CAIRN ENERGY'S belief in the potential of making oil and gas finds off northern Malta has been endorsed by a firm that specialises in the Mediterranean region.
Mediterranean Oil & Gas said it had agreed with Edinburgh-based Cairn to join in the exploration of three blocks covering a big area off the tourist playground.
The Aim-listed firm is acquiring a 40% stake in an area of approximately 6000km2 containing a number of prospective leads, which Cairn has been gathering information on.
Cairn Energy signed an exploration study agreement (ESA) with the Government of Malta for the area concerned in December as part of chief executive Simon Thomson's strategy of building a balanced portfolio.
This combines potentially high impact exploration in areas where there has been little drilling activity, like Greenland, with lower risk activity in the North Sea.
The Mediterranean is one of the relatively under-explored regions that Cairn believes has the geological ingredients of success. Renowned for making bumper finds on unfancied territory in India, Cairn is also conducting early work off eastern Spain.
The frontier portfolio has been expanded in recent months to include acreage off Ireland, Senegal and Morocco.
The agreement with the Maltese authorities only required Cairn to complete the kind of early stage work that firms have to do before deciding whether it might be worth drilling a well in an area.
However, Mediterranean Oil & Gas's decision to farm into the area suggests Cairn's enthusiasm for the area covered by the licence is shared by a firm that has done more work than many off Malta.
Run by a geologist who held senior posts with Chevron, Bill Higgs, Mediterranean Oil & Gas hopes to drill a well off southern Malta this year.
The Haga Qim exploration well will target leads the company believes could hold 109 million barrels of oil equivalent.
The costs of the well will be paid by Genel Energy, the company run by former BP chief executive Tony Hayward, which bought a 75% stake in the relevant licence from Mediterranean Oil & Gas last year.
Mr Higgs said Mediterranean Oil and Gas was very pleased to expand its footprint off the shore of Malta.
He added: "We look forward to working with Cairn to evaluate the exploration potential of Area 3, which we believe could mirror the exploration opportunities demonstrated elsewhere in the Sicily Channel."
Mediterranean Oil & Gas has agreed to pay Cairn around $365,000 (£240,000) in respect of 40% of back costs incurred during the preparation of the ESA application and expenditure to date. It will pay Transunion $50,000 for that firm's right to enter the ESA and $150,000 consultancy fees.
A spokesman for Cairn Energy said: "The Mediterranean is one of our core areas and Malta falls into our longer-term planning for this region."
Cairn made a low-key announcement regarding the signing of the ESA in December. It said the agreement covers an initial two-year period with geological studies, reprocessing of existing and acquisition of new 2D seismic data and limited capital works, with the right to negotiate a production sharing contract on an exclusive basis thereafter. The agreement can be extended to a third year in order to acquire 3D seismic.
Mediterranean Oil & Gas also has a stake in a producing field offshore Italy.
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