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Bulgaria Confirms Commerciality of Melrose's Kavarna Gas Field

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Bulgaria-Black Sea Devt
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Melrose Resources has provided an update on its operational activities in Bulgaria, Romania and Egypt.

Bulgaria

Melrose is pleased to announce that the Bulgarian Government has issued a Certificate of Commerciality for the Kavarna gas field and the Company has now submitted an application for a similar Certificate of Commerciality for the Kaliakra field.

The approval effectively commences the development of the Kavarna field, which contains estimated reserves of 24 Bcf and is located 8 kilometers east of Melrose's Galata field platform. The field will be produced using a single subsea well completion tied back to the Galata facilities using a 6 inch flow line and is expected to be on stream by July 1, 2010. The Kaliakra field, which contains 57 Bcf of reserves, is located 14 kilometers east of Galata and will initially be developed using a single subsea well with a dedicated 10 inch flow line to allow for future expansion. First gas is expected from this field by 1 October 2010.

The two field flow lines will be laid by Grup Servicii Petroliere, a Black Sea based drilling and oil field services company, using the Bigfoot lay barge and the same company will be responsible for the subsea completion activity. The total capital expenditure for the two developments is expected to be $59 million (including historic well completion costs) equating to $0.73/Mcf.

With respect to other project approvals, the Company is also in active discussions with the Bulgarian Ministry for Economy and Energy to finalize the terms of an Amendment to the Galata Production Concession which is required for the Galata gas storage project.

Romania

During October the Company formally received approval from the Romanian National Agency of Mineral Resources to conduct petroleum operations in the country under new administrative guidelines. This is an important step towards receiving the Romanian Government's approval to complete the farm-in transaction with Sterling Resources.

Egypt

Development activity on Melrose's fields in the Nile Delta has continued and the Company is pleased to announce that the South Khilala field, which contains estimated reserves of 36 Bcf, was successfully brought on stream on October 16, 2009. The field was discovered in the Mansoura concession in April 2009 and has been tied back to the West Khilala production facilities using a 10 kilometer, 6 inch flow line. The combined South and West Khilala production rate is currently 114 MMcfpd.

The Company is also pleased to announce that it has completed the commissioning activity on the West Dikirnis LPG Fractionation Towers and Vapour Recovery Plant. The construction activity on the Gas Reinjection facilities is now expected to be completed in early January due to delays related to the delivery of equipment from the Far East. This will result in the production of additional sales gas volumes from the field equating to approximately 30 MMcfpd during the last quarter of this year.

The EDC9 drill rig is currently completing the fourth West Dikirnis horizontal development well and will then commence a four well drilling program in the Nile Delta, comprising three exploration wells and one further West Dikirnis horizontal well.

The first exploration well will be drilled to test the North West Nabourah prospect, which is located on the same Qawasim geologic trend as the South and West Khilala fields, and contains mean unrisked reserves of 60 Bcfe with a Chance of Success ("COS") of 43 percent. The second well will test the Tall Rak structure, a Sidi Salim prospect on the same geologic trend as the Tamad oil field in the South East Mansoura concession. This prospect has unrisked gas reserves of 190 Bcf with a COS of 33 percent and similar to Tamad has oil potential. The third well will drill the South Damas Sidi Salim prospect which has unrisked reserves potential of 32 Bcfe and a COS of 65 percent.

Following the completion of the Nile Delta drilling sequence, the EDC9 rig will be mobilised to Upper Egypt to spud the first exploration well on the Mesaha exploration concession in late 2010. In preparation for the well, in early 2010 the Company plans to acquire a 2,000 kilometer 2-D seismic survey over the western area of the concession, where a recent gravity survey has confirmed the presence of a major untested sedimentary basin. Melrose operates and holds a 40 percent working interest in the Mesaha block.

Commenting on the update, David Thomas, Chief Executive said, "The receipt of the Certificate of Commerciality for the Kavarna field from the new Bulgarian Government administration is an important milestone. We now look forward to accelerating the development of our various projects in Bulgaria and Romania which will contribute significantly to the regional domestic gas supply. We are also looking forward to an active near term exploration program in Egypt with some important wells to drill in the Nile Delta and 2-D seismic to acquire in the Mesaha block."
 

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