Cuban oil work hits a snag for Melbana Energy

One of the few Western energy companies working on Cuba, Melbana said an agreement with Petro Australis to acquire 40 percent of a production sharing contract was terminated.

Both companies have headquarters in Australia and pursued the joint effort five years ago. Petro Australis had until Sept. 2 to exercise its right, but failed to obtain the proper regulatory qualifications from the Cuban government.

Melbana Managing Director and CEO Peter Stickland said that his company now has 100 percent control over the so-called Block 9 production sharing contract.

"We will continue our farm-out process with our data room remaining open and active," he said in a statement. "Our preparatory activities for drilling in 2018 also continue unabated with good progress being made in Cuba to advance our readiness to drill up to two wells in Block 9 commencing mid-2018."

The Block 9 onshore basin in Cuba holds an estimated 637 million barrels of recoverable oil. There are more than a dozen individual sites that Melbana sees as high-impact drilling sites. Petro Australis had no statement on the cancellation, but said last year the Cuban acreage had "significant" potential.

By August, the company already had local contractors working with its personnel to get a proposed well location ready for future operations. Melbana already completed preliminary work, which involved geological surveys of the area, and said it's ready to move on to an exploratory phase.

Funding may be an issue for Melbana moving forward. Through the arrangement, Petrol Australis had assumed 40 percent of the costs associated with future operations.

Melbana was able to secure millions of dollars in a capital drive this year, but fell short of its goals. Funds raised were to support a drilling campaign in Cuba next year.