Oil drillers in legal spat while authority vets Tony Hayward’s energy firm

Leni Gas to sue oil explorer who sold off 10% stake to former BP chief and netted $10 million.

Malta's prospects for hydrocarbons are now the subject of a legal spat.
Malta's prospects for hydrocarbons are now the subject of a legal spat.

A legal battle is brewing between two oil exploration companies who acquired Maltese exploration blocks, after former BP chief Tony Hayward moved in to acquire a farmed-out block from Mediterranean Oil and Gas (MOG).

David Lenigas intends to sue MOG over a business venture in which he alleges he was misled, after his Leni Gas (LGO) sold its 10% stake in wells near Malta for a nominal $1 not long ago, wells in which Leni Gas was joint-venture partner with MOG.

MOG then sold most of these wells in a much more lucrative deal to Tony Hayward's Genel Energy, netting $10 million.

LGO said its directors, through lawyers Mishcon de Reya, said they had attempted to seek confirmation from MOG on the "the factual position underlying MOG's representations to LGO before the sale of the company's 10% working interest in Malta Area 4."

LGO expressed surprise that MOG had entered into farm-in agreements with Genel, which comes with a two-well commitment on the offshore Malta Area 4 production sharing agreement.

"Leni Gas would not have sold its interest for US$1 plus liabilities had it been aware of interest from Genel Energy or other potential farm-in partners. LGO considers that MOG's subsidiary PECL (Phoenicia Energy), as operator, was at all times under a duty to provide such information to LGO."

The Financial Times reports that for Genel, the deal with MOG is a bet that offshore Malta will prove as rich in hydrocarbons as nearby Libya. Tony Hayward knows Libya well, having spent months negotiating BP's famous $900m exploration deal with the Gaddafi regime in 2007.

In an interview last month, Hayward claimed Malta was an extension of Libya's Sirte basin, one of the world's great oil-producing areas. Malta's waters had "significant exploration potential", he said.

In comments to the Times, MOG said it is planning to drill for oil in Maltese waters within the next if the government gives it the green light - the second well to be dug in a decade.

The Malta Resources Authority has said it only informed "at the last minute" that former BP boss Tony Hayward had acquired 75% of its participating interest in Area 4 offshore Malta. A due diligence of Genel Energy is currently underway.

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 (PECL) 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.