Issue link: https://maltatoday.uberflip.com/i/1184160
14.11.19 12 OPINION George Mangion E xperts predict that 2020 will see oil prices slowly escalating and may reach sustainable levels to attract attention of oil companies to start exploration in central Mediterranean. It is common knowledge that any loss of supply from Iran due to increased U.S. sanctions will exacerbate the pressure on oil prices and it is unlikely that OPEC intervenes to increase output in the interim. The steep losses from Venezuela combined with the potential disrup- tion in Iran could force the oil price to reach new heights. Cyprus announced it recently signed its first natural gas exploitation deal worth $9.3 billion with a consortium comprised of industry giant Shell, US- based Noble and Israel's Delek. The 25-year license is for the Aphro- dite gas field, the first to be discovered off Cyprus, by Texas-based Noble En- ergy, in 2011. It is estimated to con- tain over four trillion cubic feet (over 113 billion cubic metres) of gas. The re-working of the production contract means Nicosia is set to receive an av- erage yearly income of $520 million over an 18-year period. By comparison, this equates to the annual income Malta expects from running the Citizenship by invest- ment scheme but the Cyprus windfall stretches for a much longer term. In February, ExxonMobil and Qatar Petroleum discovered an even big- ger natural gas reserve off the coast of Cyprus, holding an estimated five to eight trillion cubic feet. Italy's ENI and Total of France are also heavily in- volved in exploring for oil and gas in a number of fields offered for explora- tion off Cyprus. One appreciates that it took Cyprus almost a decade since it discovered oil in the Aphrodite well to start monet- ising its worth. The question, one may ask is why Malta has not followed suit and one observes that during the PN administration (later followed by the Muscat government) there was no serious drive to attract investment to explore our waters. It is true that our offshore acreage during the past 65 years has been cov- ered by seismic surveys as well as sci- entific data. Nostalgically, it was 1954 when the first onshore concession was awarded to a company called D'Arcy Exploration (BP) to drill an onshore well in Naxxar. All attempts since then failed with dry wells others with some oil and gas prospects but no commercial suc- cess followed albeit it is undisputed that our 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. No wonder the rich Sicilian Vega oil fields to the north have an estimated resource of 1 billion barrels of oil in place, located only 20km away. Needless to say, experts predict that the proximity of similar concessions and similarity in geology to the pro- ducing basins of Tunisia and Sicily lend support to the theory that oil strikes for Malta cannot be excluded. The "intra-basin" ridge trend of- fers a new and highly prospective oil strike in our waters. Mediterrane- an Oil and Gas (MOG) in 2005 was awarded a license to explore for oil and gas had commissioned a special- ist operator to shoot seismic survey and it succeeded to interpret an ex- tensive long-offset 3D view over the area which looked promising (yet no positive announcement has ever been issued). Geologists tell us that this part of offshore site which is geologically analogous to the Libyan Sirte Basin, appears to contain analogues similar to proven producing fields in Libya in addition to those in offshore Tunisia. We have not exploited the rich her- itage of scientific surveys at our dis- posal which were carried out over the years yielding imaging of the Creta- ceous and Jurassic sequences - ena- bling several large leads to be defined at this stratigraphic level. This legacy of seismic data and spo- radic drilling was collected from var- ious companies including BP, Texaco, Genes, and Eni since the 50s, albeit not enough political drive was present to intensify the search. The good news is, that this govern- ment started negotiations with EU and applications to link Malta's gas network grid to Gela in Sicily. This subsea gas pipe will eventually link us with the rest of Europe. Three years ago, there were strong rumours that a National Oil Com- pany is to be set up to help promote upstream business but so far the idea seemed to have been shelved. Upon election in 2013, the Muscat government reached a deal with Socar (an Azerbaijani national gas supplier) to supply LNG for electricity gener- ation so we did convert the BWSC equipment and the new Electrogas plant (partly owned by Socar) to run on cleaner fuels. As an island, we still rely 100% on fossil fuel for electricity generation albeit now using a cleaner fuel given that our dependence on renewable energy is under 20%. Three years ago, it was thanks to a scoop by the Times of Malta (TOM) which revealed that the government appears to be trying to start a new push for oil and gas exploration in the Maltese continental shelf after a hia- tus of seven years. TOM quoted that 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 ex- ploration licence or an exploration and production licence". No major oil company has so far shown interest. We have placed un- told resources to promote blockchain and AI yet no conferences to attract exploration. Readers may say finding oil is a ta- boo subject yet realists assert that provided sufficient capital is invested in exploration using modern 3D tech- nology, then success will grace us as it did for other countries in eastern Med namely Cyprus, Israel, Egypt and Leb- anon. Success will breed more success but we must seriously focus our energies to attract investors as Cyprus did. Oil fortunes - our skeleton in the cupboard George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island