Gas prices across Europe have plunged after a record number of cargoes entered the continent from the United States, Russia, and Qatar, but Malta will continue to pay higher prices owing to its supply deal with Socar.
The Guardian reported earlier this week that gas prices had declined to such a level that UK residents will begin to enjoy cheaper energy bills, with the British regulator having lowering the price cap for consumers last October, and expected to do so again.
They report that suppliers in the UK are expected to cut their dual-fuel tariffs as energy market prices continue to tumble in the new year because of a growing glut of gas in the global market.
The market price for gas has plummeted across Europe as a record number of cargoes from the US, Russia and Qatar have flooded into the continent. In fact the UK the market price for gas hit 10-year lows as imports of liquified natural gas (LNG) reached new highs.
Natural gas prices in the European Union meanwhile stood at $5.15 per mmbtu – the standard gas measurement unit – in November, which is 37.69% less than the price of a year ago, while the price average across 2019 was that of $4.81 per mmbtu, not including the price average in December.
Malta itself has a vested interest in the price of LNG, owing to the fact that new power station in Delimara runs on the fuel, with gas being imported from overseas.
The new power station was one of the Labour government’s key electoral pledges, a pledge which was overseen by former Minister Konrad Mizzi.
In October 2013, the Electrogas consortium beat major players such as Shell and Gazprom to win the tender for the building and operation of the power station. The consortium was back then made up of Azerbaijan’s state owned gas and oil company Socar, German energy giants Siemens, GEM Holdings – a company with Yorgen Fenech, Mark Gasan, and Paul Apap Bologna as its shareholders, and Gasol. The latter withdraw from the consortium in 2015.
Various questions have been raised about the power station deal, not least about the deal that was struck between Malta and Socar for the supply of the gas needed for the power station.
Documents which were initially leaked to journalist Daphne Caruana Galizia, and then passed on to the Daphne Project after Caruana Galizia was assassinated show that the Maltese taxpayer has been losing hand over fist from the deal.
This is due to the fact that the rate being paid by the Maltese state is far above the market price for LNG.
The Daphne Project last year revealed that for the first five years of the 10-year contract with Socar, which was signed in 2015, Malta had committed to a fixed price of €9.40 ($11.50) per mmbtu, a unit of gas.
That means that there is a difference of $6.35 between the most recent European Union average market price and the price that the government committed to paying Socar as part of the contract.
The Daphne Project reported back then that Malta buys at least 14 million mmbtu from Socar in a year, which – under the rate that they reported from the leaked document – equates to $161 million.
If one takes the November 2019 European Union average though, then the amount Malta would have paid if the country was buying gas at that rate was of $72.1 million. The fee is even lower if the average rate across 2019 is taken, with the total summing up to $67.34 million.
It should be noted that the average price marked does not include the transportation costs required to ship the gas to Malta, while the rate in the contract with Socar does.
Comparing the terms in the contract with Socar and the 2019 average price, Malta has paid over $90 million (minus the transportation costs mentioned above) over the average across the European Union.
The terms of this contract with Socar have come under scrutiny, with the government initially refusing to publish the contract and then publishing a redacted version, citing commercial confidentiality as the reason for the redactions.
Konrad Mizzi had argued that the cost of the five-year fixed term was worth paying because “security of supply and price stability were paramount”. The contract itself was also approved by the European Commission in spite of the fixed term.
The Daphne Project reported that once the five-year fixed price term elapses, “Malta will pay a market linked price, pegged to the Brent oil index. Each unit of gas will cost 14% of the price of a barrel of oil”, they reported.
They had also reported that Socar is profiting off the deal because it supplies Malta through Shell – effectively meaning that they buy the gas off Shell first, and then supply it to Malta under the terms of the contract signed between the two. They said that Socar had made some $40 million due to this arrangement, wherein they would buy gas from Shell at a lower price than that at which they were selling to Malta.
This contract is not the only controversy which surrounds the power station. Questions were raised over the selection of Electrogas for the building and operation of the power station, especially after it emerged that a company called 17 Black was the target client of two Panama companies called Tillgate and Hearnville, which belonged to the Prime Minister’s former Chief of Staff Keith Schembri and former Energy and later Tourism Minister Konrad Mizzi.
17 Black was found to be owned by Yorgen Fenech – who was an Electrogas director until recently and was one of their shareholders – and documents showed that his company along with another called Macbridge, the owner of which is thus far unknown, were going to pay €5,000 into Schembri’s and Mizzi’s companies every day.
The name of that company was first mentioned by Daphne Caruana Galizia, although she never did reveal the name of its owner. She was assassinated before she managed to do so.
Fenech now stands accused of having been the mastermind behind her murder. Schembri has since resigned from his post in the Prime Minister’s office and is also under investigation in connection with the murder. Mizzi also resigned his ministerial post, but remains a government MP.