An Algerian energy company in 2004 offered Enemalta a natural gas solution that mirrors Labour’s electoral proposal, including a 10-year contract, The Times has learnt.
Enemalta was also told that the option could offer “cost and other advantages” over pipeline deliveries of natural gas.
It is not known why the recommendation was not pursued.
The information emerges from a report by energy economist John Gault, who was tasked with analysing various options to switch to gas, including a proposal by Italian company Eni to build a gas pipeline to Gela in Sicily.
The report was commissioned in February 2004, when Austin Gatt was minister responsible for Enemalta and Tancred Tabone was the corporation’s chairman.
Dr Gatt last week denied claims by former Enemalta manager John Pace that he was responsible for the shelving of Eni’s gas pipeline proposal, saying: “When I became minister, the decision had basically already been taken. Formally, it could have been taken under my jurisdiction but everything was already concluded.”
But the report indicates that the Government and Enemalta were still in “negotiations” with Eni in 2004. The study by Mr Gault was commissioned to help them decide on a way forward.
The report went a step further and advised Enemalta to prioritise the LNG option that would include a terminal, as is being proposed by Labour.
“Enemalta should seriously consider pursuing the LNG option at least to the extent of exploring the costs of LNG from potential sources, such as Sonatrach,” was the first conclusion of the Gault report.
Sonatrach is an Algerian oil and gas company that offered Malta a solution similar to what is being suggested by the Labour Party, according to details included in the report.
“Sonatrach would be willing to sell Enemalta LNG and to co-invest in an LNG receiving, storage and regasification terminal in Malta as well as in the conversion of Enemalta’s power plants, in return for a take-or-pay contract for delivery of LNG,” says the report, which can be downloaded from the Finance Ministry’s website.
“The terms of this contract could be as little as 10 years. Preliminary calculations indicate LNG may offer Enemalta both cost and other advantages over pipeline deliveries of natural gas,” it adds.
Mr Gault was not tasked with studying the LNG option but this emerged after an enquiry was made with Sonatrach about the possibility of investing in a gas pipeline, which the company turned down.
“During our discussions with Sonatrach concerning pipeline natural gas, we learned that Sonatrach would be willing to sell LNG to Enemalta for a price in the range of $2.10 to $3.20 ‘or a little bit less’ per million btu (British Thermal Unit),” writes Mr Gault.
He adds that the transportation costs could be as low as $0.20 per million btu depending on the size of the vessel used and the possibility of scheduling deliveries so no vessel need be dedicated exclusively to the Algeria-Malta route.
The cost of reception, storage and regasification was “roughly estimated” at $0.40 per million btu.
In all, the total cost was valued at $3.80 per million btu, compared to the Gela pipeline option estimated at $4.15.
In its conclusion, the report first advises Enemalta to “seriously consider pursuing the LNG option” and explore the costs of LNG from potential sources like Sonatrach.
“Others who should be contacted include BP, BG, Gaz de France (all of whom will soon have access to LNG from Egypt), Shell (with LNG from Nigeria and perhaps one day from Libya) and Qatar. Each should be asked to make a preliminary offer on a common basis, including co-investment in the receiving, storage and regasification terminal as well as the conversion of Enemalta’s power plants.”
It then adds that if LNG was not entirely satisfactory, Enemalta should opt for the pipeline option but preserve a right to purchase at least some gas directly from third party suppliers.
On Wednesday, The Times reported on another study, conducted by global firm Lahmeyer International in 2008 for the Malta Resources Authority, which evaluated a gas terminal similar to the one Labour is proposing.
It came up with almost identical solutions to the ones proposed by Labour and priced the project at €102 million in 2008 (Labour is forecasting €142 million) although it also estimated that it would take four years to deliver, as opposed to Labour’s two.
Questioned about the Gault report, Dr Gatt first pointed out that he was having to reply from memory on something that happened nine years ago and then explained that this was one of many reports that ultimately led to the decision to opt for an interconnector as the first priority.
“The Gault report was one in a series of reports where, at various times between 2003 and 2011, decision-makers from Enemalta, Malta Resources Authority and Government studied the ultimate aim of going for gas. It is easy to set the target – the difficult part is the when, how and how much,” he said.
“It was never one report or two: it was always keeping clear the ultimate aim but also dealing with financial realities. Specifically – as Enemalta explained publicly in detail – Eni never made a formal proposal in 2003 and actually wrote that, at the time, gas would not provide a cheaper solution.”
Dr Gatt said the first report, the SNAM report, came about in 1986 and had been completely ignored by Labour.
“All subsequent reports showed that the electricity interconnector was actually a better alternative to gas and you understand why the first step is the interconnector and not gas.”
He said the second step was the gas pipeline but that only became viable because of EU subsidies and the recent reality of a trans-European gas distribution system.
“The very same Gault report says how difficult it was at the time (2004) to source natural gas,” he added.