Government awards oil company offshore exploration study agreement

Three offshore blocks totalling 6,400 square kilometres were awarded by the Government of Malta to the oil company Capricorn Malta Limited to conduct a study and to acquire additional data and assess the exploration potential of the acreage under an Exploration Study Agreement.

The company is a subsidiary of Cairn Energy plc, a company listed on the London Stock Exchange having its head office in Edinburgh, United Kingdom, and operations in North West Europe, North Atlantic, Mediterranean and South Asia.

Resources Miniser George Pullicino signed the contract on behalf of the Maltese Government. The offshore areas granted are Blocks 1, 2, and 3 of Area 3, located north of Malta. The term of the Exploration Study Agreement is of 2 years and the principal financial obligations of the company are:

(i) A signature bonus of US$ 100,000 to be paid to the Government within 15 days of signing of the contract;

(ii) Expenditure of at least US$ 2.5 million on exploration operations within the term of the agreement;

(iii) Annual rentals payable to Government of US$ 192,000 per year;

(iv) Annual administration fee of US$ 100,000;

(v) Annual contributions for education and equipment of US$ 75,000.

The work programme consists mainly of the reprocessing of existing 2D seismic data, the acquisition and processing of a minimum of 1,500 km of new 2D seismic data and the carrying out of technical studies consisting of the integration and interpretation of the existing and reprocessed data together with the newly acquired seismic data with appropriate well data and the mapping of key horizons over the area covered by the available seismic data.

The agreement may also at the option of Capricorn Malta Limited be extended for an additional period of 12 months if Capricorn Malta Limited undertakes to carry out an additional annual work programme comprising of acquiring 3D seismic.

At any time during the term of the Exploration Study Agreement, Capricorn Malta Limited has the option to notify Government to enter into a Production Sharing Agreement for any part of the acreage covered by the Exploration Study Agreement. The terms of this agreement will need to be negotiated at the time between Government and Capricorn Malta Limited.

Technical meetings will be held between the Government and the oil company in order to review and discuss the interim results of the exploration study.