Issue link: https://maltatoday.uberflip.com/i/1465278
W ith Europe actively seeking alternative gas supplies away from the Kremlin hegemony, we must consider the controversy hitting the proposed Mediterranean Pipeline (EastMed). is is a natural gas pipeline linking East Mediterranean energy resources to Greece through Israel, Cyprus and Crete (see map). e pipeline which is still being designed, will allow for the transportation of 10 billion cubic meters of gas per year, which figure will increase to 20 billion cu- bic meters of gas per year once the second phase of this project materialises. e costs of this pipeline will tanta- mount to an estimated €6 billion and it is being currently developed by IGI Po- seidon S.A. on a 50-50% joint venture between the Greek gas utility DEPA and Italy's Edison. e pipeline is expected to be complet- ed by 2027, but its completion may come as soon as 2025, following the Israeli gov- ernment's approval of the accord where- by it allowed the signatories to proceed according to plan. One asks how useful is this ambitious commercial venture to exploit offshore rich gas sources in the Eastern part of the Mediterranean. e raison d'etre behind this project is the bolstering of Europe's energy securi- ty by diversifying its routes and sources and allowing for direct interconnection to the production fields. It goes without saying that all this will eventually sup- port the economic development of Cy- prus, Israel and Greece by providing a stable EU market for gas exports. Following Russia's invasion of Ukraine, plans to make the EU independent from Russian fossil fuels before 2030 have been placed at the forefront of the agen- da. e EastMed Pipeline would pro- vide an alternative albeit modest supply. Where does Malta fit in all of this? Can it benefit? e European Parliament has agreed to make an exception for those Member States (like Malta) with a unique geo- graphical position which makes them less connected to the main European en- ergy structure. is concession is main- ly intended for island nations which may find it more challenging to partake in Eu- rope's main energy reservoir. Future materialization of this project marks it as a Project of Common In- terest. Nonetheless, from a gas-funded project, to render it eligible for assis- tance, the EastMed pipeline must be able to form the basis for the transition to hydrogen. Only, under such conditions will the EastMed gas pipeline remain an eligible project. is is being done with the aim of linking Member States to the European power network. But there is a fly in the ointment since in the first days of 2022, the Biden ad- ministration withdrew its support for the EastMed project. ere is now op- position from the EU. Despite plans to make the EU independent from Russian fossil fuels well before 2030, the EU has not welcomed the development of this project. e European Commission is adamant on evaluating the EastMed's pipeline commercial viability as a green energy producer before approving this endeavour. Generally speaking, projects concern- ing natural gases do not fall within the 'Projects of Common Interest' listed under the Trans-European Energy Net- works (TEN-E) Regulations. ese regu- lations prioritize a climate neutral econ- omy powered by green energy adapting new infrastructures and technologies. e Commission put forward a set of propositions back in 2013 to achieve cli- mate neutrality by 2050. ere is an ob- ligation for all projects to meet manda- tory sustainability criteria and to follow the 'do no harm' principle as set out in the Green Deal. ere exists a priority for infrastructure categories eligible for support through the TEN-E policy, thus ending support for oil and natural gas in- frastructure. is matches a new focus on offshore electricity grids with provisions facil- itating more integrated onshore and offshore infrastructure Green fuels and implementation of offshore one-stop- shops. Top preference is being given on a drive to produce hydrogen as an alter- native to fossil fuel. is encapsulates new infrastructure including transport and certain types of electrolysers. Pref- erence is given to rules to promote the uptake of smart electricity grids. Such grids will facilitate rapid electrification and scale- up renewable electricity gen- eration. e EU is moving away from fossil fu- els and prefers to fund smart grid invest- ments for integrating clean gases (like biogas and renewable hydrogen) into the existing generation. It targets new provi- sions on support for projects connecting the EU with 3rd countries that demon- strate their mutual benefit and contri- bution to the Union's overall energy and climate objectives in terms of security of supply and decarbonisation. e targets for de-carbonization in- clude a revised governance framework to enhance the infrastructure planning process and ensure it is aligned with declared climate goals and energy sys- tem integration principles, through in- creased stakeholder involvement. is is facilitated by a reinforced role of the EU Agency for the Cooperation of Energy Regulators (ACER) and improved over- sight by the Commission. One cannot omit to mention new measures to simplify administrative procedures, accelerating project imple- mentation, shortening permitting proce- dures for 3rd Countries. e emphasis is to avoid delays in projects that facilitate the energy transition, and strengthen transparency and participation in con- sultations. Certainly such goals do not warmly embrace the funding and sup- port of the EastMed pipeline - because it does not comply with the objective of the TEN-E Regulations. As a rule, natural gas projects will not be eligible to obtain the PCI status, nonetheless, the European Parliament and Member States agreed to an ex- ception for those Member States with a unique geographical position which makes them less connected to the main European energy infrastructure. Despite the fact that the EU is generally against the use of intensive carbon-emit- ting fuels, in this case, the EastMed pro- ject may prove to be vital from some Member States to successfully transit energy from rich offshore deposits. A crucial fact to consider that while the EastMed project has its merits but in the general scheme of things it is insubstan- tial given that it runs at 10BCM, which is less than 2% of Europe's annual gas consumption (541 BCM), less than 6% of Europe's annual imports from Russia (167 BCM). It is fair to say that EastMed would not be as much a game changer for Europe's energy supply as we usually think, how- ever Malta stands to gain if it is linked to the Italy pipe network, should this be retrofitted to produce Green hydrogen. Linking to the EastMed gas pipeline George Mangion George Mangion is a senior partner at PKF, an audit and consultancy firm, and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have made PKF instrumental in establishing many companies in Malta and established PKF as a leading professional financial service provider on the Island 8 OPINION 21.4.2022