Issue link: https://maltatoday.uberflip.com/i/1200837
16.01.2020 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 continue ex- ploration in Mediterranean. It is common knowledge that any loss of supply from Iran due to increased U.S. sanctions will exacerbate the pres- sure on oil prices and it is unlikely that OPEC intervenes to increase output in the interim. e steep losses from Venezuela com- bined with the potential disruption in Iran, linked to warfare in Libya could push the oil price to reach new heights. Last year, Cyprus proudly announced it signed its first natural gas exploitation deal worth $9.3 billion with a consorti- um comprised of industry giant Shell, US-based Noble and Israel's Delek. e 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 contain over four trillion cubic feet (over 113 billion cubic metres) of gas. e re-working of the production con- tract means Nicosia is set to receive tax/ royalties income of $520 million annual- ly over an 18-year period. Comparisons are odious, but this equates to the annu- al income Malta expects from running the Citizenship by investment scheme albeit the Cyprus windfall stretches for a much longer term. Last February, ExxonMobil and Qatar Petroleum discovered an even bigger natural gas reserve off the coast of Cy- prus, holding an estimated five to eight trillion cubic feet. Italy's ENI and Total of France are also heavily involved in exploring for oil and gas in a number of fields offered for exploration - off Cy- prus. One acknowledges that it took Cyprus almost a decade since it discovered oil in the Aphrodite well to start monet- ising its worth. e question, one may ask is why Malta has not followed suit and wasted opportunity during the past thirteen years. e honest truth is that during the PN administration (later followed by the Muscat government) there was no serious drive to attract investment to explore our waters. Ex-prime minister Muscat when elect- ed in March 2013, had set his mind to help push the Henley & Partners pass- port scheme, which to date saw about 1500 applicants approved and in the process each invested around euro 1.5 million. In hindsight, IIP scheme has helped balance annual state deficits and left us today with a tidy sum of euro 600 mil- lion albeit laced with unsavoury criti- cism from Brussels. Muscat had no time for oil and gas exploration as the next rabbit in his magic hat was the private deal with Socar (owned 33% by the state of Azerbaijan) and equal shares with Tumas/Gasan groups and Siemens to build an LNG electricity facility (cost- ing circa euro450 million). is turned out to be a highly criti- cized deal which bound Enemalta (for 18 years) to buy electricity at a fixed rate exclusively from Electrogas. When during installation, its share- holders were cash stuck with bankers, many quizzed why the finance minister issued a temporary bankers' guarantee for euro 350 million to bail them out. Fast forward to 2020, we may recall how talks are in an advanced stage with EU to help lay a gas pipe line direct to Gela Sicily. Gela is itself a rich offshore region. Equally interesting is our main source rock for oil as experts say it is expected to be rich in the organic Streppenosa oil shale unit which is designated world class in its prolific oil generating capa- bilities. No wonder, the rich Sicilian Vega oil fields to the north have an es- timated resource of one 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. e "intra-basin" ridge trend offers a new and highly prospective oil strike in our waters. Mediterranean Oil and Gas (MOG) in 2005 was awarded a license to explore for oil and gas had commis- sioned a specialist operator to shoot seismic survey and it succeeded to in- terpret an extensive 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 off- shore site which is geologically analo- gous to the Libyan Sirte Basin, appears to contain analogues similar to proven producing fields in Libya in addition to those in offshore Tunisia. Mysteriously, governments have not exploited the rich heritage of scientific surveys at our disposal which were car- ried out over the years yielding imaging of the Cretaceous and Jurassic sequenc- es - enabling several large leads to be defined at this stratigraphic level. is legacy of seismic data and spo- radic drilling was collected from var- ious companies including BP, Texaco, Genes, and Eni since the 50s. Four years ago, there were strong ru- mours that a National Oil Company is to be set up to help promote upstream business but so far the idea seemed to have been shelved. ree years ago, it was thanks to a scoop by the Times of Malta (TOM) which revealed that the government ap- pears to be trying to start a new push for oil and gas exploration in Maltese continental shelf after a hiatus 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 authorisa- tion on a permanent basis under either an exploration licence or an exploration and production licence". No major oil investor has hit the ground with a fat cheque book. With hindsight under the Muscat ad- ministration, we have rightly explored new sectors such as blockchain and AI. e ambitious slogan Malta - the blockchain island saw mega conferenc- es funded partially by government and were successful in attracting thousands of evangelists and tech enthusiasts. Obviously, this tech sector is volatile, highly competitive and carries a long gestation period. Back to the black gold - can Robert Abela the energetic prime minister, reopen this forgotten treasure chest and reconstitute a NOC empow- ered with experienced geologists and experts to turn the tide. Readers may say finding oil is a taboo subject yet realists assert that provided sufficient capital is invested in explora- tion using modern 3D and AI technolo- gy, then success will grace us - as it did for other countries in the Med. Success will breed more success but Dr Abela must pluck up courage to focus our energies to attract bona fide investors. If Cyprus and Israel attracted American capital to fund serious explo- ration - so can we. Dr Robert Abela, lift our sunken treasure chest 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 Robert Abela with his wife Lydia and their daughter Giorgia Mae