Labour’s energy policy hinging on Sargas, bilateral agreements on cheap fuel

Opposition leader Joseph Muscat has yet again hinted at a carbon-recovery energy project proposed by Norwegian firm Sargas, as one of the "alternative possibilities" a Labour government would resort to in a bid to reduce utility rates.

In an interview to business magazine The Executive, Muscat said Sargas were willing to invest €1 billion "out of pocket" to re-engineer the Delimara power station for a carbon-capture system, which would enable us to reduce energy bills.

Muscat has previously floated this proposal as a solution to Malta's dependence on oil in an interview to the Chamber of Commerce's Commercial Courier.

A pre-feasibility study on the Sargas proposal, which attracted political controversy since it was proposed to the government in 2009 by European Commissioner John Dalli and was apparently shelved before Muscat resurrected the idea, is still ongoing. KPMG have been entrusted with the study.

"It was precisely after we brought forth this alternative that government decided to procure a feasibility study on the proposal. This should have been done five years ago. Inexplicably this government stuck its head in the sand on this issue, and its consistent intransigence has led to a negligible change in the status quo," Muscat said.

Sargas claims it can bulid a 180 megawatt or 360MW power plant in Delimara, which would include carbon capture and storage technology and aim to capture around 95% of its carbon dioxide emissions. The plant, which will be fuelled by coal and biomass - through gas feedstock has also been mentioned - will be assembled in the Republic of Korea, and eventually installed alongside the existing Delimara power station. The plan is to then ship the captured CO2 to Denmark, where it will be stored in depleted oil reservoirs. Sargas aims to secure a power purchase agreement with Enemalta, with no investment and no capital expenditure required from the Maltese government.

The United Kingdom has just launched a £1 billion competition to build the first demonstration carbon capture and storage plant, but the UK's Energy Research Council says CCS has never been demonstrated at scale on a working power station.

Muscat, who mounted a campaign at the use of heavy fuel oil for the Delimara extension, described Labour's energy policy as "gas oriented and less dependent on oil, and directed towards renewable energy sources to meet 2020 targets."

The Labour leader hinted at bilateral agreements on cheaper oil and gas prices as part of his strategy for reducing energy prices.

Referring to Finance Minister Tonio Fenech's visit to Qatar, Muscat questioned why Malta had been buying oil at market prices when there was a possibility to buy at below-market prices on a state-to-state agreement.

"This encourages us in our resolve to reduce utility bills and we intend to do this by seeking to secure the best energy prices through concluding the best agreements for Malta...

"Our pledge to realistically and sustainably reduce utility rates will go a long way to redressing the cost structure to create a better economy and sustain more jobs. We are already late on the 2020 target configuration and failing those targets is not an option," Muscat said.

Prime Minister Lawrence Gonzi has reiterated his commitment to present a refinancing plan for Enemalta, after Standards & Poor's downgraded the beleaguered corporation when government did not produce a debt-repayment programme in 2011.

Gonzi said the refinancing plan is expected to be presented to parliament soon, according to an interview he gave to the Chamber of Commerce's official magazine.

Gonzi told the Commercial Courier the plan for Enemalta's €600 million debts will provide a long-term framework for their repayment. "This repayment programme will provide clarity and transparency to the banks and the regulator. It will provide comfort to rating agencies and financial institutions as to the feasibility and financial viability of Enemalta," Gonzi said.

This article was corrected on Monday, 7 April. 'Danish' firm Sargas was changed to 'Norwegian'.