Melrose Resources Acquires Permit in Gulf of Lion

Melrose Resources has acquired from TGS-Nopec the Rhone Maritime Exploration Permit which is located in the Gulf of Lion off the southern Mediterranean coast of France. Formal approval for the transfer of the interest in the Permit was confirmed by the French Ministere De L'Economie, Des Finance Et De L'Industrie on March 8, 2005. The Permit covers 25,000 km2 and the first three-year exploration period runs until November 2005. Two further exploration periods of up to five years each are available.

Consideration for the transfer in ownership will be the full recovery of past costs by TGSN which will also retain a net profits interest in the permit. TGSN will continue to work with Melrose on the further technical evaluation of the permit area.

The area is an under-explored oil and gas province: two wells were drilled in the shallow-water shelf in the northern part of the concession in the 1970's when offshore drilling technology was limited to relatively shallow water. The prospective area of the current concession lies in average water depths of nearly 2,000m but drilling operations in such water depths are now routine. 4,305km of 2D seismic data was acquired by TGSN in 2001 and initial evaluation of the seismic has demonstrated significant potential. Two major play fairways, divided by a thick salt sequence, have been recognized across the basin. The thick clastic sediments in both of these play fairways have been deposited via the Rhone Delta system into the deepwater slope system setting of the Liguro/ Provencal Basin. In the shallower post-salt play the Pliocene interval has undergone significant structuring over time caused by deformation and flow of the salt layer beneath. This folding and faulting has resulted in large closures that could accommodate sizeable accumulations of hydrocarbons. Within the section abundant AVO anomalies suggest the presence of hydrocarbons,

The second of the two play fairways is the deeper pre-salt Miocene sequence which directly underlies the salt and has distinct seismic reflection characteristics that could again indicate the presence of hydrocarbons. This sequence is inferred to comprise turbiditic deposits with reservoir, seal and source rocks all present. The combination of large structures and hydrocarbon indicators in both plays is very promising.

Commenting on this, Robert Adair, Chairman, said:

'We are very pleased to have been able to acquire this very prospective exploration acreage, located in our geographical focus area. We look forward to working with TGSN on the technical evaluation of the permit. We believe that the Rhone Maritime Permit has great potential and further 2-D and 3-D seismic data will be acquired by Melrose in the expectation of confirming this potential. The structures already identified in the post-salt play are capable of trapping gas volumes in excess of 10 Tcf. The deeper pre-salt play is believed to be more oil prone and again very large structures have been identified on the seismic. In due course our goal will be to farm down from the current 100% ownership prior to committing to an exploration well.'