Though it is overshadowed by the petroleum wealth and activity of its Middle Eastern neighbours, the Mediterranean hosts several important hydrocarbon provinces.

The region’s under-explored hydrocarbon potential, combined with a ready network of executives specifically skilled in Mediterranean operations, which led to the establishment of MedOil as a private company in 1994.

The management team is led by chief executive David Thomas, a geologist with more than 30 years experience in the oil and gas business, mostly in North and West Africa.

Executive director Joseph McKniff – a friend of Thomas’ since the early 1980s – has almost 40 years petroleum exploration experience, including stints in Barcelona, the North Sea and crucially, in Tunisia. Non-executive chairman John Lander is a “highly experienced upstream oil company executive with a proven track record in adding value”, according to Thomas.

The company is focusing on a region where its directors have extensive expertise, Thomas said.

“We have to know the country in terms of petroleum geology, culture, and be comfortable in working there – we don’t have the time or the inclination to start at the bottom of the learning curve.”

The company had been working for some months on a potential near-term development project off the coast of Tunisia and a “blue sky” – high risk/high reward – permit on the Malta side of the Malta-Italy maritime border, before listing on AIM in January last year.

Thomas said the Mediterranean was ideally situated to deliver oil and gas into hungry European markets, but the region had experienced significantly less modern exploration than other leading areas.

“We are all aware of the decreasing gas reserves in the UK southern North Sea and the increasing dependency of Western Europe on imported Russian gas,” he said.

“We believe that there are significant amounts of gas yet to be discovered and exploited in the Mediterranean region that will help feed the insatiable European demand. Egypt is a very good example. Egypt has changed virtually overnight from an oil-based export economy to that of gas.”

MedOil has the 4100sq.km Louza permit offshore central Tunisia, next to the Isis oil field and 60km from the Miskar gas production facility. The company’s modest portfolio (for now) is completed by the 4000sq.km offshore Malta permit.

The Louza permit is home to the M’Sela oil discovery made by Union Texas in 1995, which flowed at a rate of 1200 barrels of oil per day from one reservoir and 118bopd from a deeper horizon.

Thomas said M’Sela could be producing at a rate of up to 30,000bopd in the near term “if all goes well”.

Thomas said the development cost of bringing M’Sela on stream would not break the bank thanks to location in relatively shallow water depths. MedOil will consider several development options, but the frontrunner at this point is a converted jack-up rig with a floating production storage vessel, with shuttle tankers taking the good quality sweet crude oil to the nearby European market.

The permit has four other prospects near the discovery well that are yet to be drilled, which MedOil’s technical consultant, Merlin Energy Resources, believes could be potentially developed as satellites.

According to the Merlin report, M’Sela-1 has contingent resources of 109 million barrels of recoverable oil and 499 million barrels of oil in place, based on a P50 (probable) confidence level. The remaining four prospects – M’Sela West-1, M’Sela West-2, M’Aila East and Outrata – have combined in place oil volumes of 1264MMbbl. Merlin estimates the proven reserves (P90) at M’Sela to be around 50MMbbl.

Thomas believes the permit was put to one side when Union Texas was taken over by ARCO – around the time the oil discovery was made – and ARCO was then taken over by BP.

“It fell between the cracks with management focused on the consequence of corporate change,” he said.

MedOil has started a 600sq.km 3D seismic acquisition program over M’Sela and the surrounding four prospects, which will “help identify the optimum location for an appraisal well on the M’Sela oil accumulation, and identify an exploration well location on each of the other prospects”. The seismic will cost MedOil about £2 million.

A £3.25 million capital raising in March has given MedOil the ability to fund the seismic work at Louza and continue new venture activities, as well as providing funds for general working capital.

Thomas said that the company had initially received several unsolicited approaches from major oil companies keen to study the technical information on the permit, and it has now opened a data room for companies to review the available technical data.

Thomas said a farm-in partner at Louza would ideally fund the imminent seismic program, allowing MedOil to pursue its regional growth strategy.

“A partner at Louza would free up the money currently allocated for the seismic work and be used for a new project.,” he said.

“However, we believe we have a valuable asset and farm-in terms have to reflect this. If we do not receive a reasonable offer, then we have the funds to do the seismic ourselves, and further enhance the value to the property.”

The company has identified, other high potential exploration areas in the Mediterranean, onshore and offshore, according to Thomas.

“The Louza permit is our proven oil, near-term appraisal/development project and Malta has our ‘blue sky’, way down the road, high risk/high reward permit,” he said.

“Malta needs a lot of work, including 2D seismic, to define a prospect, then 3D to define a location. Water depths are also deep. Work done to date has indicated that a recognisable fairway of oil discoveries and oil fields run from onshore Sicily into the offshore and into offshore Malta.”

The offshore Sicily Vega oil field has an estimated 1 billion barrels of oil in place and is just 20km to the north of the Maltese permits.

“We are currently in the process of negotiating work program terms to continue our Malta permit,” Thomas said.

Meanwhile, MedOil has applied for two permits adjacent to the Vega oil field offshore Sicily.

“We are very interested in a permit offshore Albania. We are very excited about this; there is more than one petroleum play, and we have already identified a number of structural leads. The oil and gas fairway extends into the offshore, and this is where we will concentrate our efforts,” Thomas said.

MedOil

…at a glance

HEAD OFFICE

117 Waterloo Rd

London SE1 8UL

Ph: +44 020 7921 0001

Fax: +44 020 7902 1133

Email: info@medOilplc.com

Web: www.medOilplc.com

DIRECTORS

John Lander, Joseph McKniff, David Thomas, Graham Wrafter

MARKET CAPITALISATION

£8.378 million (at press time)

MAJOR SHAREHOLDERS

Gerard Walsh 10.79%

David Thomas 8.48%

Joseph McKniff 8.48%

*Previously published in a different form in RESOURCESTOCKS