Why lay a gas pipeline to Gela, Sicily?

Some may ask: what is the point of spending millions to lay a gas pipeline to Italy other than to use it exclusively for electricity generation. Do we need this third source of energy when we can easily buy cheap electricity via the submarine cable or procure units from the Electrogas consortium? The answer is that the gas supply via a pipeline guarantees more flexibility/stability in prices and opens future opportunities that will enable us to become an export hub. Again, having a surplus power supply makes us more flexible and assures us that future increases in demand will not be a problem.

The ideal solution will be to start looking for investors to search for gas in our offshore waters emulating the success in Cyprus, Egypt, Libya, Tunisia and Algeria. Some may say this is a pipe dream unless we appoint experts (preferably no political appointees) in the National Oil Company which will be adequately funded.

Realists may assert that provided sufficient capital is invested in exploration this may in the near future improve our chances of striking oil. This will enable us to export our own hydrocarbons to Europe. Can our political leaders stop and reflect that we have no current exploration activity planned for the foreseeable future? This may be an unpalatable story since, notwithstanding the dearth of discoveries in both oil and gas in past decades, we have been repeatedly reminded by top geologists that the prospect for discoveries in the Malta continental shelf is bright and that we should not shy away from starting an intensive exploration programme.

Granted, this is a risky sector yet taking into consideration the current increase in oil prices, it is time for a renewed initiative by the government to swiftly resolve any delineation disputes with neighbouring countries as only thus can we expect to attract new investment. This administration recently appointed a CEO to run the National Oil Company. Let us hope we can afford to invest in the sector having been told by the finance minister that the economy ended last year with an annual surplus of around €460 million.

Rumours on the grapevine talk of steady progress in research and collection of past seismic studies by the National Oil Company. Who dares wins says the adage and we congratulate countries like Cyprus which try. They announced a second offshore discovery – this augurs well now that the price of oil is climbing and is in the mid-seventies dollar range per barrel. Can we start in earnest to make up for lost time?

It is no state secret that Enemalta has, since time immemorial, been buying heavy fuel oil and gas oil for power generation. A change of government in 2013 saw new alternatives in fuel mix put in motion. Adding gas to its fuel mix, Electrogas (a privately owned electricity consortium) aims to meet future demand by operating its new generating equipment to run on gas – thus satisfying cleaner environmental criteria. There is no forgetting that in the past Malta had expensive tariffs and ever since, the Chamber of Commerce has continuously urged 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 we might need further storage in the Has Saptan underground terminal. Realistically speaking, Central Europe will always be energy dependent on external sources so in the light of this, the importation of gas depends heavily on Gazprom – the Russian state monopoly. This may be a short-term position since countries in the Levant such as Cyprus, Egypt, Lebanon and Israel are in discussion on how to best monetize their gas deposits and evaluate different options to service future customers. It is not surprising that Malta is finally waking up to the realisation that it pays if its infrastructure is linked 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. The greatest benefit in connectivity is represented by the offshore pipeline link and this will reach its zenith if Malta discovers its own offshore gas reserves. Environmentalists may complain that laying of such a gas pipeline will endanger the Mediterranean seabed morphology, face engineering limitations, maritime boundaries and upset seafaring activities. However, the government announced last summer that a tender was issued to enable the feasibility study for laying a gas pipe which, when and if completed, will link us to the European gas market. The engineering firm winning this tender 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. Additionally, the said firm will also be required to satisfy the Italian authorities and to initiate the pre-application permission process in both Malta and Italy. It goes without saying that 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 undertaken during the second phase of the project.

It is good to reflect that 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 among 195 projects for Europe’s energy and climate objectives as part of its EU’s Energy Union. It is strange that in the past the government and Enemalta officials adopted an ostrich attitude and resisted the offer to change from oil to LNG. The in- flexible policy adopted by directors of Enemalta to stick exclusively to importation of oil and face the problems of emissions amid the vagaries of oil price is an enigma when one considers how more efficient gas is. It is a pity that in the past our industry had lost its competitive edge due to having the highest utility rates in Europe.

The change in policy did not come a moment too soon. Thus, the switch in government policy resulted in a drive to jettison the Byzantine energy system. 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) finished laying a submarine gas pipe linking Libya to Italy in the Greenstream project. This 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 three sources: the Bahr Essalam offshore field, Bouri Field and Wafa field near the Algerian border. In 1999, that the Italian energy giant Eni wanted to pass a free branch from this pipe through Malta offshore waters but as negotiations with the government failed, ENI re-routed it. Malta lost its golden chance for a link to the Greenstream pipeline. This project had cost €7 billion. With a sense of déjà vu, we rejoice, a decade too late, that the EU will help us fund a project to lay a gas pipeline to Gela.