Libya oil purchases: talks at initial phase but Libya showing good will

Talks on oil and gas purchases from Libya at favourable rates are at an early stage, but Libya is showing good will, Finance Minister Tonio Fenech told The Sunday Times.

Mr Fenech was contacted after the Libya Herald reported he held meetings with the Libyan Undersecretary at the Ministry of Oil and Gas, Umar Shakmak, and the chairman of the National Oil Corporation.

A cautious Mr Fenech emphasised that discussions were still in their early stages, but the Libyan transitional government was showing strong signs of goodwill to strike a deal.

The meetings come amid a 12 per cent spike in oil prices to reach $124 a barrel, primarily as a result of rising tensions between the West and Iran.

“The huge volatility in the markets is pushing prices up and putting immense pressure on industry and households. We have to look at alternatives which can give us price stability to maintain a sound economy. For us, it’s the number one concern,” Mr Fenech said.

Discussions with Libya so far have concentrated on the possibility of obtaining more stability on oil prices, even if they are regulated to a large extent by OPEC.

“We’ve been in talks with Libya for years, but during the Gaddafi regime it was mostly talk and no action. This time there seems to be a genuine willingness to help, maybe because Libya really acknowledges the help we gave (during the crisis),” the minister said.

According to the NTC website, Shakmak suggested during the joint meeting that a Maltese technical team be appointed to discuss the matter with specialists from the National Oil Corporation.

Malta will be studying the compatibility and quality of the oil which could be provided by Libya as well as the cost of refining it, Mr Fenech said.

The government currently buys its oil from different sources every two months with only 20 per cent of it hedged at $99 a barrel.

Amid constant laments about electricity and fuel prices, Mr Fenech insisted the government was absorbing some 30 to 40 per cent of the additional cost of the current electricity tariffs.

“It would be an economic catastrophe if we charged consumers for the actual price of oil. We are waiting and hoping that the Iran situation calms down so we can hedge at a favourable price,” he said.

The government was “seriously looking” at using gas alternatives but the investment to set up the necessary infrastructure was massive, Mr Fenech said.

The cost of building a pipeline to Europe would only be viable if the EU offered to part-finance it. This is being discussed in thecontext of the post 2013 EU financial perspectives currently being negotiated.

The other alternative would be to build a gas terminal, but Mr Fenech said its size would practically eclipse Delimara. A third option would be to ship the gas, which is roughly estimated to cost as much as building a gas pipeline.

“In any case, a gas pipeline cannot be made available within at least three years, requiring also a source of gas that is secured, and that is the aim of such discussions,” said Mr Fenech, rejecting the Labour Party’s claims that Malta should immediately switch to gas.

While pointing out that the extension to the power station could run on gas in future, Mr Fenech called on critics to realise the need for an intermediary solution until the gas structure is built.

“Do we leave the island without power in the meantime?” he said.

Meanwhile, the Labour Party yesterday lambasted the gas price hike announced by Liquigas – a private company – on Thursday, saying it showed the way the government was ignoring the middle class and failed to protect the weak.

A 12kg gas cylinder now sells at €19.70, up from the €18 increase announced in January, which according to Liquigas is the result of an increase in the price of butane and the strength of the dollar against the euro.

(Source: Times of Malta)

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