Mediterranean Oil & Gas Plc. announced that the Company has signed an agreement with the Government of Malta to extend the first exploration phase of the Production Sharing Contract (“PSC”) for offshore Malta Area 4 (Blocks 4, 5, 6, 7), by 18 months to January 18, 2013.
In addition, the Company is in advanced negotiations with a third party to farm out 75% of the working interest held by its wholly owned subsidiary, Phoenicia Energy Limited.
The key conditions agreed with the Maltese Government for extension of the PSC include: No change to existing level of minimum exploration expenditure (US$5 million) Commitment to acquire 1,000 sq km of 3D seismic by January 2012 A drilling penalty of US$5 million applicable to the working interest holders in the event a well is not drilled by the extension expiry date on 18th January 2013, unless there is a technical justification not to drill such a well Payment of extension bonus of US$300,000 in July 2011
Background to Malta PSC
On 18th July 2008, MOG entered into a PSC with the Maltese Government following an encouraging geological and geophysical assessment of the PSC Area undertaken by the Company and its consultants during the 36 month Exploration Study Agreement (ESA) phase. The PSC granted MOG the exclusive right to explore for and exploit oil and gas in a 5,700 sq km area which extends south from Maltese waters to the agreed and internationally recognised border with Libya.
The PSC is for a term of 30 years and is divided into exploration and production periods. The 6 year exploration period is divided into 3 stages with an initial 3 year stage in which the Contractor is obliged to drill a 2,500 metre well. Following the current stage the Contractor can extend the exploration phase for two additional exploration periods of 18 months each by undertaking a further one well commitment for each extension. Prior to execution of the extension to the PSC, the first exploration period was due to expire on 18th July 2011.
Malta is surrounded by large proven petroleum systems, in the offshore parts of Libya, Tunisia and Sicily. The studies performed by the Company established that the geology within the PSC Area has potential for petroleum systems related to the Tunisian and Libyan hydrocarbon plays and fields. These systems provide encouraging analogues for Area 4. Source, reservoir and seal rocks, similar in age and character to those developed in both Tunisia and Libya, are present in the PSC Area.
The PSC Area is covered by various vintages of 2D seismic data and by a 3D survey over the western part of the block 7. Since 2007, the Company acquired in the area 1,012 km of new 2D seismic, processed the newly acquired seismic, reprocessed in time and depth the existing 3D dataset and re-interpreted the entire 2D and 3D seismic data package available in the area.
Four prospects and five leads on the PSC Area have been confirmed and delineated. The new assessment of prospective resources and potential hydrocarbon volumes in place undertaken by the Company in 2010 substantially confirm the previous assessment undertaken for the Company by
RPS. The total un-risked hydrocarbon potential of the PSC Area is estimated to be around 5 billion barrels of oil in place with resultant total ‘most likely case’ un-risked prospective recoverable oil resources of about 1,500 MMbbls. The three most mature prospects are located in Block 7 along the ramp setting of the Melita – Medina Graben close to the Libya pelagic basin.
Source:Mediterranean Oil & Gas , June 2, 2011;