Melrose Begins Production on Two Developments in Egypt

Melrose Resources says that first production has been achieved on two of the company's development projects in Egypt. First production was achieved on the South Batra development on December 5th. Production from the South Batra No.1 well is currently 30 MMcfd and 500 bcpd. The South Batra No.2 development well is currently drilling and is scheduled to go on production before the end of January 2004. The agreed gas sales rate for the field in 2004 is 30 MMcfd. Further development wells are scheduled in 2004 in order to raise field production to 100 MMcfd in 2005. Gross field proved plus probable reserves are approximately 500 Bcfe.

First production was achieved from the one-well development at Mansouriya on December 8th. Current production is 10 MMcfd which is the agreed gas sales rate for the field. Melrose holds a 50% interest in both developments through its wholly-owned subsidiary, Odyssey Petroleum (El Mansoura) Limited.

Further interpretation of existing 2-D seismic over the El Mansoura Concession suggests that the Miocene channel system in the South Mansoura area has similar reserve potential overall as the South Batra discovery. The edge of a Miocene structure was identified on logs of the South Mansoura No.1 Pliocene discovery well drilled earlier this year and deepened to the Miocene. The Salaka exploration well, which is scheduled to be drilled in the first quarter of 2004, will test the Miocene horizon as well as targeting a shallow mid-Pliocene structure. Also on this concession, the initial interpretation of the new 2-D seismic which has been acquired is very encouraging. The large numbers of leads and prospects expected in the shallower Pliocene formation are being confirmed.

On the Qantara Concession, the Qantara No.8 well encountered gas in non-commercial volumes and has been plugged and abandoned. The focus of activity on the concession will now move to the shallower Pliocene horizon where a number of exploration prospects similar to the discoveries made on the El Mansoura Concession have been identified on 3-D seismic. Melrose holds a 46% interest in the Qantara Concession through its wholly-owned subsidiary, Odyssey Petroleum (Qantara) Limited.

Melrose is currently in discussions to obtain debt finance for a planned significant increase in exploration and development expenditures in Egypt.

Commenting on the news, Robert Adair, Chairman, said 'It is excellent news that we have achieved first production on two fields within 10 months of the discoveries being made. Exploration activity on the El Mansoura Concession continues to gather momentum with the South Mansoura/Salaka prospect looking particularly promising. A second drilling rig has been contracted from April 2004. A total of 5 development/appraisal wells and up to 8 exploration wells are planned next year, which promises to be very exciting for us.'