AN INTRIGUING event took place last Tuesday evening at Nicosia’s Cleopatra hotel. Intriguing in more ways than one.
The event was a talk on “Renewable sources of energy and use of natural gas in Cyprus”. By appearances, it was organised by the Institute for the Environment and Sustainable Development, which sent out the invitations. But judging by the attendance and the tone of the discussion, it would not be far-fetched to suspect it was the DISY party pulling the strings.
DISY chief Nikos Anastassiades was there, and so were many of the top party brass, including no.2 Averof Neofytou, Ionas Nicolaou, Christos Stylianides and Maria Kyriacou. Indeed, one might be forgiven for thinking it was essentially an AKEL-bashing DISY powwow under the guise of a discussion on renewable energy systems (RES) and natural gas.
The key speaker – or to be more exact, the star of the show – was Solon Kassinis, director of the Energy Service at the Commerce Ministry. For the uninitiated, he’s the man who a few weeks back blew the whistle on Cyprus’ enormous hydrocarbon reserves – casting a shadow on government plans to commit itself to a 20-year contract with Shell to import Liquefied Natural Gas (LNG) when all the signs are that Cyprus has significant gas deposits of its own. His report created something of a stir and angered his superiors.
Environment Commissioner Charalambos Theopemptou, who also attended, said it well during a short speech introducing Kassinis: “He’s a great talker.” An understatement, in fact. Minutes later, the fluff over, the great communicator Kassinis took over.
His presentation was solid – covering items from wind farms to photovoltaic systems to electricity consumption – but it raced through these issues at warp speed until it got to its final destination: the natural gas saga. That was what the audience had come to hear, after all.
After a low-down on the Cyprus energy sector – 96 per cent of electricity production comes from oil – the show really got on the road.
Kassinis said that, under the formula agreed between the government and the interested supplier of LNG – which we all now know to be Royal Dutch Shell – we’d pay $10.5 per million BTU, compared to just $4.5 per million BTU if Cyprus were to exploit its own (assumed) natural gas resources. That immediately drew some huffs and puffs from the assembled crowd – particularly from the front-row seats assigned to DISY cadres.
As the talk went on, it became harder and harder to discern whether some of the information divulged was (or should be) restricted. But Kassinis just went with it, transfixing everyone in the room.
A major reason why the ‘deal’ with Shell was raw, he explained, was because of the formula, which linked the price at which we’d buy LNG to the price of crude oil. Now while this linkage is common practice, in the case of Shell we’ve apparently agreed to buy LNG from them at 0.98 the price of crude oil – in other words, at practically the same price.
The idea for this formula, Kassinis remarked pointedly, belonged to the British firm hired as consultants by the Natural Gas Public Company (DEFA) and the Electricity Authority of Cyprus (EAC) to advise them on the negotiations with Shell.
What was really “nuts” (his words) was that LNG prices have remained relatively stable and low over the past decades, much lower than oil with its ups and downs. It thus made no sense to buy LNG at virtually crude oil prices.
“It would be a shame,” he said. “It is plain wrong to sign a 20-year contract for LNG,” Kassinis remarked, perhaps forgetting – or maybe not caring – that he was trashing government policy. His audience – heavily comprising opposition politicians – didn’t mind.
Now on a roll, speaking in Cypriot slang and cracking jokes, the senior civil servant stepped it up a notch. You couldn’t put an entertainment value on his talk if you tried.
While mentioning that he had been on the government’s case for years to exploit our own hydrocarbons, Kassinis took time out to tease DISY MP Averof Neofytou.
“Do you remember when you were minister and I was telling you about all this?” he asked Neofytou, who nodded.
“You made fun of me, remember? You said: ‘Re Kassini, what colour keffiyeh (Arab headdress) should we wear once we find the gas?’
“Now what have you got to say for yourself?” he told Neofytou. The room erupted with laughter.
While discussing the background to the sea plots for potential hydrocarbon exploration and exploitation, Kassinis talked a little about the mapping of the plots by the Norwegian company PGS which conducted surveys off the south of the island.
In passing, he mentioned that Turkey was at the time threatening and posturing to prevent Cyprus from mapping out the area.
“Yeah, whatever…they already grabbed half of Cyprus anyway. What else they gonna do?” he quipped.
On one occasion, he recounted, a Turkish ship was spotted close to the area where the Norwegian vessel was conducting seismic surveys. “Well, so what if they’d sunk it. It’s wasn’t our ship anyway, it belonged to the Norwegians.”
According to Kassinis, the Cypriot plots could hold up to 176 tcf (trillion cubic feet) of natural gas, present at a depth of 5km and perhaps even 7km deep.
These deposits, he said, could satisfy Cyprus’ energy needs for 150 years. And Noble Energy, a US firm which has a concession to drill for hydrocarbons in an area inside Cyprus’ exclusive economic zone (EEZ), would begin “drilling any day now”, he said.
Kassinis extolled the deal with Noble, which he more or less presented as his baby, saying it was a production-sharing contract with a zero per cent tax on profits and providing for market outlets.
Kassinis conceded, however, that it would take about five years (“I never said three”) from the start of drilling to the time that natural gas could be brought to market.
“The question is, can we build a natural gas liquefaction plant in five years?” he added.
He went on to urge politicians to amend or revoke the law passed in 2007 which gives authority for import and storage of natural gas to a new utility (DEFA) in which the state has a stake. Because the law is tied to the construction of a re-gasification plant on the island, it means the only type of fuel that will power the grid is liquefied natural gas. But any natural gas harvested by Noble from the seabed would have to be brought to the island in its gaseous form – requiring a completely different type of infrastructure, a liquefaction facility.
Cyprus decided to explore only its southern waters so as not to “avoid problems with the Turks”, Kassinis noted. He paused for a minute.
“One thing you should know is that the Greeks didn’t agree to delimit with us our respective EEZs (Exclusive Economic Zones] at Kastellorizo.”
He then proceeded to describe “the Greeks” with an epithet alluding to poultry and denoting a lack of daring.
When it came to Q&A, Kassinis – who playing to the crowd had grown in swagger and self-confidence – totally blew off a man who asked about the option of Compressed Natural Gas (CNG).
The man introduced himself as a local representative/associate of Sea NG, a Canadian company specialising in marine compressed CNG transportation.
“Yeah, yeah, I know all about them,” Kassinis barked. “These guys don’t even have any boats to bring us CNG.”
The man then protested that the company possesses the technical know-how and needs a purchase order before starting to build ships; but Kassinis had already moved on to the next question.
Another member of the audience, who identified himself as a representative of a multinational corporation said he had first-hand knowledge that Noble Energy had received warnings, in writing, from Turkey to stay away from the Cypriot plots.
One of the most intriguing parts of the presentation was a diagram illustrating an imagined pipeline in the Eastern Mediterranean/Levant meandering up through Israel and Syria and linking the South to North Energy Corridor and then onto the Nabucco conveyor – the gas bridge from Asia to Europe.
The project for the North-South energy corridor in the Eastern EU is supposed to be formally approved by the European Union by the end of 2011.
Cyprus, said Kassinis, could become a player in this grid if it decided to produce and sell its own natural gas. The Mediterranean pipeline, if it materialised, would have wide-ranging political ramifications, as it would also benefit Turkey as a transit point.
That’s a lot of what-ifs. On the face of it, it sounds good – perhaps too good to be true. No doubt Kassinis does come across as a straight-talker, the voice of common sense. Yet by the same token, one might ask: if the prospect of harvesting our own resources has long been known to many people – including the indomitable Kassinis who for years has been in charge of energy affairs – how come we’ve been looking at other options anyway?
