THE PURCHASE and storage of oil reserves for a further 30 days, as is expected by the EU, could cause a sharp increase in fuel duty, the House of Representatives heard yesterday.
The President of KODAP (the Cyprus Organisation for the Management of Oil Reserves), Giorgos Demetriou, told the House Finance Committee that extending the storage of oil from 60 to 90 days would mean an increase in duty from 0.33 cents per litre to 0.63 cents per litre.
But he added that the increase could be smaller if the purchase of reserves was made at current international rates.
The storage of reserves is the problem, according to Demetriou, as there are no appropriate areas in Cyprus, while the Greek oil storage areas in Elefsina, which Cyprus is currently using for 60 days’ supply, will not be able to cope with more. The possibility was being examined to rent areas in Malta or Holland, he added.
The Finance Committee had convened to discuss KODAP’s 2007 budget, which foresees expenses amounting to £61.2 million and an income of £61.4 million – £11.5 million of which will come from the Organisation’s members’ subscription fees, £123.000 from interest fees and £49.7 million from loans.
Demetriou told deputies that the loans would be paid off in 15 years, while there would be an increase in subscription fees, to bring them up to the standard of other European member states.
Cyprus, he said, was obliged to have 90-day reserves by January 1, 2008, while an increase now from 60 to 90 days would entail the purchase of 200,000 fuel tons.
Demetriou said there would not be any problems in storing white oil in Greece, but there would be a problem in storing fuel oil, which is used by the Electricity Authority of Cyprus (EAC).
He pointed out that the EAC has the capacity to store 140,000 square metres, and that was why the state was examining the option of closing an agreement with Malta or Holland.
Demetriou informed the committee that 74,000 metric tons of reserves were currently kept in Cyprus at the Larnaca Refinery storage area, while 70,000 metric tons are stored in Greece.
“We must hurry and buy the reserves, as China and India are creating 90-day reserves, which are expected to increase prices by the end of the year,” said Demetriou.
A spokesman for the Commerce Ministry assured deputies that the problem with the storage areas would be resolved with the completion of the energy centre in 2011, though he said the storage depots were expected to be ready sooner.
He also explained that even if the government did buy the reserves, based on European legislation, the cost would be felt by the consumer, while he mentioned that agreements were going to be signed with Italy, Germany and Holland regarding storage areas.
AKEL deputy Stavros Evagorou expressed his party’s disagreement with the increase of any prices, especially when it came to oil and gas.
He said “we all know, and we shouldn’t hide behind our little finger, that the EU imposes an increase of oil and gas reserves to 90 days by January 1, 2008, and that for this to happen reserves must be bought, and that the cost of buying these reserves cannot be covered by the state budget, but it is imposed by the EU that the cost be covered by duties”.
Evagorou pointed out that Germany was asked to store reserves in 1970, when oil and gas cost six dollars a barrel, while Cyprus is being asked to buy reserves with the current prices.
DISY’s Averoff Neophytou made a note of the delays in constructing the energy centre, while he said the current problems were probably due to the EAC’s bad planning.
“We are observing a 100 per cent increase in duty, at a time that there are EU countries with a duty of 0.33 cents per litre; plans that aren’t being realised and in the end the Cypriot taxpayer will pick up the pieces,” said Neophytou.
