Updated 5.25pm with PN reaction below
The price Malta is paying for its Liquified Natural Gas (LNG) is seven times higher than the international price, as the COVID-19 pandemic continues to drive the cost down to almost record lows.
Despite the plunge across Europe, Malta’s price remains fixed due to a supply agreement singed in 2015 with Azerbaijan’s state-owned company, Socar.
According to details of a $1 billion deal that Electrogas entered with Socar, published by the Daphne Project in 2018, Malta had committed to a fixed price of $11.50 (€9.40) per unit of gas.
The contract was among files that had been leaked to Daphne Caruana Galizia, months before her assassination on October 16, 2017.
The price at which Electrogas buys gas from Socar is fixed until April 2022.
According to Bluegold Research, on which investors base their decisions on investments, the average price in Europe of LNG so far in May is $1.67. The global average is $1.81.
This puts the price Malta is paying at seven times the European average.
Questions sent to the new energy minister, Michael Farrugia, remained unanswered by the time of writing, despite reminders.
Opposition spokesman on energy, Ryan Callus, said it was a shame that the deal was holding the government back from passing on the reductions to the consumer.
The deal was holding the government back from passing on the reductions to the consumer
Whereas consumers across Europe were enjoying reduced bills and fuel costs as the price of oil, fuels and gas continued to drop due to the pandemic, Maltese customers continue paying the same price.
He said that since the new power station was switched on in 2017, the price of gas had gone down by 40 per cent, even before the pandemic hit, but this was not reflected in reduced electricity tariffs.
“Since the start of Covid-19, several EU member states have reduced electricity prices, with Malta being one of the exceptions. The irony of it all? Disgraced former minister Konrad Mizzi has condemned us to pay a high fixed price for electricity from a corrupt power station from which he was caught red-handed planning to receive €5,000 a day, and a high fixed price for the purchase of gas under agreement with Socar, but he has now run away to the United Kingdom to enjoy cheaper bills,” Callus said.
In 2015, Enemalta committed to buy €131.6 million worth of LNG from Electrogas yearly. This LNG provision by Electrogas is contracted out to Socar, who in turn buys it at lower marker prices from energy giants Shell.
The gas-fired power station project had been spearheaded by Mizzi. Despite being stripped of his energy portfolio in April 2016, leaked Electrogas e-mails show he was still one of the main contact points for the project, even after Joe Mizzi was appointed energy minister in June 2017.
A 2015 investigation by the auditor general found the state-owned energy company lost €14 million from a Socar hedging agreement, this time on oil purchases.
In comments to Daphne Project partners The Guardian, energy expert Simon Pirani, who was given the leaked contracts to analyse, questioned Socar’s role in the LNG supply chain and the decision to fix gas prices for five years.
“If I were a Maltese taxpayer I would want to know why such a poor deal was signed and why a Socar subsidiary had been brought in as a seller of LNG.
“Socar is not supplying, and could not supply, these contracts from its own production,” Mr Pirani, a senior visiting research fellow at the Oxford Institute for Energy Studies, said.
The Guardian reported last week that gas prices had declined so much during the COVID-19 pandemic that the savings would result in cheaper energy bills for UK residents.
PN: People should not suffer politicians' 'mistakes'
In a reaction, the Nationalist Party said the people should not be made to pay for the 'mistakes' of politicians and it insisted once more that fuel prices should be reduced.
The party said that the fact that Energy Minister Michael Farrugia had refused to reply to Times of Malta’s questions was further confirmation that that government could not hide the fact that this was all the fault of former minister Konrad Mizzi
The party promised that should it be returned to government, it would procure gas supplies from the cheapest sources, guaranteeing lower electricity prices for the people.
Independent journalism costs money. Support Times of Malta for the price of a coffee.Support Us