Melbana Energy Limited (ASX:MAY) Executive Chairman Andrew Purcell provides an update on the company’s flagship onshore Cuban oil and gas project via its Block 9 PSC where drilling of the first (Alameda-1) of two exploration wells recently commenced. He also discusses the company’s Australian giant Beehive prospect with its Prospective Resource of up to 1.4 billion barrels of oil.
Good to be here again. And I appreciate the time that you’ve given us to give everybody a quick update as to where things stand, particularly in Cuba, which I’ll focus on today. I’ve put up on the screen, a brief introduction as perhaps as much as anybody who’s unfamiliar with our business. And what we’re doing at the moment needs to know is we’re drilling onshore Cuba, two exploration wells in a prolific hydrocarbon zone. We started last month. Now, this program has immediately made a discovery and it is being tested at the moment. I should say we haven’t got to the appraisal stage yet, but you can see a picture on the front screen. We’ve got free flowing hydrocarbons that we’ve discovered in an unexpected area. The wells that I will speak to in a moment that we have designed to explore four prospects onshore Cuba, we haven’t reached the main targets yet, but immediately we came at across a very long pay zone of free flowing oil, which is very exciting for all of us. After all these years of planning.
I will, however for those of you who aren’t familiar with our company, just give a quick introduction as bit of background ASX listed of course, we’ve been in around for 20 plus years and we have a bit of a reputation for going after elephants in this company. So the onshore program in Cuba, which is our main focus at the moment, so I’ll give you a little bit more details on, and the upcoming slides is what’s got our attention. We’re funded for it. We’ve got a very good partner that we’ve introduced and we’ve raised some cash recently for our component of it, so all that’s left to do for us at the moment is to keep that drill bit turning and to test the prospects.
Where we are in terms of priority for what we are doing in the world. Our two projects are summarised on this screen. The Cuban wells that are being drilled on shore at the moment of testing between the two of them, 236 million barrels of oil, best case perspective resource. This is an enormous potential prize, particularly for a company of our size, we have a 30% interest in this drilling program. So our success here would be very material for us. And, and this is the sort of opportunity that drives juniors like us around the world to find jurisdictions where we can really deliver bank for buck in the success case, but coming up behind the drilling in Cuba, we have another very exciting project in Australia for next year. Earlier this year, we sold one of our offshore permits, shallow water offshore permits in Australia. That contains what we call the beehive prospect to a fortune 500 company out of Houston in the United States called EOG resources.
This is a, it’s an exciting development for Australia to have a company of that size, making a country entry and particularly exciting for our company to have sold this project, we will receive upfront cash consideration, subject to receiving regulatory approvals for the sale, and EOG will fund the drilling of the well. And in addition to the cash, we get paid up front. If they’re successful, we will get paid a royalty of $10 million for every 25 million barrels that they may find. And put that in context, this prospect has an upper case estimate independently assessed of 1.4 billion barrels of oil Shallow Water Offshore, Northern Australia. So success here as well would be on its own very material for our business.
The drilling program, the runway for our company is best explained by this slide, we have put a little red line over here in September, this is where we started drilling, Cuba. And as you can see, as we move forward to the end of 2021 and into the beginning of first quarter 2022, we’ll drilling these four targets that combined in Cuba have the 235 million barrels of prospective resource. There’s lots of potential for news flow with us, now that we’re actually drilling, it’s no longer talk, it’s real, the drill bit spinning, so over, every week we’re providing updates to the market on a Tuesday, unless something more material happens, it’s every Tuesday we provide an update and these will take us through, we project until about March, but lots of interesting news flow. Once this program completes, then back end of next year, as I already mentioned, the Australian prospect will be drilled. The 416 million barrels is the best case estimate for that oil target. We think it’s an oil target, but these types of build ups are particularly known for when they work, they work big. So the upper estimate it’s 1.4 billion barrels. And that’s the excitement that I think was enough to introduce this American company, to come and acquire this permit.
To a little bit more detail then on what we’re doing in this first real drilling program in Cuba. The first well we call Alameda-1, and what we have are previous discoveries in our block, and the photos here show you the results of these previous wells that were drilled in our prospect area that flowed hydrocarbons to surface. The origins of these hydrocarbons were never explained adequately technically our job was to amass all of that data that existed and come up with this drilling program that allows us to see why those earlier wells Marti-2 and Marti-5 probably found oil where they did find it. And these structures that we call the U1 structure, the N structure and the Alameda structure, good candidates for traps for hydrocarbons.
