EMPLOYEES at the Electricity Authority of Cyprus (EAC) have warned of dynamic measures, including possible strike action, if the government goes ahead with plans to build a floating unit instead of a land facility processing Liquefied Natural Gas (LNG).
The threat came as a ministerial committee decided yesterday to initiate tenders for an offshore storage facility.
“We are not abandoning the land-based option, far from it,” explained Trade Minister Antonis Michaelides.
He said the government’s first choice remained the land terminal, but at the same time they were exploring other possibilities.
“If in the meantime we receive offers [for an offshore unit] that are deemed feasible, then of course we’ll go for it. We’re not about to keep our arms crossed. Meanwhile, preparatory and design work will commence on the land terminal so that no time is wasted. We’re keeping our options open,” Michaelides told the Mail.
The government is keen on an offshore unit, which it says will cost less and be ready much earlier than a land terminal, which would be completed no earlier than 2014. In this way, says the Ministry of Trade & Industry, Cyprus can more quickly switch to natural gas from the more expensive diesel fuel.
The EAC disagrees.
“A land terminal would be the economically sound solution for both the EAC and the country,” said trade union leader Andreas Panorkos.
He cited the findings of studies by foreign experts and the European Investment Bank, which he said corroborated this.
“A land-based terminal ensures uninterrupted supply of electricity, and lower cost to the consumer per KW,” Panorkos claimed.
Moreover, he added, these same studies had been commissioned by none other than the government.
“They are backtracking. The other options considered by the Trade Ministry are unreliable or consist of untested technologies.”
For his part, Trade Minister Michaelides said the unions’ attitude were “inexplicable.”
And he accused the EAC board of refusing to implement government policy.
The EAC’s stance is proving to be something of an embarrassment to the government. Though on paper a semi-governmental organisation, the EAC’s board of directors is appointed on the recommendation of the Cabinet or the President, and would be expected to follow the government line.
“The differences are not so vast that I should ask for the resignation of the [EAC] board – at least not at the moment,” Michaelides said yesterday.
The minister charged the EAC of a monopolistic mindset, and rubbished their proposal that the natural gas sector be declared an “emergent market.”
The EAC wants the market to be termed emergent, so that it can remain the main supplier of electricity on the island.
The government says that the energy market has been liberalised, and that asking for a derogation would make Cyprus a laughing stock in the EU.
But Demetris Constandinou, a trade unionist with SIDIKEK, shot down Michaelides’ arguments.
“First of all, to set the record straight, the study by the European Investment Bank (EIB) said it was quite possible a land terminal could be finished by 2013 or even 2012, not 2014 or 2015 like the government insists.
“Second, declaring a market emergent relates only to the production of electricity, not its consumption. Therefore, the government does not need a derogation from the EU; a ministerial decision would be enough.
“And third, why should we experiment with untested technologies? The reliability of floating units is untested, so why risk blackouts?”
While conceding that the EAC were keen on remaining the key player, Constandinou said a land-based terminal would ultimately benefit the public.
The EAC could participate as a majority investor in the project, he said, and the government could receive a piece of the profits, which it might then use to subsidise the cost of electricity to consumers.
The Mail has seen the EIB recommendations, which tilt in favour of an onshore facility. It reads:
“The ability of the EAC to use natural gas in firing the Vassilikos Unit 4, which is currently under construction and its commissioning date is contractually set for January 2009, is the driving factor. The Vassilikos Unit 4 is a 200MW Combined Cycle Gas Turbine unit that can burn either gasoil or natural gas. Given the environmental and cost advantages of natural gas over gasoil it should preferably run on natural gas.
“However, running the Vassilikos Unit 4 on gasoil during the period when gas is not yet available would not increase the current cost of fuel per kwh produced as the higher efficiency of Unit 4 (compared with the existing thermal units) would compensate for the difference in price between heavy fuel oil and gasoil.
“Natural gas, when available, will reduce EAC fuel costs and therefore electricity price to consumers, but the key argument here is that the non-availability of natural gas for a certain period will not result in higher electricity prices for the consumer during that period.”
It goes on: “An offshore LNG terminal can, however, offer the advantages of a faster and less complicated permitting process, lower impacts to population, and a faster implementation period. This timing advantage for offshore LNG terminals is however rather theoretical, as no such terminal has been implemented before.”
On the onshore option, the EIB states:
“…the terminal is likely to be operated on the basis of long-term throughput agreement with gas purchasers and/or suppliers that would book capacity in terminal.
The free access of the terminal capacity to third parties (i.e. not only to EAC) would be required to comply with EU gas market rules. An exemption [derogation] to some of the third party access regulation of EU directive EC/2003/55 might however be required in particular to allow fixed terminal’s tariff over a long term period.”
Former Minister of Trade and Industry Nicos Rolandis yesterday suggested the government was in a rush to make up for lost time.
Having wasted four years due to inaction, the government was now gravitating toward the faster solution, which happened to be the floating unit.
Rolandis pointed to a Cabinet decision dating to February 2003, under the Clerides administration, which set a timetable for a regasification plant and the import of natural gas from neighbouring Egypt.
“Under the decision, the offshore terminal would be ready by the end of 2007. It is now mid-2007, and they are starting from scratch,” said Rolandis.
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