Melrose Resources plc has announced that it has found gas in the Kavarna exploration permit, a company media statement said on October 29.

Initial reserves estimate the discovery amounts to 24 billion cubic feet, the company said.

The Edinburgh-based firm currently supplies about 15 per cent of Bulgaria's gas from its Galata field, approximately seven km west of the new find.

Melrose was in negotiations with the Bulgarian government over turning the Galata field, which is nearing the end of its commercial life, into a gas storage facility, UK daily The Scotsman said.

Melrose chief executive David Thomas was quoted by the daily as saying that the company still had to agree commercial terms with the Bulgarian government and submit a development plan for the facility, but was confident the deal would be completed smoothly.

"I don't think we expect any issues, the government really is driven from a strategic perspective to put in a new gas storage facility," Thomas was quoted as saying by The Scotsman.

According to Thomas, the Bulgarian government saw the storage as a way to lessen the potential power Russian gas giant Gazprom had over it. Gazprom currently provides 80 per cent of the country's supply.

Unnamed analysts quoted by The Scosman estimate the value of the deal to be in the region of £60 million (75.8 million euro).

Earlier this year, Melrose announced gas finds at the Kaliakra discovery, located approximately 15km to the east of the Galata field. Production at Kaliakra was scheduled to start in Q3 2009, the company said.
Plans were currently being formulated for the development of the Kavarna discovery and first production was expected in 2010, the company media statement said.