Brussels bruising: Malta could lose €200 million grant for gas pipeline

The financing of Malta’s €400 million gas pipeline to Sicily is hanging in the balance, after the Maltese project lost points inside Brussels over claims that the island’s need to have a pipeline from Europe was not “urgent”.

Malta will have to stamp its foot inside the EU’s corridors of power, after European Commission officials ‘punished’ the Maltese project – which is requesting €200 million in EU funds – by suggesting that the existing interconnector cable to Italy and the floating LNG vessel at Delimara are sufficient for the island’s energy needs.

Malta lost points on just two of seven mandatory criteria under which the funds from the Connecting Europe Facility can be released. It needs to pass on all seven to have the money released to start building the pipeline.

Kadri Simson, the new energy commissioner, says that in the future, the EC must move focus away from natural gas and towards biogas or hydrogen

But the major sticking point is that Brussels now believes Malta is well-serviced by the sub-sea electricity cable to Sicily, which was damaged just two days before Christmas 2019, leading to a nationwide blackout.

A gas pipeline would allow Enemalta or Electrogas to plug into the natural gas supply from Europe, without the need for an LNG vessel to be anchored off Delimara; as well as reduce dependence on the sub-sea electricity cable.

But although Malta presented what EC officials called a “mature” action, they claimed it was unclear as to why replacing the LNG vessel with a pipeline would be give the island security of supply, which politically is the main argument for Malta’s demand for the pipeline.

More seriously, the EC officials now say there is “insufficient evidence” on the urgency of the project, because Malta is already procuring electricity through the sub-sea interconnector.

Seemingly ignoring Malta’s small size, Brussels is saying the fact that the island has no competitive market for gas-only Electrogas supplies gas to the Delimara 4 and 3 plants, which power the entire island – then there is no demonstrable need for the pipeline to supplant the LNG vessel.

Michael Farrugia, Malta’s new energy minister will have to stamp his feet in Brussels if he is to get Malta the €200 milion it needs for the pipeline

And yet, Brussels still gave positive marks to the project in five of the seven criteria, saying the application was of good quality and mature, and that it recognised that CEF funding for the pipeline was needed to keep gas tariffs at an affordable level.

The plan by the Labour government, which in 2013 led a changeover from heavy fuel oil to natural gas, was to replace the floating tanker in Delimara, with a gas pipeline.

Politically, the Nationalist Opposition has shown undue preference for a second interconnector cable, a project it pioneered when it was last in power. The Maltese government insists the island cannot depend on the electricity cable alone, despite its competitive pricing. Enemalta, Malta’s national energy provider, also has an 18-year agreement with Electrogas to procure electricity from the Delimara 4 plant, and to buy power from the gas-fired Delimara 3 plant which is 90% owned by a Chinese state-owned company Shanghai Electric Power.

Maltese government officials will now apply for the fourth, and final round, of cash under the current EU budget later this April, in the hope of securing the millions needed to finance the pipeline.

But Malta’s project is now hampered by a radical change in appetite in Brussels: the new Von Der Leyen executive wants to move fast on climate targets by deprioritising gas projects, and make Europe the first climate-neutral continent by 2050 by favouring innovative technologies such as smart grids, offshore wind and hydrogen.

Past commissions wanted gas pipelines from Ukraine and Azerbaijan, so that the EU could move away from dependence on Russian gas. But climate commissioner Frans Timmermans will be under pressure from Green MEPs and activists to drastically reduce EU funds for fossil fuels, gas included.

; the EU’s climate commissioner Frans Timmermans has to bind the bloc to achieve decarbonisation by 2050, which would mean deprioritising fossil fuel projects, gas included

EU Ombudsman investigation

Complicating matters for Malta is the EU Ombudsman’s inquiry into the CEF’s fourth list of Projects of Common Interests (PCI), which includes the Malta pipeline.

Ombudsman Emily O’Reilly has requested clarifications about the inclusion of gas projects in the list, after the civil society group Food & Water Europe said the Commission had broken EU rules by not adequately assessing the sustainability of the 32 gas projects.

Brussels has until 31 March to explain to the Ombudsman whether the gas projects had ever fulfilled the criteria included in the PCI list’s dedicated regulation.

And while MEPs have voted overwhelmingly to approve the fourth PCI list, the Ombudsman’s inquiry could be the last redoubt for opponents of gas projects, such as Green MEPs.

If Malta misses the boat on the fourth round, the next PCI list in 2021 – the fifth – will be more stringent on gas projects’ eligibility for cash from the EU and the European Investment Bank.

Malta’s gas pipeline was expected to be operational by 2024 in a bid to end Malta’s “gas isolation”.

Malta’s electrical network was linked to Europe’s via Sicily in 2015. Malta says it can slash its shipping emissions by half by 2050 if it links up to Europe with a gas pipeline.