‘A one-in-10 chance but it’s worth the risk’
Exploration company confident of finding oil off Malta
They have often intertwined but oil and elections do not mix well, according to the CEO of a company holding a Maltese oil exploration licence.
It takes between eight and 10 years to reach the production stage if oil is discovered, according to Bill Higgs, who heads Mediterranean Oil and Gas, a company planning to drill for oil next year. This has nothing to do with politics, he says with a smile.
Mediterranean Oil and Gas has an exploration licence for Area 4 to the south of Malta in the zone where the sea border with Libya was delineated by the Inter-national Court of Justice in 1985.
And the company is very excited about the seismic data that have given them strong indications the area may contain anything between 130 million and 200 million barrels of oil.
“This area has never been explored but the information we have obtained has given us enough confidence to move ahead with the drilling of two exploratory oil wells,” Dr Higgs says.
The confidence he speaks of still means the company only has a one-in-10 chance of striking oil. But this is considered to be “a relatively high” prospect for an unexplored area that has shown similar geological structures to those found in oil-rich Libyan waters, according to company chief operating officer Sergio Morandi, a geophysicist by training.
Dr Morandi says that with the information that has been obtained since 2005, when the company first obtained an exploration licence, and $11 million later they have enough confidence to move to the drilling stage.
“It is only by drilling a well that we can confirm what we are seeing in our 3D models,” Dr Morandi notes confidently.
The two men point to a grey picture with wavy lines drawn across it, including a thin red line that goes from trough to crest and back. It is the source of all the excitement they emanate.
The picture is a cross-section of the rock formations found beneath the Ħaġar Qim exploration prospect where the company plans to drill its first well.
The sea is 450 metres deep in the area and the oil well is expected to be 2.5 kilometres deep. It will take 60 days of drilling to reach the potentially-oil-rich area. It is probably the closest Malta has ever got to identifying “a very good opportunity” to strike oil, they say.
And the latest agreement with Genel Energy, a company headed by former BP boss Tony Hayward, means the finances to drill two wells are secure.
Dr Higgs says Genel Energy, with more than $1 billion in cash reserves and a wealth of expertise, has committed $30 million to the deal with Mediterranean Oil and Gas. “They have appreciated the high-quality technical work that has been conducted until now.”
Mediterranean Oil and Gas is having talks with the Maltese authorities to extend its licence for another year and to have the partnership deal with Genel Energy cleared. If approval is granted by January, drilling of the first well can start in the last three months of 2013.
Dr Higgs is unfazed by the controversy surrounding Mr Hayward, who had to resign from BP after the Deepwater Horizon rig accident in the Gulf of Mexico caused widespread environmental damage.
“He was the CEO of a large company and not the drilling operations manager of the rig. It is a legacy that can be easily picked on but it does not worry us because Genel have the expertise and are the second largest independent oil company listed on the London Stock Exchange.”