The company is a subsidiary of the Canadian oil & gas company: Heritage Corporation with its head office in Calgary, Canada, and with European headquarters in Lugano Switzerland, and a technical services office in London. The company has operations in several parts of the world including Russia, Uganda, Iraq, Oman, Pakistan, Mali and the Democratic Republic of Congo.

The Minister for Resources and the Infrastructure, the Hon. Ninu Zammit as Minister responsible for oil exploration, signed the contract on behalf of the Maltese Government.

The offshore areas granted to Heritage are Areas 2 and 7, located to the south and south-east of the island. Both areas were previously held by the Norwegian company TGS Nopec, under an Exploration Study Agreement. The new contract with Heritage is a Production Sharing Contract and is for a term of 30 years.

The principal financial obligations of Heritage under the contract are: A signature bonus of US$ 2.0 million to be paid to the Government on signing of the contract; Expenditure of at least US$ 22.0 million in the first three years of the contract; Annual rentals on a rising scale payable to the Government starting at US$ 240,000 per year; Annual administration fee of US$ 100,000; Annual scholarship and training contributions of US$ 100,000.

The work programme for the first three years consists mainly of: A detailing seismic survey of the two areas awarded; From the date of signature, drilling at least one firm well within 3 years.

The term of the contract is divided into two. The first six years allocated for exploration and the rest for development and production, should oil and/or gas be discovered in commercial quantities.

If petroleum is discovered, the company is bound to produce it as efficiently as possible in line with good oilfield practice. Heritage would retain part of the petroleum produced to recover its costs; while the remaining part of production would be shared on a pre-agreed scale between the company and the government. On that part of profit petroleum allocated to the company as a reward for the risk taken, a 35% income tax is payable to the Government.

Should oil be discovered, the company would, after appraising such a discovery, prepare a Development Plan for Government’s approval. Such a Plan would consist mainly of: Technical and engineering plans for development; A detailed economic, social and environmental impact study; A study on Government’s needs to develop and improve its capacity to monitor, supervise and carry out development and production related activities.

An Advisory Committee is to be set up between the Government and the oil company to act as a forum to expedite the execution of exploration, development and production programmes. A budget is to be prepared by the company so that offshore installations, etc., would be dismantled and removed if these are no longer required for oil production, in order to ensure safety of navigation and to minimize damage to the environment. The contract also includes major environmental safeguards.

There are also provisions for reference to experts and an arbitration tribunal for dispute resolution. This being a Maltese contract, Maltese Law is applicable.