Future of EU funding for Melita gas pipeline in question, despite government claims

Despite claims from the government that plans for a gas pipeline between Malta and the rest of the EU are underway, an EU official said its inclusion on a list of possible projects to be financed is not yet certain, and even then, question marks remain over whether funding will be given.

The Melita TransGas Pipeline is a 159km proposed pipeline from Delimara in Malta to Gela in Italy. It would transport gas, renewable gasses and hydrogen from Italy to Malta.

Although the EU’s Trans-European Networks for Energy (TEN-E) rules place emphasis on renewable energies and electricity interconnections, Malta obtained a derogation, and the project was included on the 5th EU list of projects of common interest (PCI) in 2022, making it eligible for EU funds towards its €400 million price tag.

The project’s inclusion has been controversial as the pipeline will link to the Delimara power station, partly owned by Yorgen Fenech, who is facing trial for the assassination of Daphne Caruana Galizia in October 2017.

At the time of her murder, she was investigating corruption allegations relating to the power station and those involved in Malta’s gas sector, but Fenech maintains his innocence.

Its inclusion on the 5th PCI list came despite calls from the Caruana Galizia family and several MEPs and NGOs for the European Commission to reconsider.

In February 2023, Energy Minister Miriam Dalli said the government is working on a “gas pipeline between Malta and the rest of the EU,” adding “works are ongoing on the second interconnector and renewables including offshore” about the Melita pipeline.

But when The Shift asked if the project would be included on the 6th list, due to be published at the end of November, an EU official declined to confirm or deny.

“Member States have agreed that there is a need for Malta to end its energy isolation through integration into the trans-European gas network. On that basis, it was decided to include the Malta-Italy Gas pipeline in the 5th PCI list. The sixth list is still in the making and is due to be adopted later this autumn,” the EU official said.

But even if the project makes it to the sixth list, something that is not certain, there is no guarantee it will get funding.

“It is important to highlight that while the inclusion on the PCI list makes the project eligible for CEF financing, the access to CEF financing is subject to a separate application process involving an independent evaluation process by experts contracted by the executive agency CINEA,” the EU official said.

When asked if an investigation was carried out during its inclusion on the 5th list and what the findings were, the EU official did not answer.

They did, however, note that the Malta-Italy project has received CEF financing for preparatory studies but has not received a cent for constructing the pipeline.

As for the controversy surrounding those involved with the pipeline, the EU official said, “According to EU law, funds must not be awarded to project promoters, operators, or investors convicted for fraud, corruption or conduct related to a criminal organisation.”

When pressed, they clarified this could include funding anyone directly or indirectly benefitting from any such offence, or even “before a final judgment or decision, the facts supporting a conviction have been established” or “Facts are not yet established, when investigations are still ongoing.”

This puts the future of the pipeline’s funding into question as Electrogas, in which the man accused of involvement in the journalist’s murder still holds a stake.

In 2021, Energy Minister Miriam Dalli said the corruption clause would not affect the bid as the pipeline is being overseen by a state-owned company, not Electrogas Malta. This is now believed not to be strictly true.

She blamed the opposition for objections and ignored those from the Caruana Galizia family. Dalli has also refused to publish Malta’s proposal for funding, as it contains ‘commercially sensitive’ information.

Electrogas deal

The Electrogas deal, described as “sinister” by Council of Europe rapporteur Pieter Omtzigt, was struck with the help of ex-minister Konrad Mizzi, ex-chief of staff Keith Schembri, and disgraced former prime minister Joseph Muscat,

Months after Malta’s Labour party came to power in 2013, a major public contract was awarded to a consortium of companies, including Fenech’s and Azerbaijani State energy company SOCAR. 

The Auditor General raised concerns that “the selection committee had been inconsistent in assessing bids” and that “changes to parameters were made during the selection process.” It was also noted that there were “concerns over the project’s design overall.”

Maltese investigative journalists then discovered that the Maltese state energy company, Enemalta, would pay twice the market rate for natural gas through the deal, giving SOCAR at least $40 million in profit.

Further revelations showed that through a company called 17 Black, Fenech was set to make payments of €150,000 a month to Panama companies owned by Mizzi and Schembri.

Omtzigt’s 2019 report stated that the “facts have given rise to widespread suspicions of corruption and money laundering”.

The EU official also explained that aside from an independent evaluation of the entire project and those involved directly or indirectly, the EU budget is also protected by the anti-fraud office of the Commission (OLAF), the European Public Prosecutor’s Office, the Court of Auditors, the European Central Bank, European Investment Bank, European Investment Fund and other international organisations.

Not viable for many reasons

Friends of the Earth Malta commented on the pipeline project earlier this year, stating that investing in new fossil fuel infrastructure is against EU and international carbon emission targets. They also said the project will not reduce the country’s energy isolation.

“A fossil gas pipeline is a false solution to increase Malta’s energy security… To increase energy security, we need to diversify energy sources, away from fossil fuels, instead of investing in diversification of gas supplies,” the organisation said in a statement.

It also notes the project contains no targets for when the pipeline would be used for hydrogen, nor does it say what kind of hydrogen it would use.

“Green hydrogen, produced from renewable energy, is not yet available on a commercial basis,” and it is not clear if it ever will be.

Lastly, they said, “There is a risk that the Melita gas pipeline will result in Maltese taxpayer money and EU funding ending up in the pockets of Electrogas shareholders”.

“Electrogas currently operates the Delimara power station and its LNG supply. The Melita gas pipeline project will trigger the payment of a gas exit price from the Maltese government to Electrogas, to compensate for the assets the energy company would hand over,” they said.