Melrose updates Galata project update, block 91-III

Melrose Resources has drilled and completed two production wells on the Galata gas field development in the Black Sea, offshore Bulgaria. Both the Galata No. 1 and Galata No. 2 wells tested 30 MMcf/d and flowing wellhead pressures of 1,500 psi. The Galata No. 2 production well confirmed an extension to the gas reservoir in the northern fault block of the Galata structure. This has resulted in an increase in the proven reservoir volume and field reserves. Based on the original production test and the new pressure data, proved reserves are 65 bcf, compared with 49 bcf, and proved plus probable reserves have increased from 80 bcf to 90 bcf.

Melrose owns a 100% working interest in the field.

Melrose also reports that a late December storm caused damage to a barge, which was laying an offshore pipeline. The barge has returned to port in Varna for repair. It will resume operations before the end of January to complete the remaining 5.3 km of pipeline in early February. First production on the development will be delayed until the end of February. The offshore platform and the onshore pipeline are complete.

The processing of 470 km of infill seismic over the southern part of block 91-III, which Melrose acquired in 2003, is complete. The initial interpretation has identified seven structures in the same producing horizon as the Galata gas field. The company has also confirmed the prospectivity of the deeper Oligocene channel play. Enhanced seismic processing will be carried out on these structures prior to selecting a drilling location.

01/13/04