Waking up from a sunny California dream

Perhaps it is all a balmy Californian dream that we are living. Are we throwing caution to the wind?


The results are clear to all: Malta has the worst oil exploration record in the Mediterranean with only 13 wells drilled in the past 60 years. Compare this to 6,000 wells in Italy, 500 in Israel etc.

Intuitively, the joke in the past was the so-called gargantuan challenge in the search for international investor with substantial means. Wanted – deep pocketed investors seriously able to afford multiple well exploration in our untapped Continental shelf.

Three years ago, the Office of the Prime Minister was asked to confirm a declaration by ex-Italian Ambassador Giovanni de Vito that there was a “gentleman’s agreement” between the two countries under which no licences would be issued in the 18,000 square kilometre zone until a formal agreement on possible joint exploration was reached.

In reply, a spokesman did not refer to the moratorium but said: “As stated by the Italian Ambassador, there is no formal agreement on oil exploration between Malta and Italy and negotiations are ongoing. Both countries are engaged in constructive discussions and enhancing confidence building with the aim of agreeing on joint activity”.

The minister previously responsible for oil exploration, Joe Mizzi, also assured the Times of Malta that discussions with Italy on possible joint exploration in the disputed area were ongoing. He stated “no licences have been granted by Italy on Malta’s continental shelf as far as the government of Malta is aware”.

Most say this is a pipe dream. Realists assert that sufficient capital has to be invested in exploration. Only thus can we catch up for lost time. A national oil company (if it exists) needs the best technical brains to engage with the big players in the industry for a renewed initiative to risk exploration in a multiple well search.

History has taught us that palliatives are a waste of time. Definitely, a change in government in 2013 saw new alternatives put in motion.

Adding gas to its fuel mix, Enemalta (the majority owned State electricity company) aims to meet its future demand while satisfying environmental goals at lower costs.

It was a smart move to combine an electricity interconnector link with Italy and concurrently invite offers from third parties to build a new gas-fired power plant. A Liquified Natural Gas facility (LNG) is to be added later. Enemalta converted the controversial BWSC power plant to run on natural gas making use of the new LNG facilities.

Talks to lay a subsea gas pipeline linked to Sicily started in late 2012 and when this is commissioned it will connect the Delimara power station to Gela. A degasification plant is available in Delimara to facilitate the unloading of LNG tankers and will improve future prospects for cross border trading.

Environmentalists may complain that laying of such a gas pipeline will endanger the Mediterranean seabed morphology, encounter engineering limitations, maritime boundaries and upset seafaring activities yet government issued a call for a tender to commence a feasibility study. The bidder will be required to identify the best route through a detailed study including conceptual design of the pipeline and land-based infrastructure; identify the connection points, onshore routes and sites for the terminal stations in both Gela and Delimara.

Sadly, geopolitical tensions with neighbouring countries over the delineation of the continental shelf have been a problem in the past with some seeing this as a serious marker for having no exploration. Oil exploration efforts also led to tensions with countries Malta had considered as friends.

The most prominent incident occurred in the 1980s when Libya sent a gunboat to stop Saipem - an Italian oil rig - from drilling for Malta in an area it considered as its own. A dispute filed at an international court lasted over a decade and led contestants to reach a settlement during which time many opportunities were lost considering that on the south side, there is a good prospect for exploration.

In the North, near Sicily, there are known oil fields, so there is a chance for a profitable find, but economies of scale must be considered. Interest in oil exploration under the Labour administration eased when prices collapsed. Prime minister Joseph Muscat adopted smarter ways to bolster the economy.

Let’s face it: oil and gas exploration has a longer payback period when compared to other cash generating ventures such as the deal with Henley and Partners or negotiating mega construction/medical care projects.

Private sector was lured to invest and risk own capital after been compensated by the granting of concessions in public land and/or hospitals on easy terms.  

Be that as it may, the news that government last month awarded a one-year exploration licence to Edison International in three blocks close to Sicily came as a welcome move, although many consider oil exploration as a joke.

The last serious attempt to drill was almost a decade ago and since then there have been no initiatives taken to attract investment. Having lost a decade to issue the next license, our competitors raced ahead and have struck gold.

This is an embarrassment, even though during the past six years the economy raced ahead without any dependence on oil drilling.

Last month, Edison announced that it was allocated to explore three north offshore blocks totalling approximately 6,400 square kilometres. These are prime sites located close (only 80 kilometres away) from the long producing Vega offshore field in Sicily.

As can be expected, the Continental Shelf department has accumulated substantial seismic studies conducted over past 60 years, some of which can be useful if passed over to Edison (albeit such data based on old technology may now be obsolete).

Edison International is an Italian mega firm and has only recently sold its oil and exploration arm to a Greek owned company -Energean Oil and Gas. The initial consideration was $750 million plus other amounts based on future discoveries. Edison E & P was a medium sized operation employing a total of 282 people.

One hopes that Malta is well-served by Energean and that the necessary risk capital is placed at the disposal of this and other long-awaited challenges. The island has had to deal with a lot of false hope on previous exploration melees  and the electorate has started to consider such announcements (usually timed close to a general election) with a sense of déjà vu.

Talk to Dr Gatt, a trained and independent geologist about the subject and he is emotional about the dire attempts so far by past and present administrations to restart the quest for oil.

It is embarrasing how we failed when the central Mediterranean basin is so rich in proven deposits.

Perhaps it is all a balmy Californian dream that we are living. Are we throwing caution to the wind?

A leaked preview of our dissolute performance in latest Moneyval’s fiscal governance assessment does not bode well. Critics lament that unless we mend our ways, the future of our domicile hangs in balance.

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