The Malta Independent 28 June 2022, Tuesday

A Preliminary Market Consultation – Malta’s offshore opportunities

George M Mangion Sunday, 22 May 2022, 08:07 Last update: about 2 months ago

Readers ask why is Malta so late in claiming its own exclusive economic zone?

The answer is not clear but perhaps this is due to the fact that we had so many disputes on delineation of our Continental shelf with neighbouring countries; still at the end of the previous legislature, it was Clyde Caruana, the finance minister, who came to the rescue.

Last year, a law was passed to make provision for the establishment of the exclusive economic zone. Caruana declared that this will constitute an exclusive economic zone (EEZ) which, if properly exploited, could hold economic potential for "fisheries, artificial islands, wind farms, floating solar farms, wave-generated electricity and revenue from shipping movements".

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Have we finally discovered the route to El Dorado? This year, government announced that it identified with the EEZ, a 900sq.km zone of shallow waters around Hurd's Bank and a 6,500sq.km belt around the island as two areas where it intends issuing concessions to private companies for the production of renewable energy, the production and storage of hydrogen, fish farms and the establishment of "artificial islands".

It committed to fast-track planning permits for such projects to a maximum duration of three months from the submission of all required documents. Hurd's Bank is designated as Area 1 (see map), the entire offshore belt extending between 12 to 25 nautical miles, which spans over 6,500sq.km, is designated as Area 2.

The document suggests that the area around Hurd's Bank is characterised by its relatively shallow waters. It is the jewel in our crown. In fact the area of interest adjacent to Hurd's Bank has a depth ranging from 50m to 100m, with an area of 900sq.km. What are the benefits arising from exploitation of such exclusive zones? At a time, when Europe is frantically looking for a greener alternative to burning fossil fuel, the next goal is the alternative use of green hydrogen.

Hopefully, this signals government's intention to seriously explore local production of this energy sector, instead of relying exclusively on the hydrogen-ready pipeline linking us to Sicily. It came as no surprise that a Preliminary Market Consultation (PMC) was published on 2 May to invite international reputable companies to propose economic activities. Submissions close at end of September. The PMC enables government to gauge the interest of investors in Malta's offshore opportunities and can gain knowledge of the possible activities that companies are willing to invest in.

Following the evaluation of the responses received through this PMC, the Contracting Authority intends to issue a call for a particular activity or activities. The issuing office is the Continental Shelf Department within the Ministry for Finance and Employment and it proposes the following activities to take place within the EEZ. The list includes:

(a)       the production of renewable energy from water, winds, currents and solar including the production and storage of hydrogen;

(b)       fisheries and aquaculture projects in accordance with the Fisheries Conservation and Management Act (Cap. 425);

(c)       establishment of artificial islands; and

(d)       any other economic activity that is allowed under the EEZ Act but it excludes proposals for oil and gas exploration.

PKF has been active to promote the renewable energy proposal and attracted a number of interested investors who approached it to participate in the PMC.

Investors are encouraged to specify their proposed type of economic activity (for example, production of renewable energy from water, wind, currents and solar; the production and storage of hydrogen; fisheries and aquaculture projects; establishment of artificial islands; and so n) and provide key technical (for example, estimate of power generation capacity of renewable energy source) and financial details (for example, indicative level of investment and estimated annual revenue as well as the assumptions on which they are based); and amplify how they intend to achieve production of renewable energy from water, wind, currents and solar; the production and storage of hydrogen.

It also includes a scope for the use of the area for fisheries and aquaculture projects. Another ambitious target is the establishment of artificial islands.

Interested parties are to announce and give an estimate of power generation capacity of renewable energy source together with financial details. Naturally, investors may wish to enter into a Public Private Partnership and thus they need to indicate the level of investment to be provided by government. 

The procedure for awarding concessions in the two areas has now been spelt out in a PMC document recently issued to industry stakeholders by the finance ministry. Readers may ask what are the advantages of producing hydrogen and how can this solve the greening of our island's ecology. The answer by experts shows how hydrogen being produced using renewable power via electrolysis. Hydrogen has the potential to be used efficiently in fuel cells and hydrogen-based energy storage systems. Obviously, studies show how integrating these systems, with other renewable energy systems, are becoming feasible.

Malta has been slow to exploit the advantages of wind farms; the main stumbling block is spatial area needs. It goes without saying that due to climate change and the global drive to de-carbonize our ecology, the demand for clean energy is unprecedented and it seems that the use of hydrogen in fuel cells for production of electricity is the ideal alternative.

An important distinction between hydrogen and other forms of energy storage is that hydrogen can be stored and transported via a mix of natural gas through the existing gas network. Can the production of hydrogen in the Hurd's Bank facility prove to be a rich vein of export revenue? In our situation, if using the shallow waters at the EEZ can attract foreign investors to generate electricity from renewable sources, then the resulting hydrogen comes with numerous emissions benefits. Take the example of Scotland, currently the world leader in the deployment of floating offshore wind farms. Its huge EEZ makes it one of the few countries in Europe that could host multiple projects of such scale and offer a vision of an offshore wind-to-hydrogen industry which would rival oil and gas in its heyday. It is interesting to note how the cost of wind power has continued to drop, even though the inherent variability of wind is an impediment to the effective use of wind power.

The same can be said for floating solar farms, the latter have been under experimentation by MCAST and the University and prototypes are being tested. The journey to diversify electricity production using renewable energy is a long one as Malta started late in exploiting the EEZ but perhaps attracting the right investment, following the publication of PMC, will help to solve climate change challenges.

 

 

George M. Mangion is a partner at PKF, an audit and business advisory firm

 


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