from satellite imagery up to 765 Bcf of gas or 330 MMbbl of oil,
If Melrose is successful in its application have identified possible sea-floor oil seeps is being finalised and will determine if the
then a drilling programme on the Block near the northern border of Rezovska prospect is ready for drilling.
Melrose Resources plc 2005 11
The Group’s interests in the USA comprise
approximately 25,000 gross acres, concentrated
in the Permian Basin in New Mexico and Texas.
Melrose is the operator of the majority of these
properties. The properties are characterised by
shallow oil production with substantial, low-risk
enhanced recovery upside through infill drilling
and water injection.
The emphasis during 2005 was on preparing the Group’s three principal fields for widespread
water injection after successful implementation of pilot water injection programmes. In 2005,
13 new wells were drilled and a further 6 wells have been drilled in the first three months of 2006.
Average daily production increased by Jalmat field converted to water injection during 2005.
15% compared to 2004, but In the Jalmat field, the work programme There are now 21 active water injection
development activity during 2005 was for 2005 involved completing the infill well wells in the Jalmat field and up to 20 are
frustrated to some extent by escalating pattern for a “five spot” injection planned to be activated in 2006.
drilling and service costs and, more configuration, building new injection
significantly, by the tight market for facilities and laying flowlines, so that water The construction of a second water
drilling and completion rigs and for other injection rates can be increased in 2006. injection facility and tank battery on the
field services. Average production rates In total, 13 new producing wells were Cone Jalmat Unit is underway and the
were also affected by the inevitable successfully drilled and completed during drilling of two water-source wells is
disruption to production when 2005, with a further 5 wells awaiting scheduled for 2006. Average daily
waterflood projects were implemented. completion at the year-end. production from the Jalmat field increased
by 34% from 342 boepd in 2004 to 457
Capital expenditure in 2005 of $14.2 Despite good initial flow rates on these boepd in 2005.
million comprised $8.0 million on new infill wells, the depleted reservoir pressures
wells, $4.1 million on waterflood experienced on a number of the wells has Artesia field
implementation and $2.1 million on emphasised the need for the water injection Work on the secondary recovery project on
workovers and recompletions. Daily programme in order to re-pressurise the the Artesia Unit continued with the
production of 2,500-3,000 boepd remains reservoir and to maximise ultimate oil workover of 17 existing wells to enable
the short to medium term target for recoveries. Two new water injection wells water injection to commence in the north
these assets. were drilled and a further 7 wells were west and south west areas of the Unit.
12 Melrose Resources plc 2005
NEW MEXICO Lea County
Fort Worth Basin
Turner Gregory Field,
In 2005, 13 new wells were drilled in the USA and
capital expenditure amounted to $14.2 million.
The capital expenditure budget for 2006 is
significantly higher at $20.7 million, with the focus
remaining on implementation of the secondary
These injection patterns are expected to be over the next three years is expected to
activated during the first half of 2006. increase production significantly.
There are in excess of 30 drilling locations Other interests
to be drilled on the Unit over the next two Average daily production from the Group’s
years as part of this enhanced recovery other interests in the USA during 2005
project and the drilling rig is scheduled to was unchanged at 152 boepd. The Group
move to this Unit in April 2006. Average is now receiving royalties from its interests
daily production from the Group’s interests in the Barnet Shale gas play in Texas, but it
in the Artesia field increased by 10% has not yet exercised its right to participate
during 2005 to 214 boepd. in any wells on a working interest basis.
Turner Gregory Unit
The Turner Gregory Unit is on trend with
two large secondary recovery projects to
the north east and south west. A line-drive
water injection programme was initiated
on this Unit during 2005, with 3 wells
being converted to water injection.
Average daily production declined by 4%
during 2005 to 102 boepd, but since the
year-end 10 shut-in wells have been put
back onto production and current
production is in excess of 130 boepd.
Full implementation of this waterflood
Melrose Resources plc 2005 13