Do we need a national oil company?
as it has no indigenous fossil fuel sources, so electricity generation is wholly dependent on imported fuels. Furthermore, there is ever-increasing demand for energy and running Delimara power station with a dismal low efficiency rate of production (except for the BWSC plant) had forced the previous administration to charge high utility rates.
The change in government in 2013, saw new alternatives put in motion. Adding gas to its fuel mix, Enemalta (the majority owned State electricity company) aims to meet its future demand while satisfying environmental goals at lower costs. It was a smart move to combine an electricity interconnector link with Italy and concurrently build a new gas-fired power plant with a Liquefied Natural Gas facility (LNG) added later. And this apart from the drive to convert the controversial BWSC power plant to run on natural gas once the new LNG facilities are built. The government hopes that when the project is ready the combined system would see substantial savings. The Chamber of Commerce continuously urges the government to offer cheaper rates to industry.
Back on the subject of a gas pipeline, talks to apply for funding started in late 2012 and it is anticipated that when this is commissioned it will connect the Delimara power station to Gela in Sicily. A degasification plant is necessary in Delimara, as this facilitates the unloading of LNG tankers and will improve future prospects for cross border trading and possibly further storage required in Has Saptan underground terminal.
Last year, Prime Minister Joseph Muscat led a delegation to Algeria as the country has the 10th largest gas reserves in the world and is only currently using less than half of its gasline capacity. Realistically speaking, Central Europe will always be dependent on external sources so in the light of this, the importation of gas depends heavily on Gazprom – the Russian state monopoly. Countries in the Levant such as Cyprus, Egypt, Lebanon and Israel are in discussions on how best to monetize their gas deposits and evaluate different options on how to service future customers.
It is not surprising that Malta is finally awakening to the realisation that it pays if in the near future it connects to the TransEuropean Natural Gas Network via Gela, Sicily. This is a smart move as this pipeline will provide alternative routes for the Sicilian onshore section, routes for an offshore pipeline section, and finally Maltese onshore pipeline routes. Obviously, the greatest challenges are presented by the offshore pipeline section and this will reach its nadir if Malta discovers its own offshore gas reserves. Environmentalists may complain that laying such a gas pipeline will endanger the Mediterranean seabed morphology, face engineering limitations, maritime boundaries and upset seafaring activities. However, the government announced this summer that a tender was issued for feasibility study for laying a gas pipe which, when and if completed, will link us to the European gas market.
The engineering firm that wins it will be required to identify the best 1.2km wide route through a detailed study including conceptual design of the pipeline and land-based infrastructure; identify the connection points, onshore routes and sites for the terminal stations in both Gela and Delimara. The firm will also be required to satisfy the Italian authorities and to initiate the pre-application permission process in both Malta and Italy. Additionally, in the near future, there is the possibility to export gas to Italy sourced from a floating storage and regasification unit (FRSU) ideally located in a purpose-built breakwater and offshore terminal. This could potentially be considered as a second phase of the project.
Last year, the pipeline study was favourably considered by the European Commission and was awarded a maximum grant of €400,000. Media reports show that Malta has retained its PCI status concerning projects of common interest – selected from among 195 projects for Europe’s energy and climate objectives as part of its EU’s Energy Union. It is strange, how in the past, the government and Enemalta took the ostrich attitude when it persisted in limiting its electricity generation options. The rigid policy adopted by directors of EneMalta to stick exclusively to importation of oil and face the problems of emissions amid the vagaries of oil prices is an enigma when one considers how more efficient the current plan which takes into consideration a number of options where to source electricity supply.
It is a pity that in the past our competitive edge suffered a disadvantage with industry having to pay the highest tariffs in Europe. Thus, the change in government policy to reform a Byzantine energy policy came not a moment too soon. Cynics may say it is sour grapes to remind ourselves of how a golden opportunity was lost in 2004 when ENI (the Italian State oil company) offered us a free link to the Greenstream pipeline .This active gas pipeline is 540 kilometres long and runs from Mellitah in Libya to Gela, in Sicily. It is located in water depths exceeding 1,100 metres and it is supplied from the Bahr Essalam offshore field, Bouri Field and Wafa field near the Algerian border. In 1999, the Italian energy giant Eni wanted to pass a gas pipeline from Libya to Sicily through Malta offshore waters but after discussions with the government they re-routed their pipe for undisclosed reasons.
The Libya to Italy pipeline had cost €7 billion but to be fair one must admit that this oncein-a-lifetime opportunity of gas supply would not have benefitted EneMalta in 2004, as this would have meant decommissioning the ageing (oil fired) Delimara plant and replace it, at a heavy cost, by modern gas turbines. Now, just over a decade later, we are pleased the EU will fund the project for laying a gas pipeline to Gela.
email@example.com The writer is a partner in PKF an audit and business advisory firm