Malta paying twice the market price for gas while Azerbaijan reaps in the profits

Malta is paying almost twice the market price for gas from Azerbaijan’s state-owned company Socar and Maltese taxpayers could be losing tens of million of euros a year.

In the latest revelations by the Daphne Project – an investigation by more than 18 media organisations – it transpires that the Electrogas consortium, which built and operates the new power station in Delimara, entered into a $1 billion deal with Socar.

Through this deal Malta agreed to import all the gas needed to supply its power stations for the next 10 years.

On Wednesday, the Times and the Guardian reported that leaked contracts show that the price at which Electrogas buys gas from Socar is fixed at €9.40 per unit for five years. Electrogas, which is one third owned by Socar, then sells on the gas to Malta’s energy corporation Enemalta.

Since the deal was signed in 2015, gas and oil prices have crashed and according to the Guardian  Enemalta paid Electrogas at least €131.6 million for gas in 2017, nearly twice the open market rate. Estimates by the Guardian suggest Socar paid $40m less for the gas than the prices it charged Malta.

A whistleblower leaked a cache of 680,000 leaked files from the Electrogas consortium to murdered journalist Daphne Caruana Galizia. This data is now being analysed and investigated by The Daphne Project.

Socar buys liquefied natural gas (LNG) at lower marker prices from energy giants Shell and three energy experts who spoke to the Guardian said if Malta had dealt directly with Shell, it could have struck a better deal and saved millions.

In 2017, thanks to a fall in oil and gas prices, Enemalta paid nearly twice the market rate for LNG, one of the experts said. Maltese taxpayers were losing money “hand over fist”, as one expert put it.

To date, Malta’s taxpayers were kept in the dark about the contracts signed with Socar, because the Maltese government only published heavily redacted versions of the Enemalta agreements with huge chunks of text blacked out.

In 2015, Electrogas signed contracts to buy all the gas Malta needed from Socar but the Azerbaijani company is not supplying the gas from its own reserves.

Tourism minister Konrad Mizzi, piloted the project when he held the energy portfolio and as revealed by The Shift News last week, he personally signed the agreement for the supply of liquified natural gas (LNG) to the Electrogas power station for 18 years.

Although government has kept this agreement hidden from the public, Malta’s anti-money laundering agency, the FIAU, had questioned Mizzi’s personal interest in the deal that gave Socar exclusivity on the supply of LNG.

The FIAU also found that this agreement appeared to have been tampered with because of a number of anomalies, such as the lack of page numbers on the agreement and text that appeared to have been scanned and converted from a pdf version of the original agreement.

The agreement was signed by Mizzi on behalf of the Government of Malta on the one hand, and by Arzu Azimov and Emil Bayramli appearing on behalf of SOCAR Trading, which is the marketing arm of the State Oil Company of Azerbaijan Republic (SOCAR), the leaked report shows.

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