And this is what we are drilling down into at the moment we are at about 1800 meter is depth at the moment. And that first section of the Alameda well, there was supposed to have been journeymen drilling on the way to get to the first targets. We’ve made a discovery how big it is, whether it’s commercial, that’s still all ahead of us. We’re doing that work at the moment, but it’s certainly very, very intriguing given we’ve intercepted hydrocarbons over a 600 meter zone with multiple pays in that zone. So it’s not uncommon in Cuba either. You know, that upper sheets, a prolific producer on the Northern coastline of Cuba. So it is not uncommon that we would’ve found something, but we were from the previous offset, well, to have found anything at the shell of the deaths. So that’s taking a lot of our time and attention at the moment. It was very exciting for us.
But the main game is hit. The main game is this Alameda well, this lowest structure on this target, which flowed 44 barrels once to surface of 24 API oil, which in Cuba speak is very quite light, typical sort of Venezuelan, Cuban quality crude’s, plus some better characteristics that we’re very encouraged by what we have already found at the shallower of depth, which is already lighter than typical in the upper sheets in Cuba, which is what we theorised we would find in this section, but we’re all very keen to get to this lowest target and see what’s down there, that’s the one that we’re focused on mostly now.
Follower the first well, we move immediately to a second well about 20 kilometres away. The reason we chose this as our second target is there was a historic oil field in this part of the block called the Motembo oil fields, and it is responsible for a lot of production over the years, that surfaced. Farmers would anecdotally just take their buckets and fill up from this field and tip it into their tractors, but again the source of this oil field has not been found. Previous wells have tried, and I’ve marked them on this cartoon here at Itabo, Bolanos, Guadal and they all recovered some hydrocarbons minimally, but from the analysis we’ve done of those offset wells and marrying with the size making studies, we can see, they probably didn’t drill deep enough because we can see these two very large structures proximate to the location of this oil field, the Zapato field, and the A2 lead.
So of those two, one of them could be the candidate for the kitchen or the source of that oil field, and we’ve chosen the Zapato, and it’s a massive structure, it’s like a 1000 meters of vertical relief at least, and probably 10 to 15, maybe 20 kilometers across laterally, so it’s a huge structure capable if it is a trap for these hydrocarbons containing out an enormous resource, but we put a best estimate of 95 million on it. That’s been independently assessed and we will drill that one target, one well, one target straight after the current program, straight down into the crest of that Zapato structure. So those two wells are, as I say on foot at the moment, people on the ground, drill bit’s turning everything’s happening.
This Australian prospect, just to close out on, I’ve already talked about a little bit. You got this very nice image here from a recent 3D seismic acquisition done by Total and Santos over this prospect who at one stage had an option to drill this well, the results of which were very high quality and these carbonate buildups, I explain them in my non-technical terms as being like the old average little mittens, where they throw their oyster shells over decades and centuries and build up this mound, limestone in that case carbonates, and have a geological time these isolated buildups tend become traps for these hydrocarbons, and we haven’t tested this play type in Australia before. This is the first one that’s been identified and analysed to this quality, but where these types of buildups have been tested internationally, and where they’ve worked, they’ve tended to work very big. And I think that’s what the attraction was to this US fortune 500 company into Australia to acquire this permit, it is yes, it’s a best estimate of 400 million barrels, which is enormous, which is a very large discovery if that’s successful.
But, the high side where I’ve dotted there, the high side potential is 1.4 billion barrels of oil. So a very exciting prospect for Australia, for our company and for validating the thesis of our geo science team, who I identified this all those years ago. So that’s the runway for Melbana at the moment. Two very exciting projects, multiple targets across these various wells, all of which are funded in a rising hydrocarbon environment, oil prices where they are, energy demand only going up. The timing of everything is as good as we could have hoped, and all we need to do now for our shareholders is deliver on a success, which we already have with the discovery we’ve made in Cuba, which we’re still to appraise and declare commercial. So contact me please, on the details on this screen, if you have any questions or would like to know more about our company, I’d be only too happy to just talk to you and give you some more detail.