Oil exploration – little ventured, nothing gained

This week, it was reported that the government seems to be trying to start a new push for oil and gas exploration in Maltese waters after a hiatus of five years. The official journal of the European Union issued a notice that says Blocks 1, 2 and 3 of Are

The government has been urged to announce a licensing round to attract consortia for the three blocks on offer. Readers may ask why the government is offering Area 3 which faces Italy and not the oil rich site of Area 4 which points to the Gulf of Sirte, itself the pride of Libya offshore oil acreage. The answer must be political and the saga takes a twist recounting the mysterious way how Genel abruptly stopped drilling in Area 4 three years ago, capped the well and left. No official reason for the dry well was given by the Continental Shelf Department and much less was heard from Genel, the drilling company. Here today, gone tomorrow – after a few weeks of drilling.

Could this week’s welcome announcement by the government to restart exploration be timed to dampen the euphoria following the election of an enigmatic opposition party leader (regrettably so far no one in Parliament has conceded him a seat)? The public will never know but it is a fact that in last year’s budget, the government promised to set up a National Oil Company. This is chaired by Maria Micallef a political appointee who has no experience in complex oil management yet it is a start, albeit a weak one. The incumbent previously ran an established local soft drink bottling plant and acted for a short period as chairman of the debt-ridden Air Malta. Her task is daunting. Malta has the worse oil exploration record in the Mediterranean with only 13 wells drilled in the past 60 years. Compare this to 6000 wells tested in Italy, and 500 dug in Israel. Cairn Energy, which was the last operator engaged in exploration, told the media that it was not conducting any activity in Malta and it had “no news to report” when asked about its plans for 2017. Geologists treat this as a bad omen for the industry.

The gargantuan challenge facing Ms Micallef is the search for international investors with deep pockets to seriously start exploration in our relatively untapped Continental Shelf when oil prices are low. Can we emulate the success registered in Cyprus, Egypt, Libya, Israel, Italy, Tunisia and Algiers? Ideally, any future gas discovery coincides with the immediate plan to lay an underwater gas pipe linking us to Italy. The minister responsible for oil exploration, Joe Mizzi, was asked about discussions with Italy on possible joint exploration in the disputed area who assured that these were ongoing. He stated “no licences have been granted by Italy on Malta’s continental shelf as far as the government of Malta is aware.” Disputes on the delineation of the continental shelf led to problems with Italy, and in 2015 the two countries informally agreed to observe a moratorium on oil exploration activities in a vast offshore area southeast of Sicily and Malta where both countries have overlapping claims. No such agreement could be reached with Libya due to the instability of its warring factions all clamouring to seek control so there will be delays until attempts to hold elections for a national government prove successful.

The penny has dropped that at present we have no current exploration activity planned for the near future. Much of the blame can be attributed to politics. In order to get the licensing process renewed, the government needs to commit to sign two decrees: the first dividing Malta’s exclusive offshore zone into blocs and setting their coordinates; the second specifying tender protocols and establishing how the oil produced would be shared between companies and the government. Another serious caveat concerns how to reach agreement with neighbouring countries on the legal boundaries of our Continental Shelf. At this junction, it is opportune to give some information on exploration progress reached by countries located in the central and eastern Mediterranean basin.

To start with, to our north of Area 3 lies the largest offshore field in Sicilian waters termed the Vega and others which were discovered in the midfifties. To the south lies the oil rich Sirte Libyan offshore basin and to the west the equally prolific Tunisian wells. It is encouraging to note that North Africa offshore fields have been extensively explored and only two years ago, Egypt announced the discovery of the offshore Shorouk Concession, which contains the massive Zohr gas field – the largest natural gas field ever discovered in the Mediterranean. It is estimated to contain 30 Tcf of gas according to Italian energy firm Eni. Moving on to the Levant basin, Israel itself has made some of the biggest discoveries so far. In 2009, companies exploring in Israeli waters found the Tamar field, containing some 8.4 trillion cubic feet of gas. Another discovery by Noble Energy announced the larger deep-water Leviathan field with 16 trillion cubic feet of gas. Cyprus discovered a gas field termed Aphrodite with more gas than can be used by Cyprus’s population, leaving around 90 per cent available for export. It is eager to become a natural gas producer next year having its second licensing round attracted 15 consortia for the 12 blocks on offer.

While the existence of large fields in the eastern Mediterranean has been known since 2009, it is strange that Beirut has yet to start drilling. Like Malta, Lebanon is slow in its drive to join the ranks of oilproducing nations. It has ongoing disputes with neighbouring countries which need to be resolved before investors risk placing their bid for new concessions. In fact, it appears that Lebanon’s southern-most blocs overlap with maritime territory also claimed by Israel. Saddled with debt, Lebanon could do with the revenue it would receive from exploiting its offshore hydrocarbon reserves, estimated at 850m barrels of oil and 96trn cubic feet of gas.

In conclusion, it is almost two years ago that the media reported a sensational statement made in Parliament by Minister for the Infrastructure Joe Mizzi who, in a casual way, reminded all and sundry about his prophetic prediction on a positive offshore oil discovery. As stated earlier, history has taught us a bitter lesson that palliatives are a waste of time. Therefore, we need to continue political negotiations with Italy, Tunisia and Libya to resolve any disputes. Future generations deserve the opportunity to enjoy the fruits of a professionally administered National Oil company – a government agency that deserves adequate resources to succeed in its quest to diversify our tenuous dependency on economic pillars of mass tourism, property speculation and IGaming. Sadly, as revealed in our history of exploration, little was ventured and nothing was gained.

Maria Micallef