articles | 18 February 2016

After 3rd gas round, investmentstability needed, says minister

Energy Minister Yiorgos Lakkotrypis said following an increase in interest for hydrocarbon exploration in the island’s exclusive economic zone, ENI’s latest mammoth gas discovery off the coast of Egypt and a third oil and gas round, Cyprus needs a more stable environment in order to attract investment.

“We have witnessed a significant interest in the past few months from companies” in the oil and gas industry, Lakkotrypis said in an interview on Wednesday. “The first to react were those in possession of our geological data” including unsuccessful participants in Cyprus’s second hydrocarbon exploration and exploitation round in 2012.

Cyprus Mail reported on Wednesday that the U.S. firm Exxon-Mobil was one of the companies which had demonstrated interest in Cyprus.

The energy minister also said that companies which did not participated in the previous rounds showed interest in Cyprus following the Zohr discovery, as Egypt’s 30 trillion cubic feet gas finding is also known. “As the industry was comprehending what this discovery meant we started to see interest from companies which were not present,” he said. “The significance of Zohr lays into the fact that it opened up a completely new geological play”.

The meetings President Nicos Anastasiades had a month ago at the World Economic Forum in Davos “were catalytic in the decision,” hesaid. “We saw the great interest (and) the potential, so this was a very good moment for us to announce it. Of course certain processes and procedures need to be followed to do this properly”.

Lakkotrypis said that the decision to go ahead with a third round would not affect reunification talks with Turkish Cypriot leader Mustafa Akinci, given that Turkey which opposes Cyprus’s plans to develop its hydrocarbon resources, sent ships to the area when U.S. Noble Energy Inc. Co. launched its drilling programme in block 12 of Cyprus’s exclusive economic zone in 2011 which led to the discovery of Aphrodite, a 4.5 trillion cubic feet natural gas reserve.

In late 2014 Turkey sent its survey vessel Barbaros to carry out hydrocarbon exploration off the southern coast of the island prompting Anastasiades to suspend his participation in the negotiations with the hardliner Dervis Eroglu, Akinci’s predecessor.

“We as a government, from the president all the way to the ministers, said on many occasions that (the talks and gas exploration) are not related,” the minister said. “We have a tremendous opportunity now” that Cyprus needs to keep hold of.

In reference to the decision by Larnaca municipality to virtually evict hydrocarbon companies involved in exploration in Cyprus’s exclusive economic zone after refusing to extend their right to operate from the town’s port, which Lakkotrypis described as “ideal” for their needs, he said that Cyprus needs to find a permanent solution for shore-based hydrocarbon activities “to the benefit of the companies and the country”.

“We have laid down the strategy which is based on three pillars,” he said. “One is in the short-term (concerning) this kind of logistic services base. This will bring immediate benefits to the country”.

In the mid-term Cyprus could benefit from “the hydrocarbons themselves” while in the longer-term it could create “a knowledge-based economy,” he continued, adding that the island already has human talent including professionals such as lawyers, accountants, technicians and engineers. “We want to specialise in the oil and gas industry and be able to export these services that we have to buy from outside today. The first pillar is very critical but we (should) find a permanent solution to their shore-based facilities”.

Larnaca’s decision angered hydrocarbon and logistic companies which invested millions of euros to set up production and storage facilities in the town and subsequently started to reconsider their presence in Cyprus. On Monday, Lakkotrypis and his colleague Marios Demetriades, in charge of transport, met with representatives of the hydrocarbon firms in an attempt to resolve the issue with relocation to Limassol port.

Lakkotrypis said that none the ministries involved in the process was non-responsive to the hydrocarbon industry’s needs.

“We have challenges and certainly, what we agreed on Monday with the three companies is that there will be a joint technical committee,” led by the Cyprus Ports Authority which will investigate the requirements of the companies, he said. “One cannot say for certain whether the Limassol port is suitable or not”.

The minister said that at this stage he could not say what the relocation of the companies to Limassol would cost. “This is what the technical committee will look into,” he said.

Companies could recover their expenses in the case of a discovery, he said. “Once we have production, these expenses will be added up”.

“One of the things that the companies expressed on Monday is ‘we don’t want to be moving left and right’ and they are correct,” Lakkotypis said adding that Cypriot authorities need to create a stable institutional framework and make their decision making predictable so that energy companies know the current environment, what they can expect “in the years to come” and what could come as “an addition”.

Source: Cyprus Mail

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