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Malta: The Strategic, Painless Next Big Venue

Malta, in the heart of the Mediterranean, hasn’t made that one major find to make commercial extraction viable just yet, but it’s only a matter of time--and the low-level security and political risk make this venue a haven for prospective investors looking for the next big offshore opportunity.

Israeli finds in the Mediterranean’s Levant Basin provide us with enough of a prospective geological backstory here to spark interest in Malta. And when you consider the Malta’s offshore area is 150 times the size of its onshore territory—and larger than Israel’s continental shelf—the prospects suddenly widen.

We’re also keen on taking cue from investor darling, Anglo-Turkic Genel Energy Plc, which is banking on a big find offshore Malta.

Offshore Blocks

Malta is a good venue even for the juniors, particularly because the risk is so much lower compared to other venues. Genel acquired a 75% interest in four offshore blocks in Malta in 2012, and in a recent interview with Oilprice, the company’s CEO, Tony Hayward (of BP fame), told us a bit about why Genel is optimistic about the venue.

“As with all of our acreage [it’s about] geology. As we have expanded outside Africa we have targeted opportunities to take material interests in high impact prospects, with the potential for field sizes of at least 250 million bbls. Malta and Morocco both fall firmly in these categories and, while expectations are dangerous in this business, we are confident in the geology and look forward to drilling them both,” Hayward said.

Last week, Hayward told local media that Genel will begin drilling at the end of March and will expect the first results in mid-July for Malta’s Area 4. What are the chances that Genel will strike commercially viable oil in Malta by July? Hayward says there is a “one in five chance”.

According to Mediterranean Oil & Gas (MOG)—from whom Genel acquired its 75% stake--the 3D seismic data in Area 4 has a potential of 200 to 300 million barrels of oil to exploit.

Legally, there is one ongoing court battle that has marred the venue’s otherwise clean slate. Last week a High Court in London began hearing the chairman of Leni Gas & Oil (LGO), David Lenigas, who launched legal proceedings last year against his former exploration partner in Malta for alleged fraudulent misinterpretation. In July 2012, Leni Gas agreed to sell its 10% stake in an offshore zone in Malta for £1 to MOG. Later that same year, MOG struck a deal with Genel to sell 75% of the rights to the same zone for around $25 million. Lenigas claims that he “was unfairly duped out of a sweetheart oil deal by his erstwhile partner”.

The Hub Potential

Malta is strategically situated in the heart of the Mediterranean, which means it is easily linked up with Europe and MENA (Middle East/North Africa). Indeed, Malta is a member of the European Union, but also has quick access to African ports such as Algeria, Libya, Tunisia and Egypt. Like Turkey, a big find could make it not only a key production venue, but a genuine oil and gas hub—spurred along by some top-notch port infrastructure with highly developed logistics. And it’s already one of the top-ten countries in the world for attracting foreign direct investment (FDI).

Earlier this month, the government of Malta announced it was preparing to unveil plans for transforming its Marsa ship-building site into a maritime hub. One of the possibilities is to shift its focus to the oil and gas industry, and logistics. So far, sources say that it is this that the government is eyeing as offering the most potential.

We believe that oil and gas will win out, making Malta an even more attractive venue for investors. Malta stands to become the central hub of Mediterranean oil and gas. And for developers, an added benefit is that rigs can be attracted from the Atlantic Ocean to West Africa—one week’s sailing each way. There is presently no rig repair station in the Mediterranean, so there is a logistics gap here that Malta could easily capitalize on. So far, Malta has received 28 international expressions of interest for the development of a Maritime Hub at Marsa.

Beyond this, we’re looking at a venue that is low risk: Political stability is high and corruption is low.

On 4 November 2013, the government of Malta opened up all geological and economic studies to potential explorers, and is also taking steps to establish the Malta Oil and Gas Corporation, which will be responsible for implementing the government’s oil and gas exploration plans.

We are also closely watching Malta shift to gas and the government’s plans for a floating LNG storage facility it wants to anchor at Marsaxlokk Bay for a new power station. Beyond exploration, there are opportunities here, as well—particularly as the gas sector is in a major transition phase. Siemens was offered an 18-year power purchase agreement with Enemalta, which led to its bid for a new power station. Speaking of the deal, Siemens described Malta as a “great country to invest in”, due to its stability and financial standing, as well as its use of the Euro currency.

This is all part of the proposed Delimara project, which will convert an older LNG carrier to a Floating Storage Unit, with LNG re-gasified on land and powering the existing power plant as well as the new plant that will be built by Siemens. The project is, however, the crux of a political controversy ostensibly over its safety, but we’re optimistic that it will be pushed through in the end.

For more information on Malta oil and gas exploration opportunities, contact James Stafford for details on OP Tactical operations and land packages.




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