Gasco: Truth versus fiction

Charles Buhagiar has written about the Enemalta/Gasco Energy Ltd deal for LPG apparently as the official spokesman for his party.

In his parliamentary intervention, the Opposition Leader, Joseph Muscat, made it clear that the opposition has nothing against the private investors. Mr Buhagiar's article, however, contradicted this as it is loaded with direct and indirect darts aimed also at Gasco, particularly where Mr Buhagiar asserts that Gasco has been a party to a non-transparent transaction, a very grave assertion indeed.

Beyond this, Mr Buhagiar refers to the Labour government of 1996/98 but he has clearly no clue that the Labour government actually opened the door to Multigas to submit a proposal to take over this activity from Enemalta. This was done through John Cassar White (Mimcol) and Martin Bonello Cole (chairman, Enemalta).

The general idea was to start off with a joint venture. This seed idea took root and was subsequently continued by the Nationalist government elected in 1998. Previous minutes of the Enemalta board meetings refer to a "joint venture with Multigas".

Discussions took time and, following the election in 2003 and a change of minister, it was decided that LPG should be put to public tender, which resulted in the issue of a Request for Proposals in 2006. This led to Gasco winning the resultant public bidding.

Mr Buhagiar refers to the "aircraft hazard" of the Bengħajsa site and says that Enemalta took over the site on April 23, 2004. He leaves out that it was a lease for 65 years at a rent of only €58,234 per annum while Gasco has a sub-emphyteusis, not lease, for 33 years at €116,468 a year, rising 15 per cent every fifth year.

Mr Buhagiar is unaware that the chances of some plant blow-out that could affect a passing aircraft, in the relevant safety report before the Labour Government of 1996 was put at as once in 10,000 years. The authorities concerned felt they could live easily with this risk factor.

But, Mr Buhagiar never pits this ultra-remote risk versus the very real hazards that the Qajjenza plant has posed for all those years to this very day to the private dwellings that have been allowed to exist next to it.

Mr Buhagiar has never come across the Seveso Directives that today are a major part of Malta's safety laws and thank God for these directives, say the Qajjenza and other residents.

Mr Buhagiar argues that "we (taxpayers) pay for their mistakes". May I remind him that the investment of €25 million will be paid out of private funds. This will result in a safe and secure environment for residents and security of supply at the best possible prices for the island.

Mr Buhagiar states that Gasco plant would be obsolete after 33 (in fact 30) years due to technology changes. He forgets to state that specific clauses exist in the contracts which regulate the capital expenditure needed to maintain the plant's technological status towards the end of the lease term.

Mr Buhagiar's gravest allegation is that a non-transparent award to Gasco took place. This smears all parties on the government side and those on Gasco's side. It smears all those who have followed relevant EU rules throughout all the adjudication process. He has to substantiate his slur of non-transparency, not just sling it like the proverbial mud.

The competitive tender was won following a very clear request for proposals (RFP), which contained all the relevant policy decisions, aims and considerations.

Private monopoly: This is inverting the facts. Gasco had to come in with a project, as per the RFP, that would guarantee the national supplies at stable prices. This protects the consumer.

Beyond this Mr Buhagiar should read the new LPG market regulations published several weeks ago by that (according to him) resourceless MRA and he will find out that others can come into the market even by just setting up a minuscule storage unit of 50 tons (two road tankers at most) and import LPG directly.

Through the RFP, Gasco had to set up a storage of 4,800 tons to guarantee national safety stocks. Anyone can also set up to handle segments of the market and to deliver cylinders or bulk.

The assault on MRA is also incorrect; they have come up with all the petroleum (gas included) market regulations and licence conditions and will shortly bring out a large number of gas codes of practice. We found professional responses from them.

Gasco to operate Qajjenza: Mr Buhagiar has this all wrong too. Qajjenza will remain in Enemalta's control. Gasco will never be involved in Qajjenza. It will operate its own new plant at Bengħajsa once it is built. It has no contract to operate Qajjenza at all.

The three-year contract Mr Buhagiar refers to is something extremely different. It is a three-year supply and refilling agreement till Gasco's plant is operational. This includes the payment to Gasco for various services and obligations undertaken on behalf of Enemalta, which have nothing to do with using or operating Qajjenza.

It includes such services as the retesting of a very large number of cylinders on behalf of Enemalta, which Enemalta are obliged to test and such tests would be done by other companies at a charge. Gasco undertook to do this service at an agreed charge.

Gasco also has to dismantle the Qajjenza plant entirely at its own expense, another convenient omission by Mr Buhagiar.

Servitude payments: The servitude of €20,000 payable to Freeport was paid €10,000 each by Enemalta and Gasco, not only by Enemalta. This is based on the fact that both parties have half of the 65-year lease each.

The other servitude of €950 was paid by Enemalta to the Land Department for underground use, via pipeline, of a strip of a tiny roadway that links the Oil Tanking and Gasco sites. No payment was made to Enemalta.

Goodwill payment: Mr Buhagiar states that a sum of €743,976 has been paid to Enemalta by Gasco as goodwill. Wrongly he also deducts from this sum an amount he attributes to the cost of the carousel. Where did Mr Buhagiar locate this amount of €743,976 for goodwill when goodwill is included with another seven items for which eight items a sum of €4,516,655 was paid to Enemalta by Gasco, an amount never mentioned by Mr Buhagiar?

Contrary to what Mr Buhagiar states, the cost of the carousel, less standard depreciation, will be paid for by Gasco to Enemalta once Qajjenza shuts down and the carousel is transferred to Bengħajsa as planned.

Finally, Mr Buhagiar failed to mention the following positive benefits of this new investment, namely:

• the introduction of autogas as an alternative to petrol and diesel;

• the introduction of LPG as a fuel for air-conditioning;

• LPG in industrial processes;

• heating by gas;

• local pipe networks using metered gas and eliminating cylinders, also resulting in safe usage in various outlets;

• dismantling and clean-up of Qajjenza and purchase from Enemalta by Gasco of any serviceable items, such as the carousel, at Qajjenza;

• takeover of all personnel subject to their agreement to join Gasco.

I expect that articles such as Mr Buhagiar's, especially since he is an opposition spokesman, to be more seriously written. Because of his gross incorrect assertions, his article cannot be taken seriously.

Mr Mallia is director, Gasco Energy Ltd.