The Australian company Melbana announces the discovery of “high quality oil” in Cuba

The Australian company Melbana announces the discovery of "high quality oil" in Cuba

HAVANA, Aug. 30th  The Australian company Melbana Energy, which has been drilling for oil in Cuba for the past decade, announced on Monday a discovery that it described as “tremendously successful” in the Alameda-2 well, located in the municipality of Martí, in Matanzas.

According to a report from the specialized site Upstream Online, which quotes Melbana’s CEO, Andrew Purcell, the appraisal well has been a “tremendous success” and gives the company more short-term production options to consider completing its development plan at that site.

“We are now also reassessing whether there may be value in not leaving Alameda-1, which is the current plan, before starting Alameda-3, to further assess the two intervals,” he said Monday.

According to reports from the Australian company, the Alameda-2 appraisal well, located in exploration block 9, successfully flowed 1,903 barrels per day of oil (bpd) at its peak, with an average stabilized rate of 1,235 bpd.

According to Melbana, the oil obtained there is “significantly lighter” and of a lower viscosity than those extracted in the Matanzas area, which together with the north coast of Occidental has most of the crude exploitations Cuban heavy oil, with a high sulfur content, which is mostly used as fuel for the production of electrical energy.

“That it contains higher quality oil has implications for the value of oil produced and the possibility of higher recovery rates than assumed in our original resource estimates,” Purcell added.

“Importantly, these results were obtained drilling less than 20% of the total area and the flow exceeded our expectations for a vertical test at such a shallow level,” he said.

Jorge Piñón, director of the Energy and Environment Program for Latin America and the Caribbean at the University of Texas, about the announcement that block 9, where the discovery was made, covers an area of 2,380 square kilometers in the north coast of Cuba, which includes the Motembo deposit, discovered in 1881 in Corralillo, Villa Clara, and abandoned in 1993.

“The two-well exploration program has targeted Alameda-1 and 2 and Zapato-1. The Alameda-1 well targets the same structure as the Martí-5, drilled by CUPET in the 1980s.

The drilling of the Zapato-1 well aims to find the source of the nearby Motembo deposit,” the expert said.

Piñón recalls that Melbana is the 30% operator of the exploitation, after in December 2019 the Angolan state company SONANGOL acquired a 70% stake in the project in exchange for financing 85% of the exploration costs of the two wells exploratory.

Piñón emphasizes that “these are ‘exploratory’ wells, not ‘production’ wells; several of them will be drilled when the reserves are certified. The country’s total production today is approximately 38,000 barrels per day.”

Likewise, he indicates that the Havana Refinery must evaluate the quality of the crude oil extracted by Melbana. “If it’s ‘light-medium’, there’s more value in refining it into light products (gasoline/diesel) than burning it as fuel in power plants,” he notes.

But, warns Piñón, “until the reserves are certified, the production wells will not be drilled. So, the question is: who is going to pay for the multimillion-dollar investments necessary to monetize these reserves? Melbana with its own sources? sonangol?”

On this issue, the Dhaka Tribune reported that Melbana’s shares rose 40% on the stock market after learning of the discovery in Matanzas.

“These results are good and, logically, they deserve to push the share price up. The problem is, as always, doing business in a dictatorship, especially a communist one. That is, it is less than certain that the contractual terms will be fulfilled” , third.

“The extraction of resources, by definition, depends on the goodwill of the jurisdiction in which they are extracted. If the Government decides to vary the terms, there are always international courts, but they are expensive, they take years and there is no certainty with them.

Therefore, the value of any resource of this type (oil, gas, other minerals, a mine, etc.) depends on the local government complying with the contract it has signed,” he clarified.

With the above in perspective, Piñón recalls that in September 2016 CUPET officials Roberto Suárez Sotolongo and Osvaldo López Corzo gave a press conference in which they denied the announcement by Melbana (which was then known as MEO Australia Limited) that it would have made a gigantic oil discovery in block 9.