Oil Companies Eyeing the Mediterranean Region

on Sep 5, 2012
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The global oil industry is eyeing the Mediterranean region, following a series of huge natural gas finds in the Levantine basin, The Financial Times has reported. The interest in the area has also been piqued by the Arab Spring which has profoundly affected the oil and gas industry in North African countries. The FT also notes that interest in the region can additionally be explained by Italy’s partial relaxation of a ban on offshore oil and gas drilling introduced in the wake of the 2010 Deepwater Horizon oil spill disaster.

The impact of these events has suddenly placed tiny Malta on the global oil industry map. Last month, Ankara-based Genel Energy (LON:GENL) bought a 75 percent stake in exploration blocks off the Maltese coast from AIM-quoted explorer Mediterranean Oil & Gas (LON:MOG). The FT reported that for Genel the deal represents a bet that offshore Malta will prove as rich in hydrocarbons as nearby Libya. According to Genel CEO Tony Hayward, Malta is actually an extension of Libya’s Sirte basin, which is one of the region’s richest oil-producing areas. Hayward believes that Malta’s territorial waters have “significant exploration potential”.

!m[](/uploads/story/320/thumbs/pic1_inline.png)And while Malta remains a frontier play, other countries like Cyprus are already established exploration locales. Cyprus’s second licensing round this year attracted bids from 15 companies for nine offshore blocks, including energy industry giants like France’s Total SA (LON:TTA) and smaller explorers such as the British Cairn Energy (LON:CNE). By contrast, the country’s first licensing round in 2007 was barely noted by the industry, resulting in just one licence being issued, to the US explorer Noble Energy (NYSE:NBL).

In other Mediterranean states, prospects have also perked up. After easing its ban on oil drilling in coastal waters last month, Italy has become another sought-after oil exploration spot. While the restrictions remain for new projects, ventures up and running before the Gulf of Mexico oil spill can now get back into gear. In consequence, AIM-quoted explorer Petroceltic (LON:PCI) has announced that the company will resume drilling next year, after receiving the necessary environmental permits. Spain is also attracting an increased interest from the global oil industry with a case in point being Cairn Energy’s announcement of plans to drill in the Valencia Basin off the eastern Spanish coast in 2014. The British prospector will also submit bids in an offshore licensing round in Lebanon next year.

Notwithstanding the increased interest in the gas-rich Mediterranean, the FT opines that exploring in the region “is not a walk in the park”, with companies venturing into Mediterranean waters needing to consider regional rivalries. Turkey, for example, has repeatedly told oil explorers to stay away from Greek Cypriot waters while, last year, Italy protested Malta’s launch of a tender for oil and gas exploration covering parts of the Ionian Sea claimed by Rome. Malta itself is in dispute with Libya over offshore areas further to the south. Not to be outdone, Israel and Lebanon have sparred over Leviathan, which is close to the disputed line separating their territorial waters. Hezbollah, the radical Shia group calling the shots in Lebanon, has even accused Israel of stealing Lebanese gas.

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