Last Updated on Sunday, 23 October, 2022 at 10:21 am by Andre Camilleri
George M.Mangion is a partner in PKF,an audit and business advisory firm
Now, that we are seeing the end of the pandemic tunnel, folks are facing a new obstacle to growth as oil and gas prices are again at a high peak.
This is another obstacle for a fast recovery and return to normality. However, combined with the uncertainty of supplies chains, since the start of the Russian invasion of Kyiv saw shortages of grains and fodder trapped in silos in Ukraine, this has created an artificial shortage.
In the past months, due to various rushed de-carbonisation policies, oil giants stopped investing in new upstream projects and focused only on active fields. It goes without saying that as interim measure, this leads to a shortage of oil, rather than an abundance of it, even the fracking oil producers in the US have now upped their output.
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.
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 attempts to curb emissions by repeated curfews. It does not rain but it pours as with dwindling coal stocks at power stations in India, these conditions led to a surge in the price of imports of the commodity.
Look to Germany, and we note its national hydrogen, highlights the potential and the opportunities of green hydrogen. The core mission is to replace fossil fuels particularly gaseous and liquid energy sources, which are an integral part of Germany’s energy supply. The Federal Government has been aware of the potential of hydrogen technology for many years and has made available considerable funding and subsidies.
Under the National Innovation Programme on hydrogen and fuel cell technology, a total of €1.4bn in funding is currently being provided and €310m will be provided under the Energy and Climate Fund for practice-oriented basic research on green hydrogen.
Germany adopted a package for the future which makes available another €7bn for speeding up the market rollout of hydrogen technology and another €2bn for fostering international partnerships. Back home, the price hike on LNG 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. As a temporary measure the finance ministry is subsidising Enemalta and Enemed to fight increases in its products to the public.
Some expect that in the near future, the problem will solve itself when the planned gas pipeline to Italy is ready to supply us with cheaper green hydrogen. As can be expected, the EU favours the use of clean fuel and wants us to cut down on the burning of fossil fuel. By the way, Germany in the past generated 40% of its electricity from buying Russian gas, this is now being phased out as Moscow has unilaterally stopped selling gas.
By sheer contrast, investment on renewables in Malta is modest with a mere 8% to 10% of electricity generated from clean energy such as PV panels yet no turbines are in use. For an island, which is almost 100% reliant on transport powered by fossil fuel, this situation calls for a plan encompassing a scientific but speedy plan to de-carbonise.
An ideal option is to use renewable energy to produce green hydrogen. The 2023 Budget may help if it attracts foreign investors to set up infrastructure in the EEZ (particularly in Hurd’s Bank) installing sophisticated production facilities. Green 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.
The good news can be heralded if transportation fleets are converted 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. There are many reasons that speak for hydrogen such as meeting climate targets for 2030 and greenhouse gas neutrality targets for 2050.