Oil and gas- a pyrrhic victory for party acolytes.

Source: George M. Mangion¸ PKF Malta

As published in the Malta Independent on the 26th August 2012

It was more than fifty years ago that the government of the day  embarked on a drive to market Malta’s offshore acreage among oil companies with a view to encouraging them to prospect for oil and gas . Precisely it was 1954 when an unsuccessful onshore concession was awarded to a company called D’Arcy Exploration (BP) to drill a well in Naxxar . All attempts since then failed some with dry wells others with some oil and gas prospects but no commercial success followed.The bone of contention is the promising areas in the south banks numbered 4¸5¸ 6 and 7 which are located close to Libyan waters .These have been in dispute for over forty years since the Gaddafi regime never conceded to Malta’s claim of ownership and so far refused even joint exploration. In particular Area 4 comprises four contiguous licence blocks in the southern part of the Maltese offshore adjacent to acreage in Libya. Mediterranean Oil and Gas Plc’s (MOG) as the licence holders intend to explore for and produce oil and gas in the Area 4¸5¸6 and 7.

MOG has previously commissioned a specialist operator to shoot seismic survey and succeeded to interpret an extensive long-offset 3D view over the central graben area of Area 4. The prospects look promising such that it is now apparent that this part of offshore site is geologically analogous to the Libyan Sirte Basin¸ containing analogues to proven producing fields in Libya in addition to those offshore Tunisia. Specifically the experts have identified a portfolio of prospects in the Lower Eocene/Paleocence sequence. The new scientific survey has for the first time allowed imaging of the Cretaceous and Jurassic sequences¸ enabling several large leads to be defined at this stratigraphic level.Last week MOG announced that its wholly owned subsidiary¸ Phoenicia Energy Company Limited has entered into a conditional farm-out agreement with Genel Energy Plcin for oil exploration in Area 4 Offshore site. Under the agreement¸ Genel will acquire 75% of MOG’s interest¸ which covers blocks 4¸ 5¸ 6 and 7¸ for $10m in cash consideration.

It will also get 100% ‘carry on’ the first exploration well¸ which is planned to be drilled to a minimum depth of 2¸500 metres¸ and a 100% carry on the second exploration well up to a maximum of US$30 million gross expenditure.  Genel Energy has effectively teamed up with  MOG by signing  an Area of Mutual Interest agreement for a minimum term of three years which covers cooperation in assessing and acquiring exploration and production assets in the offshore areas not only in Malta but also in Libya and Tunisia.The venture concerning the Maltese concession is expected to be executed by the end of October 2012¸ but is conditional on the receipt of approval from the Minister responsible for Resources and Rural Affairs¸ together with a one year minimum extension of the first phase exploration period of the Area 4 licence. This is sweet music to the ears of shareholders of both  Genel Energy and MOG while the markets have sensed a good bet and the shares have recently rallied such that MOG’s share price rose 14.13% to 13.12p¸ while Genel’s share price climbed 1.22% to 703p . This is goo