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Exploration and production

Rights

Who holds the rights to oil and gas reserves in your jurisdiction?

The property rights in petroleum (including crude oil and natural gas) in its natural condition in strata, wheresoever existing in Malta, is vested in the government. The government has exclusive exploration and exploitation rights with respect to natural resources offshore.

Is there a distinction between surface and sub-surface rights?

There is no such distinction under Maltese law.

What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?

The prime minister has the power to grant:

  • authorisations to search, bore for and obtain oil and gas on, under or from any lands in Malta; and
  • petroleum mining concessions.

Under the Petroleum (Production) Act, only limited liability companies established in Malta and similar bodies corporate established outside Malta can apply for a production or exploration licence. Applications for exploration or production licences are usually submitted by interested parties following a public call for applications issued by the prime minister. However, the government has more recently adopted an open-door policy with respect to licence applications.

An application for such licence must be made in writing using the standard form attached to the relevant regulations and addressed directly to the prime minister. The application must be accompanied by the appropriate fee along with any information or evidence required by the regulations (eg, evidence of the applicant’s financial capability).

Licences are granted for a consideration (by way of royalty or otherwise) which is determined on a case-by-case basis by the prime minister, and over such areas, for such periods and on such other terms and conditions as are stipulated in the call for applications. The licence will also include terms and conditions relating to:

  • the rate of royalties to be paid;
  • the surface rents charged in respect of the area;
  • the division between government and licensee of profits derived from the sale or disposal of the petroleum; and
  • any other terms specified in the call for applications.

All exploration and production licences must incorporate the model clauses respectively set out in the Model Exploration Study Agreement and the Model Production Sharing Contract, copies of which may be obtained on request by any interested party from the Oil Exploration Department within the Office of the Prime Minister. These clauses regulate matters such as production sharing, cost recovery and taxation.

What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?

The grant of a licence is subject to the applicant satisfying various technical and financial criteria. It also depends on the applicant’s proposed methodology for the exploration or production of petroleum and the manner in which the applicant intends to perform such activities.

The law permits companies and similar corporate bodies, whether established within or outside Malta, to apply for such licences.

Joint ventures

Do any special legal provisions apply to joint ventures?

There are no specific legal provisions or requirements relating to joint ventures.

Third parties

Can exploration and production rights be transferred to third parties?

A licence holder may assign its rights and obligations to an affiliated entity and, on prior consent of the government, to third parties.

Fracking

Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?

No law expressly prohibits fracking in Malta.

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