Oil is black, not blue or red

On December 7, 2007 the Maltese government awarded a licence for oil and gas exploration to Canadian oil company Heritage Oil Exploration.

The company had committed itself to start drilling an exploratory oil well by December 2010. In a conference call with investors in January 2010, Heritage Oil said there was a 20-25 per cent possibility they would encounter a 500 million barrel field in Malta’s territorial waters. Not only was oil not found but the well itself has not been started!

On February 28, 2008, Heritage was notified by the Libyans to refrain from any activities in the area.

One wonders why the government offered these areas for exploration to the company in the first place if they were still disputed! Is Prime Minister Lawrence Gonzi trying to emulate Dom Mintoff who had signed an agreement with an American company for part of the same acreage?

Mr Mintoff had excellent personal relations with the Libyan leader Muammar Gaddafi. He was surrounded by a first class group of top-notch civil servants. He also enjoyed the strong backing of ministers who had strong relations with their Libyan counterparts.

Mr Mintoff had wisely kept the Oil Exploration Division directly under his control, unlike Dr Gonzi.

Finally, the Libyans agreed to go to the International Court of Justice in the Hague. Due to the fact that Italy interfered, the ICJ only made a partial decision. If Italy had not objected, most of these disputed waters would most probably have ended up in Maltese hands, especially the Medina Bank. So the problem was only partially solved.

The Nationalists were elected and after nearly 20 years the situation has remained stagnated. About two years ago, Tonio Borg gave the impression in Parliament Malta and Libya were near in reaching some sort of agreement on this matter. Two years have passed and it seems we are still very far from striking some sort of agreement. At least, the Maltese government has realised the only solution is in drilling jointly with the Libyans in the disputed waters. The Libyans have done something similar with the Tunisians, forming a company called Joint Oil.

One of the few Nationalist politicians who has strong contacts in Libya is John Dalli . But Mr Dalli is now serving as a European Commissioner.

One must note that Dr Borg did a good job in the way he tackled the recent visa problem Libya had with Europe, especially Switzerland.

Malta has not as yet struck oil in commercial quantities, unlike our neighbours. There are various reasons for this, both natural and of a geological nature such as deep waters, deep objectives, relatively recent faulting, low porosity and permeability etc. Also, one has to keep in mind that, when one considers the large area under our jurisdiction relative to our size as an island, only a few wells have been drilled. This creates a problem in that, when plotting new drilling wells, we do not have enough control as we lack stratigraphic information from nearby wells.

Big possibilities exist that a major find can be struck in these concessions. The shares of Heritage Oil Exploration actually went up when they announced they were about to drill in the zones in question. The geological situation here is different from other zones.

Will the areas under Heritage Oil Exploration be handed back to the Maltese government once no drilling took place? Oil companies have a tendency to like keeping good acreage in their possession even though they have to pay yearly rental fees for them. It is not in Malta’s interest to have the best zones monopolised by one company.

Definitely Labour leader Joseph Muscat is in a stronger position than Dr Gonzi to settle this problem with the Libyans. He can seek the support of a nuclei of diehard Labourites who are still in close contact with the Libyans such as Alex Sciberras Trigona, Karmenu Mifsud Bonnici, Noel Farrugia, Karmenu Vella and others. Business in Libya is done on a personal relationship basis. Mr Mintoff’s name is highly respected in Libya and Dr Muscat being the leader of the same party will definitely take advantage of this.

I would presume Dr Gonzi will try to come to an agreement with the Libyans before the election but time is running out! Meanwhile, the Labour Party should consolidate its position in Libya in the eventuality of finding themselves in government. The sooner they start cracking the better. One thing is certain, the political party in Malta that manages to come to an agreement with the Libyans on this matter definitely deserves to be elected. There is much at stake! After all, if we strike oil, its colour is neither going to be blue nor red but black!

The author is a geologist by profession and for many years was involved in the oil exploration programme.