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European Commission approves LNG project in Malta

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LNG Industry,

The European Commission has approved under EU state aid rules Maltese plans to pay Electrogas Malta, operator of the Delimara plant, for providing energy to Maltese electricity company Enemalta.

The measure compensates Electrogas for the additional cost of fulfilling public service obligations.

In June 2016, Malta notified plans to support the Delimara Gas and Power Energy Project to the Commission for assessment under EU state aid rules. The project comprises the development of a FLNG storage unit and a new combined cycle gas fired power plant. The storage unit will supply gas to the new power plant as well as to an existing plant.

The FSU Armada Mediterrana arrived in Malta in October 2016. Built under a US$300 million contract Bumi Armada won from ElectroGas in 2015, the FSU is a conversion of MOL’s 125 000-cbm MOSS LNG carrier Wakabu Maru.

The unit received the first cargo on 11 January, when the Shell-managed 136 600-cbm LNG carrier Galea docked beside the FSU in the Marsaxlokk Bay.

The project aims to decrease electricity prices, reduce environmental damage from energy production, and increase security of supply by diversifying the energy mix. The project will partly replace the existing electricity generation infrastructure in Malta.

The measure will benefit the project developer and operator, Electrogas Malta Limited. It was selected on the basis of a competitive tender procedure by Enemalta, a public company licensed to generate, distribute and supply electricity in Malta. Electrogas Malta has a public service obligation to make available electricity and gas to Enemalta, and supply electrical energy and gas when dispatched by Enemalta. This contract will last for eighteen years. The support takes the form of payments from Enemalta, which provide an economic advantage to Electrogas as they ensure a certain rate of return and a steady revenue stream. The rate of return for Electrogas Malta is in line with that of similar projects. On this basis, the Commission concluded that the company will not be overcompensated for the services it will provide.

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