Galata Production Concession
The Galata Gas Field development is now mechanically complete. The jacket and topsides were floated out of the Varna shipyard and were positioned on the seabed in October 2003. The 58 km onshore pipeline was complete by the end of December and the onshore process plant by the end of February 2004. However, first production from the field was delayed until April 2004 due to storm damage in December to the barge which was laying the offshore pipeline: the pipeline was finally completed on 12 March 2004. As of 26 March, the system has now been built and final tests are being completed.
The two Galata production wells (GP1 and GP2) were drilled and successfully completed in November and December. Both wells were completed as gas producers and tested at rates of approximately 30 MMcfpd and flowing wellhead pressures of 1,500 psi. First system gas is now being produced into the 71 km pipeline which links into the Bulgarian gas distribution system at Provadia. First gas sales are expected to be delivered to Bulgargaz in early April 2004.
The GP2 production well confirmed the extension of the productive gas reservoir into the northern fault block of the Galata structure. This has resulted in a significant increase in the proven and probable reservoir volume and field reserves. Based on an evaluation of the original production test and the new well pressure data, it now seems highly probable that there is pressure connection between the northern and southern fault blocks of the Galata structure. Proved reserves are now estimated to be 65 Bcf compared with 49 Bcf carried previously and estimated proved plus probable reserves have increased from 80 Bcf to 90 Bcf. A third development well may be drilled to the downthrown fault block to the south-east during 2004/5. The Galata reservoir is highly suited for use as a storage facility and, after a period of production, further evaluation will be done of the potential for the conversion of the field for this purpose.
The remaining area of Block 91-III is 1,690 km(2). The block encompasses, but does not include, the Galata Production Concession. There is clear evidence of an active petroleum system in this area of the Black Sea and the block contains a number of prospects and leads which offer significant exploration upside. Melrose is interested in three plays: structures adjacent and analogous to the Galata Field; multi-reservoir targets in the northern part of the block; and larger and deeper targets in the Oligocene horizon to the south of Galata. In 2003 Melrose acquired and interpreted 366 km of 2-D infill seismic in the southern part of the block.
Interpretation of the new seismic has identified seven structures, three of which may be analogues of Galata and which have potential reserves of 40-100 Bcf each. These prospects are currently being re-evaluated and the interpretation integrated with the results of the Bogdanov North No.1 well. Enhanced seismic processing is being carried out on these structures prior to selecting a drilling location. It is expected that an exploration well on one of the structures will be drilled in the summer of 2004. The economics of any discovery would be enhanced by the ability to use the Galata Field production facilities and associated infrastructure in any development.
The new seismic has confirmed the large east-west trending Oligocene channel fill play which lies in the south of Block 91-III and runs into Block Kaliakra 99 and which may have potential upside reserves in excess of 1 Tcf. A well may be drilled on this trend later in the year. In addition, there may be a number of large stratigraphically defined structures developed on the margins of this channel.
The exploration potential of a number of multi-reservoir targets (from the Devonian to the Oligocene) in the northern part of the Block, identified from the 729 km of 2-D seismic acquired in 2001, is currently being re-evaluated. At least two of these, offsetting the onshore Tulenovo oilfield, are regarded as drillable prospects. The oil charging the Tulenovo structure is believed to have migrated from a deep 'kitchen' area offshore to the southeast and this could also have charged the Block 91-III northern prospects.
Block Kaliakra 99
Block Kaliakra 99 is contiguous with Block 91-III to the east and south and covers an area of 2,601 km(2). The initial period of the Prospecting and Exploration Permit expires in May 2004 and all the work program obligations have been fulfilled, including the acquisition of 120 km of infill 2-D seismic over the southern part of the Block. A two-year extension has been applied for.
During the next exploration phase, additional seismic will be acquired in the southern part of the Block, particularly over the high risk, potentially high reward stratigraphic plays in the Oligocene channel fill and over the structurally complicated, hydrocarbon-bearing, Samotino More structure. In the northern area of Block Kaliakra 99, Palaeocene clastics and Late Jurassic / Early Cretaceous carbonates (analogous to the producing reservoir in the Tulenovo oil field) constitute the primary reservoir objectives with oil the most likely hydrocarbon charge for the structures identified. Additional 2-D and 3-D seismic will be required to further evaluate these structures.
The operators of the two deepwater concessions located to the east and south of Block Kaliakra 99 have acquired extensive 2-D seismic data, including several lines which, by mutual agreement, extended into the Group's acreage. Technical data is being traded and further technical cooperation is possible.
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