Genel Energy has officially confirmed that it will not take up its option to conduct further exploration in the Area 4 concession, an option that was open until January 18.

“I’m afraid that the decision has been taken to exit Maltese operations,” a company spokesman said, also confirming that Genel had no plans to take up any other concession areas in Malta.

Genel owns 75 per cent of the shareholding in Phoenicia Energy Company, which holds the concession for Area 4.

Phoenicia Energy Company reportedly paid around €500,000 to the government for the six-month extension until January 2015, which it wanted in order to conclude testing on the findings of the Ħaġar Qim well. The well was abandoned in July because no reservoir was found. The consortium had an option in the concession agreement to go into a second phase and drill a second well.

The decision is not only based on the disappointing results of the first well, Ħaġar Qim, but also on the cost of oil – which is also having an impact on Genel’s global strategy.

“We are going to pursue a focused and disciplined exploration strategy going forward. This is in part due to the falling oil price, but also due to the cost of offshore exploration. We feel that focusing more on cheaper onshore exploration can provide better value for our shareholders,” the spokesman said.

Exploration costs have to be taken in the context of production costs should oil be found. With oil at its lowest point in five years – below $56 last Friday – production might simply not be worth it, although the spokesman said it was impossible to say at what price a find in Malta may be viable.

“This would depend on the size of the find. Clearly though, the lower the oil price, the larger the find would need to be,” he said. Rockhopper, which bought up minority shareholder Mediterranean Oil and Gas’ shares for £29 million, had already made it clear that it had no interest in a further exploratory attempt.

Rockhopper also holds a 40 per cent interest during the exploration study phase in Area 3 with Cairn Energy as operator. In offshore Area 3, processing of a 2D broadband survey is nearing completion and interpretation results will determine whether the partners commit to a 3D survey under the exploration study agreement.