Updated | Castille requests clarifications from Heritage Oil on Libyan 'cease and desist'
Castille has contacted Heritage Oil Corporation for clarifications regarding a ‘cease and desist’ letter the oil exploration company received from the Libyan government in 2008.
The request comes hot on the heels of MaltaToday’s publication of stern correspondence issued by the Great Socialist People’s Libyan Arab Jamahiriya to the oil exploration company in 2008 warning it not to conduct operations in a maritime area which Libya claims as part of its own continental shelf.
The claim directly threatens Malta’s own declared maritime territorial integrity, evidenced by the fact that the Government had only just ‘ceded’ oil exploration rights over the same disputed territory in question.
The correspondence - dated on March 2008, a week before the general election, and only three months after Maltasigned its contract with Heritage Oil - reveals the reason behind the apparent slowdown in offshore oil exploration, following the Government’s announcement of a contract with Heritage Oil Corporation in 2007.
Libya’s unequivocal threat was made in a letter addressed to Mr Anthony Buckingham, Chief Executive Officer of Heritage, and signed by Dr Shakri Mohamed Ghanem of the Jamahiriya’s Foreign Ministry, on 3 March 2008.
MaltaToday is also informed that multinational oil exploration companies, such as Heritage Oil, are still bewildered by attempts by the Maltese Government to give the impression that there is no on-going dispute with the Libyan government.
This attitude, sources said, has led to widespread scepticism among multinational oil exploration companies that the Maltese Government is not giving an accurate picture of its oil exploration rights in the area in question.
This letter to Oil Heritage Corporation is being made public here for the first time in 32 months. The full text is as follows:
“Dear Sir – with reference to the press release announcing the conclusion of the Production Sharing Contract between your company and the Maltese Government to acquire an offshore Exploration Area to the south east of Malta, referred to by Malta as Area (7), the National Oil Corporation would like to draw your kind attention to the fact that the area which you have been awarded to carry out your petroleum activities lies within the Libyan continental shelf. Block NC 146 of that area, which is under contact with Sirte Gulf Oil Company.
“We believe that the activities to be carried out by your affiliated company Heritage Oil international Malta Ltd and/or any partners or affiliates under the contract referred to above, shall constitute a violation of the sovereign rights of the Great Socialist People’s Libyan Arab Jamahirya and we hereby demand that you immediately refrain from any activities in the above specified area…”
“We hold you responsible under Libyan and international law for any activities you may conduct in that area and we reserve all rights to act both de facto and de jure to protect our interest in the Great Socialist People’s Libyan Arab Jamahiriya territories.”
Who owns Area 7?
The specified ‘Area 7’ covers 8,778 square kilometres to the south-east of Malta, and is one of two areas for which Malta awarded Heritage Oil an exploration and production licence in 2007.The contract was signed by former Minister for Resources and the Infrastructure, Ninu Zammit.
The principal financial obligations of this contract for Heritage are:
- A signature bonus of US$2 million to be paid to the Government on signing of the contract;
- Expenditure of at least US$ 22.0 million in the first three years of the contract;
- Annual rentals on a rising scale payable to the Government starting at US$ 240,000 per year;
- Annual administration fee of US$ 100,000, and ;
- Annual scholarship and training contributions of US$ 100,000.
The work programme for the first three years consists mainly of:
- A detailing seismic survey of the two areas awarded;
- From the date of signature, drilling at least one firm well within three years years.
Regarding the work programme, one aspect – the seismic survey – was duly carried out, and ascertained that Area 7 offers “a variety of prospects in Lower Eocene and Cretaceous carbonates, that are recognised to be major hydrocarbon producing plays in the central part of the Mediterranean.”
The Heritage survey also specified that “the licenses are under-explored, having only one well drilled in 1980 to a depth of 1,225 metres, which failed to reach the target horizons that are located at depths of 1,500 to 4,000 metres, and in water depths of only 200 to 400 metres.”
However, the second part of the work programme – i.e., that at least one firm well would be drilled by 2011 – appears to have stalled, and the deadline for its implementation has only just expired.
Progress on this aspect had been openly questioned in Parliament by Labour whip Joe Mizzi in November 2008 – a full seven months after receipt of the letter from Libya’s foreign ministry – but in its reply to Mizzi’s statement, the Oil Exploration Department claimed only that “the Government is doing every effort to promote and sustain exploration activity in offshore Malta, so much so that the drilling of two offshore wells is planned by 2011.”
No mention was ever made of the fact that one of the two areas ceded to Heritage under contract by the government of Malta in 2008, is the subject of an ongoing territorial dispute with Libya.