NEWS that AKEL had drafted a bill liberalising the natural gas market came as a big surprise. The communist party has never made a secret of its dislike for the free market while always subscribing to the idea of a big interventionist state. This is the party for which privatisation is anathema because it diminishes state control and the influence of the politicians.
So why has the party drafted a bill that goes against its ideology so blatantly? The motives for this volte face must be political rather than economic even though they are unclear. AKEL is the last party we would have expected to amend the 2007 law that created a natural gas monopoly for DEFA (Natural Gas Public Company), a corporation owned by the state and Electricity Authority (EAC).
The law was passed in December 2007, with the support of all the parties, which conveniently ignored that it was in violation of the EU acquis because the monopoly was demanded by the EAC unions. The unions believed, quite rightly, that by preventing competition they would not only protect EAC jobs but create more of them as the law meant that the Authority would be in charge of the natural gas terminal that would be set up.
So when a private company tried to set up a floating power station that would produce electricity with natural gas it was stopped on the grounds that it was violating the law. It subsequently filed an appeal in the Supreme Court, which is certain to rule that the gas monopoly law is unconstitutional, as among other things it restricted trade – it prevented a company from producing electricity and supplying it to the national grid.
The amendment of the law would change things dramatically. For instance, EAC could make arrangements to import natural gas for its power stations without going through DEFA, which has effectively been dormant, the government reluctant to use it after the natural gas find in plot 12.
There is also squabbling among the political parties, with DIKO having drafted a bill giving sweeping powers to DEFA, run by a DIKO stalwart, in the management of the island’s natural gas resources. Then there is the possible collaboration in the processing and marketing of natural gas with Israeli companies, to which the monopoly law would be a hindrance.
The exploitation of natural gas is a complex issue, affected by a variety of factors that go beyond Cyprus’ boundaries. Perhaps the government has recognised this and having decided the gas monopoly was an obstacle to the development of a long term policy, it gave instructions to AKEL to scrap the law. This indicates that the government is at last forging a policy for natural gas, which must be a good thing.
