Melrose Resources plc has provided an update on its operations in the Bulgarian sector of the Black Sea including the Galata field gas storage project, the Kaliakra field development and planned exploration drilling.
The storage project is receiving strong support from the Bulgarian Government, which wishes to supplement Bulgaria's existing gas storage capacity, located at Chiren, with a second facility in order to ensure secure and well modulated gas supplies and comply with current European Union guidelines.
Melrose, therefore, intends to exercise its right under the terms of the Galata field production concession to convert the field to a gas storage facility during 2009.
It is anticipated that the gas storage capacity will be developed incrementally in three Phases. Phase 1 will require an investment of approximately $30 million in order to reconfigure the existing field compression, tie-back the suspended Galata East No.2 well and install additional metering facilities. This is expected to provide usable storage capacity of 0.7 billion cubic metres ("Bcm"). Phases 2 and 3 will each require a similar investment to Phase 1 and would increase the capacity to 1.2 Bcm and 1.7 Bcm, respectively.
In early 2008, Melrose announced the discovery of the Kaliakra gas field in the Block Galata exploration concession. This discovery is located approximately 15 kilometers to the east of the Galata field and is being developed using a subsea completion which will be tied back to the Galata platform facilities. First production is expected in mid-2009 and the field will be integrated with the Galata field gas storage scheme.
Over recent months Melrose has carried out detailed geologic and seismic modelling on the Kaliakra discovery and three undrilled prospects which lie on the same geologic trend. These studies have yielded very positive results and the Company has become more confident that the Kaliakra discovery should contain the upside reserves potential of 47 billion cubic metres ("Bcf"). In addition, the combined unrisked reserves estimate for the three undrilled prospects in the Kaliakra trend has been increased to 72 Bcf with an average COS of 35%.
In order to accelerate exploitation of the reserves potential in this area, Melrose has secured a Romanian jackup drilling rig to complete the Kaliakra discovery well for production and drill an exploration well on one of the untested prospects on the trend. The opportunity will also be taken to perform an extended flow test on the Kaliakra discovery well to improve the reserves definition and facilitate gas storage planning. The rig activity is expected to commence in October 2008.
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