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What happened to gas pipeline?

At the turn of the millennium, Economic Services Minister Josef Bonnici announ­ced a present to the Maltese nation: a natural gas pipeline that would supply the power stations with cheap, clean energy. Recently, journalists asked Finance Minister Tonio Fenech about this project but he evaded the question.

Speaking on Dissett, Chris Ciantar, Resources Minister George Pullicino’s permanent secretary, even stated that he had never heard of it. Yet, a few days earlier, Fenech had published the report on the project on the Finance Ministry’s website.

Having been one of the team involved in this promising project, I am in a position to reveal how it came to an abrupt end.

In the late 1990s, the giant Italian energy company Eni was planning a natural gas pipeline from Libya to Italy, to be known as the Green Stream pipeline, which was eventually laid between 2003 and 2004. As the route passed through Maltese waters, Eni carried out negotiations with Bonnici and, as a result, Eni agreed to carry out at its expense a detailed feasibility study of a pipeline from the Green Stream end point at Gela to Malta. This was considered technically superior to tapping the Libya pipeline close to Malta.

We engineers at Enemalta welcomed the prospect, having had experience with coal, heavy fuel oil and gas oil. Natural gas was considered the ideal fuel but this also depended on the economics because the Government would hardly embark on such a project just to please the engineers.

A memorandum of understanding was signed and Eni and its subsidiary, SNAM, which manages Italy’s gas grid, proceeded with the study. The report can be seen on the website http://finance.gov.mt, as the Eni Gas Pipeline Report, parts 1 and 2. The report goes into a lot of detail on the route and the pipeline design and costs and is supplemented by a large amount of data not in the published reports.

The feasibility of the project was dependent on the conversion of both the Delimara and the Marsa power stations to natural gas and on the continuation of the plans to expand the plant at Delimara with further combined cycle gas turbines similar to that commissioned in 1998, with the intention of eventually closing down the Marsa power station. This, in turn, depended on the finding of the necessary finance, because Enemalta’s finances were precarious, though the projects would eventually pay for themselves through savings on fuel.

The gas pipeline would feed Delimara without the need of additional compression of the gas before injecting in the burners. A land pipeline would link Marsa with Delimara, part of it passing under Grand Harbour.

Having completed the study, Eni presented the Government with a financial proposal. Eni would construct and own the pipeline and no capital expenditure was required from the Malta side.

A gas supply contract for 25 years was proposed with a rate consisting of a fixed “capacity charge” to cover the investment charges and a “commodity charge” related to the quantity of gas delivered. A minimum amount of gas was specified in a “take or pay” clause, meaning that the gas pipeline was to be utilised to close to its maximum capacity.

The agreed prices were to escalate according to an agreed formula depending on international oil prices and inflation.

What was not specified was the actual price of the gas and this would result from negotiations between Malta and Eni. For this purpose, Enemalta engaged an independent energy economist to report on the expected price, taking into consideration recent inter­national contracts and the return on capital expenditure on similar projects. The results indicated that the project was favourable and that there would be a saving on the fuel costs once the system was converted to natural gas.

It was then that the project was left to lapse, for want of a decision to go ahead with the negotiations.

But how was such a favourable opportunity lost?

In the 2003 general election, Bonnici lost his seat and Austin Gatt became the minister responsible for Enemalta. He immediately made administrative changes in Enemalta, including a change in how fuel was procured. This resulted in the formation of a powerful lobby by the fuel oil importers who would stand to lose millions of euros if the power stations converted to gas. This lobby may have influenced the decision but I think the real reason lay elsewhere.

I think it was political jealousy. Gatt wanted to turn a new leaf and anything initiated by his predecessor was to be rejected. I do not believe he even considered reading the reports.

It was, in my opinion, the biggest mistake in his political career and the cause of much of the Gonzi Government’s present woes.

Gatt’s reforms led to nowhere and virtually all the top men he placed in Enemalta in place of the existing managers left within two years. One of them was a certain Konrad Mizzi.

Eventually Lawrence Gonzi transferred Enemalta to Fenech.

John Pace is a former manager generation at Enemalta

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