After a lot of speculation as to who would be the technical guru to launch the oil and gas exploration company, the Prime Minister this week handpicked Marisa Micallef to carry out this onerous task. She was previously appointed chairperson of the debt-ridden national airline where she held the post for three years during which talks to amalgamate with Alitalia failed. The Office of the Prime Minister (OPM) issued a statement saying: "Her skills will now be used to make a turnaround in this area, particularly in the field of oil exploration."
This announcement got a mixed reaction from the press - some critical and others voicing surprise that a person whose previous experience was running a local drinks bottler might not possess the technical skills for such a rigorous job (fit for a tough Houston oil trader). In my opinion, the most respectful comment in the media was that of Frank Atkinson who wrote that she has a great challenge ahead of her. Mr Atkinson added that for nearly 30 years incompetence and inertia had run the Maltese oil exploration sector. The results are clear to all: Malta has the worse oil exploration record in the Mediterranean with only 13 wells drilled in the past 60 years compared to the 6000 wells in Italy, 500 in Israel, and so on.
Ms Micallef's immediate challenge will be to seek international investors who will seriously start multiple well explorations in the untapped Continental shelf for hydrocarbons emulating the success of Cyprus, Egypt, Libya, Tunisia and Algiers. Two years ago, the OPM was asked to confirm a declaration by Italian Ambassador Giovanni de Vito that there is a "gentleman's agreement" between the two countries under which no licences will be issued in the 18,000 square kilometre zone until a formal agreement on possible joint exploration is reached. In a reply to questions, the spokesman did not refer to the moratorium but said: "As stated by the Italian Ambassador, there is no formal agreement on oil exploration between Malta and Italy and negotiations are ongoing."
"Both countries are engaged in constructive discussions and enhancing confidence building with the aim of agreeing on joint activity," the spokesman added. The minister previously responsible for oil exploration, Joe Mizzi, had also assured the press that discussions with Italy on possible joint exploration in the disputed area were ongoing. He stated that "no licences have been granted by Italy on Malta's continental shelf as far as the government of Malta is aware".
Some may say this is a pipe dream but realists assert that provided sufficient capital is invested in exploration, this would enable us to export our own hydrocarbons to Europe in the near future. The penny has dropped that we have no current exploration activity planned for the foreseeable future. Our own National Oil Company needs the best technical brains to engage with the oil majors for a renewed initiative to risk exploration in a multiple well search. History has taught the lesson that palliatives are a waste of time.
As can be expected, Malta has used heavy fuel oil and gas oil for power generation as it has no indigenous fossil fuel sources, so electricity generation is wholly dependent on imported fuels. Furthermore, there is ever-increasing demand for energy since Independence and running the ageing Marsa and later the Delimara power station both with a dismal low efficiency rate of production (except for the BWSC plant) had pushed the PN administration to charge high utility rates. A change in government in 2013 saw new alternatives put in motion. Adding gas to its fuel mix, Enemalta aims to meet future demand while satisfying environmental goals at lower costs. It is a smart move to combine an electricity interconnector link with Italy and concurrently build a new gas-fired power plant. A Liquified Natural Gas facility (LNG) is to be added later. Enemalta converted the controversial BWSC power plant to run on natural gas making use of the new LNG facilities.
Back to the subject of laying 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 will possibly need further storage in the Has Saptan underground terminal. Central Europe will always be dependent on external sources so in the light of this, importation of gas depends heavily on Gazprom - the Russian state monopoly. Countries in the Levant such as Cyprus, Egypt, Lebanon, Israel, are in discussion on how best to monetize their gas deposits and evaluate different options how to service future customers.
It is regrettable that Malta has been late to grasp the nettle. It has finally set up a National Oil Company and in the near future hopes to connect to the Trans-European 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. Environmentalists may complain that laying this gas pipeline will endanger the Mediterranean seabed morphology, encounter engineering limitations, maritime boundaries and upset seafaring activities. However, last year, the government announced the issue of a tender to commence a feasibility study for laying a gas pipe which, when and if completed, will link us to the European gas market. The engineering firm that wins this contract will be required to identify the best 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. The rigid policy previously adopted by 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 and clean is the use of LNG.
To conclude on a positive note, top geologists say that the prospects for discoveries are bright should we restart an intensive exploration programme. Granted, this is a risky sector when one takes into consideration the current low oil prices and obviously requires a renewed initiative by the government to swiftly resolve any delineation disputes with neighbouring countries as only in this way can we expect NOC to succeed in attracting new investment in drilling.
Here's wishing Ms Micallef the thrill of inaugurating the first gusher well.
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The writer is a partner in PKF an audit and business advisory firm