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Network News • 20-03-2021

Suggested amendments to the Petroleum Act

Author: George Mangion
Published on The Malta Business Weekly on 20 March 2021

Bill 161, amending the Petroleum (Production) Act introduced by Michael Farrugia in July last year, is being placed on the table for a second reading.

The Act will now be piloted by Miriam Dalli, the appointed minister for energy and water management.

One augur that on top of the purely cosmetic changes promulgated in the first Bill, the Act will introduce serious changes to revive this dying sector of our economy.  The changes to the Bill have not really upset any apple cart, except that it says that the minister may, on grounds of national security refuse to allow access to any entity which is effectively controlled by third countries or third-country nationals. 

In my opinion, to revive interest in the exploration of our Continental Shelf (the last attempt was more than a decade ago) the Act needs to grant better tax concessionary rates to investors, similar to those granted to non-resident investors which form the backbone of our commercial ecosystem.

We have granted purpose-built factories to deserving manufacturing foreign entities at a subsidized rent (remember the building of massive aircraft hangars), so it is only fair that we can design an incentive legislation to attract foreign investors with deep pockets (not the pioneer oil prospector types, who buy licenses to start exploration with an aim to sell out the moment they strike oil). It is a pity that for over a decade, the Continental Shelf department has not allocated any resources to promote the vast untapped acreage. Readers may argue – why waste resources on such initiatives which in the past never rendered a return?

There was a time when the Party in government, fearing a low turnout of the Party faithful, announced plans for oil exploration a few months ahead of a general election. There has never been a serious attempt to exploit our geophysical attributes in Central Europe so close to many oil-producing neighbours. Given a realistic holistic approach, the oil and gas sector may bring supplementary benefits such as increased work for local oil rig servicing companies, which are steadily increasing their turnover dealing with neighbouring countries.

Gas, despite being a fossil fuel, is considered by many as having a key role to play in Europe’s energy transition and the industry is working hard on ways to decarbonise gas and secure the future of Europe’s vast gas infrastructure. Blending hydrogen into the existing natural gas pipeline network has been proposed as a means of increasing its distribution.

Natural gas can be mixed with hydrogen to enable it to be distributed in existing pipelines, thus solving the disruptive brittle effect of pure hydrogen on steel pipes. Linde, a major producer even worked on technological solutions to extract pure hydrogen when it is mixed with gas. Severin, a spokesman for Linde, believes this technology can be the key to reduce the costs of transporting large volumes of hydrogen over long distances.

Other opportunities when amending the Petroleum Act involve creating in Malta a centre for arbitrage work in international disputes arising among oil and gas producers and host countries. This is an opportunity for experienced lawyers who take up this specialisation in their studies at the tertiary level. More options can be created for engineers. It is a pity that so far only three types of engineer courses are provided at University, AUM and MCAST. These may be expanded to cover degrees specialising in petro-engineering or deep-sea exploration.

The writer took interest and followed news concerning this economic sector; yet both the PN administration, later followed by the PL government never manifested any serious drive to attract oil and gas investors. Perhaps the second reading of the Petroleum Act opens the door to a bi-partisan drive for chasing future discoveries.

Author: George Mangion
Published on The Malta Business Weekly on 20 March 2021
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