THE government must implement a gas revenue management plan now if it is to realise the “wide and bright prospects” before it and not end up with the ‘Dutch disease’, or the corruption and inflation experienced by other gas-rich countries, experts warned yesterday.
This was the stark choice put before assembled business leaders, economic experts and Commerce Minister Praxoulla Antoniadou at the 2nd Limassol Economic Forum’s discussion panel on energy yesterday.
“You may think you have some time, but you are wrong. You have no time… you have to get the key issues on the table very soon” said Renaissance deputy Chief Executive Officer Hans Jochum Horn.
Horn, who brings decades of experience in Russian and Norwegian gas management projects said: “If you’ve got the right government framework you will not squander the wealth… but money has a tendency to cloud people. When politicians see the money coming they have all sorts of pet projects.”
A key issue is whether or not to establish a national gas company, and if so, perform the next steps needed to ensure the politicians are kept away from it.
“A successful national oil company has to be rooted in a democratic culture. There must be a lack of corruption” Horn said, adding that there ought to be various checks and balances, such as listing of the company on stock exchanges, and a fixed rate –linked to the national economy – at which the government is allowed to siphon from gas revenues to boost state revenue.
In Norway, for example, the government can take four per cent of annual gas revenue, with the rest put into a fund managed by the central bank, not politicians. Norway’s experience also highlighted another fact about oil revenue management- that the early profits are in the hydrocarbon transport sector.
“You must focus. The money is there but this is about the people.” Horn said.
Transparency in the tendering process was another issue raised in the discussion, and which earned fellow panelist and energy economist Amit Mor a round of applause from delegates when he raised it.
When quizzed on this by an audience member, Minister Antoniadou called for patience as the government awaits the outcome of the second round of licensing “so that (the government) can speak of action and not just words.”
She said: “Already the president has given a copy of the agreement (with Noble) to the president of the parliament, and it is available to be studied by the heads of the political parties, so any (political) concerns can be addressed.”
Asked about the government’s preparations Antoniadou said they have been preparing for this moment since the introduction of a new law on gas extraction that parliament passed in 2007, and that experts were already advising the commerce ministry, the attorney General’s office and other ministries.
“The government has started to plan and to add in the direction of introducing natural gas as a source of energy in the production of electricity.”
One participant in the audience called for a referendum on the allocation of gas to Turkish Cypriots.
Antoniadou responded saying the gas presented an opportunity for Turkey to play a pacifying role in the region – something it has yet to do – and that the government remained a government of the whole island, not half an island.
Regarding overall progress, she government is “more or less half way” towards confirming the amount of gas in Block 12, and though there was no certainty yet, there remained a “high probability that the amount would be significant.
“Noble energy expects the first indication of possible gas reserves by mid December.” Antoniadou said.
