Last April, after severe public pressure, Energy Minister, Miriam Dalli revealed that the government is buying gas against price changes linked to the oil price. It’s not a hedging contract and as I explained the government is not hedged on its energy trade. The minister didn’t provide any other details.
This is how major gas and oil futures contracts prices have changed ever since Miriam Dalli announced the government’s deal.
Brent Crude: -11%
Natural Gas (US): -10%
Natural Gas (EU-Dutch): +30%
Not bad, so far, but the EU-Dutch contract still needs to go down by at least 65% to reach normal levels. However, this trade is not hedged so the Maltese government is still paying a hefty premium. The government is basically buying at any price available without insurance, protection and proper hedging. By saying, “not bad, so far” I really mean “it could have been worse”.
The pegging of LNG to Brent Oil wasn’t something that Miriam Dalli did but it comes out of the SSA signed with SOCAR where, after the end of the fixed price period for acquiring gas, the contract moves to an indexed period.