articles | 18 October 2013

Cabinet approves changes to national hydrocarbons company

The Cabinet has approved modifications to the articles of association of the national oil and gas corporation, the Cyprus National Hydrocarbons Company (CNHC).

The energy ministry’s proposal for the changes to the company were submitted to the Cabinet along with the ministry’s proposal on bringing French energy giant Total on board the Liquefied Natural Gas (LNG) project. Politis writes that the government intends to re-jig the national gas corporation, abolishing the current posts of executive officers so that the board comprises seven non-executive (Cabinet-appointed) directors. The proposed changes also envisage a more active involvement for the auditor-general, who will not only monitor the entity’s financial results but also the running of the company.

Parliament will have no say in the selection of the directors, but will receive briefings on the company’s annual budget. Lawmakers also reserve the right to summon company officials to quiz them on ongoing operations. Moreover, the Cyprus Hydrocarbons Company – as it will henceforth be called – must submit to Cabinet an operational plan every six months. The new entity will represent the state in the latter’s ownership share in the mooted LNG plant, and will be tasked with the sale of the Republic’s share of hydrocarbons.

Cyprus has opted for production-sharing contracts with energy companies, giving the state ownership over a percentage of any recoverable gas and oil that is made commercial. By comparison, Israel does not own the offshore gas and instead collects royalties on sales. But before the government can make the changes, it needs to sort out the legislative framework surrounding the national oil and gas corporation. A law passed by parliament just before the presidential elections was not signed by then President Christofias, who referred it to the Supreme Court. That law provided that negotiations with energy companies would be conducted by a committee of technocrats and not directly by the trade (now energy) minister.

Another pending issue, said Politis, involves the current executive chairman of the CNHC Charles Ellinas. The government presumably has to compensate Ellinas should it decide to terminate his contract.
Speaking on the state broadcaster yesterday, energy minister Giorgos Lakkotrypis denied the new entity was being downgraded, as suggested by his predecessor Neoclis Sylikiotis. “Our proposal for the company submitted to the Cabinet is eight pages long. By contrast, the prior proposal (establishing the CNHC) under the previous government was just two sentences long. Does that tell you that it’s being downgraded?” Lakkotrypis argued. The minister said also that a declaration of intent, or a memorandum of understanding, would be signed betweenthe government and France’s Total some time in the next few weeks.

The MoU concerns Total’s participation in the development of an LNG plant on the island. Should Total make gas discoveries in its concessions (offshore blocks 10 and 11), then it would invest in the extra train to be built at the LNG terminal, the minister explained. Houston-based Noble, which signed a similar agreement with Cyprus earlier this year, has de facto priority in the development of the LNG plant. The first LNG train at the facility would process gas extracted from Noble’s Block 12 concession, with more trains added subsequently in the event Total and ENI-KOGAS discover gas in their own concessions.

On the interim gas solution, Lakkotrypis said that during talks in Israel earlier this month, the Israelis were in principle positively disposed toward providing gas from the Tamar field. However, the Israeli state must first straighten out the issue of whether it will allow exports.

Source: Cyprus Mail

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