A three-day international conference is starting this week to discuss how neighbouring countries in the Mediterranean are planning to finance new joint ventures to improve the energy problems concerning oil and gas industry. This is the first time that such an event is taking place in Malta and the organisers are proud to have invited speakers from Adriatic, Balkan, Eastern Europe and North African with vast offshore exploration experience. Speakers include the director general in our Continental Shelf department, the Head of ministry of Turkish Energy and Natural resources, PKF, MedServ, representatives from respective ministries from Croatia, Egypt, Cyprus, Italy, Azerbaijan, Algeria, Bulgaria, Middle East and Africa.
Naturally, the most interesting topic is the future of offshore operations, given that the industry is currently facing a glut of oil with record low prices. Another topic which will feature strongly is the pursuit of best practices for the development and operation of LNG distribution and related bunkering facilities in the Mediterranean. Readers may ask: what is the relevance of such a specialist conference to Malta, when we have no current exploration activity planned for the foreseeable future? This may be an extreme view, and despite the lack of discoveries in both oil and gas since the start of exploration during past decades, we have been repeatedly reminded by top geologists that the prospect for discoveries is bright and that we should we restart an intensive exploration program.
Granted, this is a risky sector and after taking into consideration the current low oil prices, it requires a renewed initiative by government to swiftly resolve any delineation disputes with neighboring countries on our Continental Shelf as only thus can we expect to attract new investment. Historically, Malta has used heavy fuel oil and gasoil for power generation and as it has no indigenous fossil fuel sources, Malta is wholly dependent on imported fuels, making its economy vulnerable to international fluctuations in fuel prices. Furthermore, there is ever-increasing demand for energy and with a decaying power infrastructure, new alternatives are badly needed but a solution is in sight. Adding gas to its fuel mix, Enemalta (the state owned electricity generation company) aims to meet both its current and future demand while satisfying environmental goals at lower costs.
Jointly combining an interconnector and a gas powered system, total system cost would see substantial savings. Local speakers at the Euro Med will discuss the current policy for power generation and it is encouraging to note that progress has been achieved such as the recommissioning of old power stations running with HFO and the gradual replacement of oil with gas to run the turbines of a new power station under construction. Other policies which merit consideration during the Summit is how Malta can attract foreign investors to build adequate fuel storage requirements so as to facilitate transshipment and of course make up for times when pipeline gas is unavailable. Making use of liquid fuels for local power generation imply higher storage requirements some of which can with some effort be built on reclaimed land.
Another milestone was the laying of a subsea electricity cable with mainland Italy, which will improve the supply and lower the cost of electricity. The government is actively studying the feasibility of laying a gas pipe linking the island to Europe which when and if completed will link us to the gas market and offer potential for starting a hub concept to activate future trade in this commodity. Talks of such a pipeline were held way back in late 2012 and it is anticipated that such a pipeline would connect the Delimara power station to Gela in Sicily. A degasification plant is planned to be built in Delimara as this facilitates the unloading of LNG tankers and on its own will improve prospects for future cross border trading and possibly storage of this important fuel.
Notable speakers at the Euro Med conference will also tackle and give their opinion on how other major gas producers are reaching their customers in Central Europe. To start with, Russia is a leading producer with Gazprom supplies – around 32.6% of total oil and 38.7% of total natural gas for Europe – with several East-European countries depending 100% on their energy supplies from the Russian Federation. For instance, Russian production will seek to double in size its Nord Stream pipeline, which goes through the Baltic Sea in through Germany. This ambitious plan shows that Gazprom is confident of its long-term relationships with the European markets, however, the EU might have different plans, seeking to consolidate Europe as an Energy Union, while looking to diversify its chain of suppliers.
It is remarkable how France, Spain and Portugal are in talks with Algeria over the possibility of increasing Algerian-provided natural gas through the Maghreb-Europe and Medgaz pipelines following a meeting in Algiers this year. Algeria has the tenth largest gas reserves in the world and is only currently using less than half of its gas-line capacity to Europe and the Euro Med focus group will make proposals on how best to facilitate the increase in exports to the EU. The security of supply depends on the degree of cutting-edge technologies used and of course, countries from which sources are imported. Realistically speaking, Central Europe will always be dependent on external sources and countries, so in the light of this, importing gas would always lead to reliance on a particular country since import arrangements in this field are generally of a long-term basis. By comparison, oil is more widely tradable and can be sourced from different countries, without the need for long term contracting. Countries in the Levant (such as Cyprus, Lebanon, Israel) are in discussion how best to monetise their gas deposits and evaluate the different options how to best to service future customers.
It is not surprising that Malta is seeking to connect itself to the Trans-European Natural Gas Network via a pipeline connecting Dellimara to Gela, Sicily with the prospects that this pipeline will provide alternative routes for the Sicilian onshore section, routes for an offshore pipeline section and finally Maltese onshore pipeline routes. Intuitively, the greatest challenges are presented by the offshore pipeline section and if and when Malta can discover 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. During the three-day Euro Med Summit there are a number of panels hosted by experts and these are tackling a number of interesting topics.
Certainly, Malta’s future energy destiny will also feature high in these discussions and one cannot forget to mention the deal signed with Azerbaijan’s Socar that will place Malta as a Mediterranean Hub for LNG supplies, via its floating storage unit which in turn, one can exploit the access to the Trans Adriatic Pipeline (TAP), which delivers Azeri gas supplies to Italy across the Adriatic Sea.
To conclude, PKF Malta has been active over the years to attract foreign investors in the oil and gas industry and is regularly participating at international events which may help galvanise the mindset of policy makers to proceed with speed in creating the much talked about energy hub. It is true that while our Mediterranean neighbors are producers and can always be relied upon to supply us with fossil fuels there is a lingering thought in our minds that after all we can one day be hosting our own oil or gas producing wells. Readers interested to hear the views of PKF Malta at this Summit can contact Anna Golis – Research & Development Manager on her email address which is firstname.lastname@example.org.