THE GOVERNMENT appears, at last, to be moving on the natural gas front. David Stover, the President and Chief Operating Officer of Noble Energy, the US company which has the concession to drill for hydrocarbons in Block 12, was in Cyprus on Thursday to discuss certain concerns with Commerce Minister Antonis Paschalides. Although there were certain matters relating to Cyprus law and EU regulations that had to be clarified, drilling is expected to start, as planned, before the end of this year.
Meanwhile, the head of the Energy Service of the Commerce Ministry Solon Kasinis was in Houston trying to whip up interest in the second round of explorations in Cyprus’ exclusive economic zone.
He told a meeting that four companies had already expressed an interest, but in Nicosia Paschalides was non-committal about when the new round of bidding would start. The fact that drilling was scheduled to start this year would have helped spark interest in the other blocks as would the statement by a Noble Energy official, about plans to set up plant for liquefying natural gas in Cyprus.
This may have been a good sales pitch, but the overall impression remains that the government is not entirely certain as to how it will proceed. Would it take up the proposal by the Israeli company Delek to set up a liquefying facility in Cyprus from which LNG would be exported to the EU, as the Noble official said? Would we do this in partnership with Israel or on our own? Israel’s foreign minister has visited Cyprus several times recently in an effort to sell the idea to the government, but no decision has been reached by Nicosia. It is unlikely there will be one soon because the government has no clearly defined plans or objectives on energy, preferring to improvise as it goes along.
Paschalides’ revelation that the government was unlikely to sign the contract negotiated with Shell, a few months ago, for the 20-year supply of LNG, for the needs of the Electricity Authority’s (EAC) power stations, was a case in point. The Authority had been applying pressure for a decision, for months, but the government could not make up its mind.
The likelihood that we would have our own natural gas in the foreseeable future did not justify such a long-term contract, it was argued, quite reasonably by politicians. Now, at last, it has been reported that a new tenders procedure for the supply of LNG will be initiated, without the restrictions and time scale of the first procedure. There are also thoughts of opening up the market and scrapping the law stipulating the LNG monopoly of DEFA.
This would be a correct decision and much less costly, but it illustrates the absence of a properly thought-out energy policy and the haphazard decision-making process. In fact, if there had been no political outcry against the 20-year contract, which caused the government to get cold feet, it would have been signed when it was agreed several months ago. Now, we are back at square one, with plans for the big investment in a de-liquefying plant in Vassiliko almost certain to be scrapped.
And we cannot expect a long-term strategy and faster decision-making from the advisory committee set up by Paschalides to deal with matters related to the exploration for hydrocarbons and broader energy issues such as the importation of LNG. Several ministry permanent secretaries and the Attorney General would sit on the committee which would meet for the first time this week. But what are the prospects of a committee of civil servants, with no expertise on energy issues taking quick decisions and offering informed advice? Are they the best-qualified people to advise the minister?
What we need is for the government to decide clearly defined energy policy objectives, set time-frames and formulate an implementation strategy. It could seek the help of academics and professionals with expertise on energy issues to formulate policy and strategy; it should also consider of ways for handling possible threats from Turkey over the drilling. True, these are difficult decisions that would require a great deal of research, study and discussion before they are finalised, but without them the risk of ultra-costly mistakes, long delays and political squabbling would be very high. We cannot handle such a big and complex issue through improvisation, we need a plan.
