MRA informed at ‘the last minute’ about former BP boss’ Malta oil deal

Malta Resources Authority officials were only informed "at the last minute" that former BP boss Tony Hayward had acquired 75% of its participating interest in Area 4 offshore Malta.

Hayward, who spent his entire career at BP until the Deepwater Horizon accident in the Gulf of Mexico which cost 11 lives in 2010, wiped tens of billions off the value of the business and brought his tenure at the helm of BP to an abrupt end, acquired the interest in the Production Sharing Contract held by Phoenicia Energy Company Limited - a wholly owned subsidiary of Mediterranean Oil & Gas Plc - through his new company, the London listed Genel Energy Plc.

According to a government spokesman, MRA was informed that Phoenicia Energy Company Limited were in the final stages of discussions with a reputable exploration and production company for the farm-out agreement.

"MRA was only informed of the company - Genel Energy Plc - a few minutes before the agreement was signed," the spokesman said, adding however that MRA still has to complete its due diligence before government approves the assignment.

"If the due diligence proves satisfactory, Phoenicia Energy Company Ltd may wish to have representatives of Genel Energy attend the next meeting with government," the spokesman said.

But while eyebrows were raised on Tony Hayward's interest in the Maltese oil exploration concession, the spokesman said that conditions safeguarding the environment and ensuring best industry practices are already imposed within the current sharing contract with Phoenicia Energy Company Limited.

Lenigas vs. MOG

The news of Hayward's acquisition hit the headlines across the globe last Thursday, as his Iraq-focused oil company also expanded into Morocco after building up its position in Kurdistan.

The deals add about 25,000 square kilometres of acreage to Genel's portfolio and follow a US$450 million deal to boost its position in the Miran gas field. The company still has about US$1 billion to spend on acquisitions.

But while government was still digesting the news and bracing for a barrage of questions from the media about Hayward's interest in Malta, Friday morning proved to be more exciting in London ahead of the August bank holiday, as traders' eyes were drawn to news of a spat between entrepreneur David Lenigas and Mediterranean Oil & Gas Plc.

Described by The Evening Standard as "a busy man with scores of directorships as well as his chairmanship of Africa-focused Lonrho," Lenigas is one of the larger-than- life characters in the penny share world.

His Leni Gas & Oil announced that it was seeking legal advice over the deal struck by Mediterranean Oil & Gas  Plc with Haywards Genel Energy in Malta.

Leni Gas said it was "surprised" by the deal, adding that it "is seeking immediate advice" from its litigation lawyers, Mishcon de Reya.

Leni used to be a 10% holder of the petroleum sharing contract which includes four contiguous licence blocks.

However, earlier this month MOG took over that stake, paying Leni just US$1 for the interest and assuming liability for the latter's residual costs of US$19,050 which are associated with a 3D seismic survey over the area last year.

On Thursday, however, Genel Energy took over three quarters of the licence for an initial payment of US$10 million. The Tony Hayward-led company will also take a 100% carry on the first and second exploration wells to be drilled, capped at US$30 million.

Phoenician Energy, the MOG subsidiary which actually holds the licence, will remain as operator until after the first well is drilled, after which Genel will have the option to assume operations.

Leni chief executive Neil Ritson said on 1 August that the company had decided to divest its interest in the PSC after carrying out its own technical assessment of the project which it considered to be non-core and non-strategic to its future operations.

"This divestment will allow us to avoid any further expenditure on Malta and to focus our management and cash resources on our core business of production growth in Trinidad," Ritson said at the time.

However, the London-based company has clearly been irked by the sudden sell-on to Genel and the relatively large amounts of cash involved compared to Leni's divestment gains.

"The board of [Leni] notes the contents of the [MOG] press release concerning their intended farm-out of the Area 4 PSC in Malta to Genel Energy," the company wrote in a brief bourse announcement on Friday, adding also that "a further release will be made in due course".

Leni Gas and Mediterranean, both advised by PR firm Pelham Bell Pottinger, refused to comment any further on the quarrel, leaving financial market watchers to speculate for themselves.

Meanwhile, Mediterranean's shares fell slightly, 0.5p to 13.6p, while Leni Gas also dropped 3.6%, or 0.02p, to 0.66p on Friday.

Howard's comeback

Tony Hayward's Malta deal comes hot on the heels of a deal with Tony Buckingham's Heritage Oil in Kurdistan this week - which incidentally also holds a licence from the Maltese government for offshore exploration - a matter which government said that it became aware of "through the media," but has no relevance to the Malta Production Sharing contracts.

Genel Energy Plc is a relatively small, but successful, Turkish-based exploration and production company with assets concentrated in the geologically exciting but politically sensitive Kurdish market.

Hayward bought the company with financier Nat Rothschild through their Vallares investment vehicle in 2011.

According to The Guardian, Genel Energy has also been run, by a colourful and controversial boss, identified as Mehmet Sepil - who was fined €1m for insider dealing by the UK's Financial Services Authority in 2009 - and partly owned by another Turkish businessman, Mehmet Emin Karamehmet, who is currently appealing against an 11-year jail sentence for embezzlement.

The Turkish businessman - who allegedly made close to €500,000 from the illegal dealings - told the London's FSA that he had made a mistake and had not intended to deceive anyone. His reputation has undoubtedly been tarnished, but Vallares's coterie of international investors - like Hayward - seems largely unmoved.

With lucrative contracts signed in Iraq, Genel is said to be in a prime position to exploit its advantageous position in the northern oil fields, Hayward has seemingly found the way to bounce back after his dark days at BP.

His interest in Malta does not come as a coincidence as he knows quite well what the oil potential may be around its waters.

During his time at BP, Hayward had been the man behind the deals reached with Libya's deposed Col. Muammar Gaddafi, and had access to sensitive geological and seismic data on the resources which lay beneath the Gulf of Sirte.

According to MOG, the 3D seismic data in Area 4 which Hayward has acquired has a potential of 200 to 300 million barrels of oil to exploit.

For Mediterranean Oil & Gas's chief executive Bill Higgs, the deal is a "welcome reward" for his hard work since he joined in January.

Higgs, who was at Chevron for 30 years and oversaw the construction of one of the largest man-made structures in the world, the BBLT oil well in Angola, was drafted after a tricky time at Mediterranean. The oil and gas firm was forced to refinance last year when an Italian offshore drilling ban led to near-disaster.

This ban is now set to be lifted as Italy's technocrat government led by Prime Minister Mario Monti seeks to revive his country's dire financial situation. The race for oil in the Mediterranean basin is on, and Malta is set to become one of the protagonists.