An international EuroMed Oil and Gas conference will be held at the Grand Hotel Excelsior next week. It is the first time that Malta was chosen as a venue for the three-day summit on the subject. One of its aims is to help global industry players make the right strategic connections. It will discuss the geo-strategic, commercial, technological and regulatory issues that confront the hydrocarbon industry in the European Mediterranean region by giving advice to delegates on how to make best use of technological advances in exploration techniques such as sub-sea and remote well intervention.
All this is linked to how to maximize return on investment on transportation, storage and extraction. More than 30 international speakers will discuss latest developments in the Adriatic, Balkans, Eastern Med, North Africa and the Middle East. Other interesting topics include talent sourcing and managing health and safety issues. A number of producing countries including Turkey, Croatia, Greece, Italy, Albania, Israel, Sweden, USA, Egypt, Cyprus, Norway and North Africa will attend. A number of major companies in a sponsorship or supporting role include ENI Spa, Saipem, Halliburton, Malta Freeport Corporation, Statoil, Shell, Noble Energy, Delek Drilling, Medserv, LNG Croatia and Ratio Oil Company.
In this context, PKF will be presenting a paper at the EuroMed Oil and Gas Summit discussing the potential for the island to become a future servicing hub. In the context of this first important event targeting the oil and gas sector in the Mediterranean, it is opportune to discuss Malta's own history of exploration. Sixty years ago, the government embarked on a drive to offer parts of Malta's offshore acreage to oil companies to prospect for oil and gas. In 1954, the first onshore concession was awarded to a company called D'Arcy Exploration (BP) to drill a well in Naxxar. All attempts since then have failed, some with dry wells others with some oil and gas prospects but no commercial success followed although it is positive news that the main source rock for the oil is expected to be rich in the organic Streppenosa oil shale unit which is designated world class in its prolific oil generating capabilities.
The offshore Sicily Vega oil field, with an estimated resource of 1 billion barrels of oil in place, is only 20km away from the northern border of the latest zone in Malta's exploration efforts. Needless to say, experts predict that the proximity of similar concessions and similarity in geology to the producing basins of Tunisia and Sicily lend support to the theory that oil strikes for Malta cannot be excluded. The "intra-basin" ridge trend offers a new and prospective oil strike in our waters. In 2005, the company Mediterranean Oil and Gas (MOG) was awarded a licence to explore for oil and gas and had commissioned a specialist operator to shoot a seismic survey. It succeeded in interpreting an extensive long-offset 3D view over the area which looked promising (yet no official announcement has so far been issued). It is undisputed that this part of offshore site, which is geologically analogous to the Libyan Sirte Basin, appears to contain analogues to proven producing fields in Libya in addition to those offshore Tunisia.
It is interesting that experts have identified a portfolio of prospects in the Lower Eocene/Palaeocene sequence. The powerful 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. Concurrently, Dr Peter Gatt, a qualified geologist had conducted his own study consisting of a detailed geological analysis of the Malta platform. His study focused on the analysis of rock samples from six exploratory wells drilled in the Maltese platform by corporations including British Petroleum, Total and Shell, with some information dating back to 1956. Such studies are an important tool to attract new investment in this industry now that the oil price is gradually increasing.
A recent announcement that an application for permits to link Malta's gas network grid to Gela in Sicily is well timed. This gas pipe will eventually link us to the rest of Europe. The environmental studies will begin this year, followed later by a public call for tenders next year. Last year, a National Oil Company was incorporated to help promote upstream business, so can we hope that behind closed doors the authorities are devising plans to kick-start the drive for exploration? Another indication is the rise in the price of oil, which now costs over $73 a barrel. As an island, we still rely 100 per cent on fossil fuel for electricity generation, albeit now using LNG given that our dependence on renewable energy is under seven per cent. It does not look as if it is going to triple in the short term, so the global oil price is an important factor for us as an importing country.
Rising global demand and falling OPEC supply may yet put even more pressure on the oil price. Martijn Rats of Morgan Stanley says that to keep the market roughly in balance with shale-producers in the US planning to raise output from 5.8m barrels a day (b/d) to 10m b/d over the next 12 months. Nobody can forecast exactly the future oil price but the improved output from shale oil may have a stabilising effect on the price of crude. Late last year, a scoop by the Times of Malta (ToM) revealed that the government appears to be trying to start a new push for oil and gas exploration in Maltese waters after a hiatus of six years. ToM said the official journal of the European Union issued a notice says that Blocks 1, 2 and 3 of Area 3, an area of 6,000 square kilometres north of Malta, are now available "for authorisation on a permanent basis under either an exploration licence or an exploration and production licence".
Some may say this is a pipe dream yet realists assert that provided sufficient capital is invested in exploration using modern technology this may permit us to export to Europe via a submarine pipe connected to Sicily. Let us hope the EuroMed conference will succeed in attracting interest from investors to explore our relatively untapped continental shelf. A successful discovery will be the trailblazer and mean a bright future for the new servicing industry.
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Mr Mangion is a senior partner of PKF an audit and consultancy firm.