Committee ponders fate of oil refinery

COMMERCE Minister Nicos Rolandis yesterday said the question of whether or not to upgrade or close the Larnaca petroleum refinery had been deliberated by a special ministerial committee and would go before the Council of Ministers "sometime in May."

"Views were heard," at yesterday’s ministerial committee meeting, he said, declining to elaborate, "and the whole matter will be before the Council of Ministers some time in May."

"Of course," he added, "the main objective is to make sure that, whatever the decision regarding the upgrading of the refinery or not, Cyprus will not be left without petroleum products, because it is the backbone of the economy, of life generally."

"So the decision has to be such that we will secure the smooth continuity of the supplies, of the availability of petroleum in Cyprus. This is the main criterion," Rolandis said.

One option facing the Cabinet includes a $40-million refinery upgrade to bring its products up to EU standards by 2003, when Cyprus hopes to join the European Union.

Other options include moving the refinery to another site – which the government has long promised the Municipality of Larnaca – or closing it altogether and ending oil refining on the island.

All these choices involve spending hundreds of millions of pounds to construct extra crude oil and refined product storage tanks to comply with EU requirements.

EU rules require Cyprus to triple its 100,000-ton crude oil storage capacity to about 320,000 tons. Building these tanks could cost over $300 million, Rolandis has said.

EU rules also require Cyprus to have a storage capacity for a minimum of 90 days worth of refined petroleum products, adding millions more to the equation.

Whether Cyprus builds the new storage tanks in Larnaca, or moves the refinery to another Cyprus site and builds them there, or even ceases refining oil and simply imports refined petroleum products, it will have to pay to build storage tanks somewhere.

Under EU rules, that "somewhere" could be in any other EU country, Rolandis said – which would include Greece.

But ceasing to refine crude oil and buying refined products overseas – whether or not they are stored on or off the island – would make Cyprus import-dependent for all its commercial and military fuel needs.

The minister sees the oil problem as probably "the biggest single issue when it comes to our EU accession."

 

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