Last Updated on Thursday, 14 October, 2021 at 2:24 pm by Andre Camilleri
George M. Mangion is a partner in PKFMalta, an audit and business advisory firm
All readers coming out of a pandemic have left most of us working online and in the process health authorities advise us to avoid non-essential overseas travel.
Now, that we are seeing the end of the pandemic tunnel, we would relish a return to cheap oil to help sustain a fast recovery and return to normality. However, the contrary is happening as the scarcity of oil on the market has pushed up its price. This week, Goldman Sachs raised its oil price forecast calling for Brent crude to hit $90 a barrel by the end of the year. In recent weeks, due to various de-carbonisation policies, oil giants stopped investing in new exploration projects and focused only on active fields. It goes without saying that this leads to a shortage of energy, rather than an abundance of it, even the fracking oil producers in the US have trimmed their output.
Watch the headlines in Britain where, due to a shortage of drivers to deliver petrol, there has been an acute shortage of fuel that has caught the world’s attention. Many angry motorists are suffering from a shortage of lorry drivers that forced the UK government to use the army to deliver petrol supplies to pumps. Turn to Asia and shortages have led to power cuts in parts of China, this time, not due to shortage of fossil fuel at the utilities but from the country’s attempts to curb emissions. Dwindling coal stocks at power stations in India are linked to a surge in the price of imports of the commodity. Lower investment in oil has a spillover effect on the production of natural gas, which is often a by-product of drilling for crude. Added to that is a dearth of liquefied natural gas terminals for shipping gas from places where it remains relatively easy to access. This has pushed the price for LNG to record highs.
Back home, the price hike does not augur well for Enemalta, which is buying electricity from the Electrogas monopoly contracted on a fixed term. Electrogas buys its LNG exclusively from Socar (a State company in Azerbaijan and shareholder in Electrogas), which in turn, not having its own supply of LNG, procures it on the international market.
One may stop and question, why has Malta stopped, almost a decade ago, to attract investment by oil producers to explore for LNG in its untapped Continent shelf? Perhaps the answer is that government alternatively decided to invest millions to lay a gas pipeline to Italy once the latter can supply green hydrogen. The EU favours the use of clean fuel and wants us to cut down on the burning of fossil fuel. Germany generates 40% of its electricity from fossil fuel whereas Malta uses LNG (a fossil fuel) in most of its plants. A mere 8% of electricity is generated from clean energy such as PV panels. The ideal solution will be to start looking for investors to search for gas in our offshore waters emulating the success in Cyprus, Egypt, Libya, Tunisia and Algiers. Some may say this is a pipe dream (forget the pun) unless we appoint experts (preferably no political appointees) to set up a National Oil Company, which in turn must be adequately funded.
Realists may assert that provided sufficient capital is invested in exploration this may improve our chances of striking oil. Hey presto this shall enable us to use such energy to produce green hydrogen from water using electrolysis. Renewable hydrogen is created by using electricity to split water into hydrogen and oxygen through a process known as electrolysis. The hydrogen is collected and used, primarily in industry, while oxygen is released as the by-product or captured for use by others. For an island, which is almost 100% reliant on transport powered by fossil fuel, this situation calls for a plan encompassing a careful transition to de-carbonise. Advances in technology has made it possible to de-carbonise the entire fleet replacing internal combustion engines by a technology called a “hydrogen fuel cell” that uses hydrogen as its power source. Powering these vehicles with renewable hydrogen makes them truly zero-carbon.
One hopes that with the judicious use of RRP grants, we can make optimal use of such EU funds to start the slow and arduous task of converting our power station and the aging transport fleet to run on clean energy. Will Malta succeed to achieve zero emission by 2050?