Insights | 01 June 2019 | Ministry of Energy, Commerce and Industry

Yiorgos Lakkotrypis , Minister of Energy, Commerce and Industry

Cyprus is an excellent investment destination and a highly competitive international business centre, whose many comparative advantages set it apart from most jurisdictions

Cyprus offers investors an attractive base for operations and preferential access to multiple global markets. A return to investment grade last year has resulted in substantial inward investments in a wide range of sectors, and with new gas discoveries and renewable solutions in the pipeline, Cyprus is an economy with real prospects.

2019 started off well with yet another new natural gas discovery in Cyprus’ EEZ, how do you see the energy sector evolving and what are the key aspects to ensure the sustainable development of this important sector in terms of both energy security and in creating a successful business cluster?

The recent news from Block 10 and the gas discovery at ‘Glaucus – 1’ well by ExxonMobil/Qatar Petroleum, were an excellent development. We hope that more such good news will follow soon, as new exploration wells will be drilled in the Exclusive Economic Zone (EEZ) of the Republic of Cyprus.

Obviously, to proceed with the exploitation of gas discoveries, infrastructure investments of billions of euro are needed, such as upstream facilities, pipelines, shorebase facilities and a liquefaction plant. And, of course, investments of such magnitude require a stable and vibrant business environment. To create this environment, we are now working towards several goals, such as expanding the industrial port at Vassilikos to host shorebases that will support offshore hydrocarbon activities in the Eastern Mediterranean region, improving the coordination of governmental authorities to efficiently serve oil and gas companies in Cyprus, particularly with regard to permits, and creating local skilled personnel, necessary for the industry.

In addition, we are concluding and signing intergovernmental agreements with neighbouring countries, necessary for investments in the oil and gas industry, especially in such situations where there is infrastructure crossing the countries’ EEZs. Establishing multilateral cooperation in the energy sector with other countries in the Eastern Mediterranean will enhance the region’s competitiveness and energy security, by for example building on synergies arising from hydrocarbons exploitation.

Renewable energy solutions have also gained momentum in Cyprus over the last few years, what plans does your ministry have to encourage more investment in state-of-the-art RES infrastructure in line with international and European targets?

In conjunction with the various support schemes for renewables operated by the Ministry of Energy, we also have several pilot projects ongoing with regard to the electricity grid, by both distribution and transmission system operators. One such project is an integrated platform for increased flexibility in smart transmission grids with storage.

Given Cyprus’ electricity isolation, our overall aim is for the new and disruptive smart grid technologies, as well as state-of-the-art control and storage methods, to be used in parallel with new market approaches, to introduce flexibility to our power system.

2019 is a critical year as far as our 2020 Renewable Energy goals are concerned, set by the EU at 13%. In 2017, the percentage of renewables in the gross final energy consumption of Cyprus rose to around 10% and we are now confident that all the necessary support schemes are already in place to achieve our goals. For example, we now operate a scheme for the production of electricity from Renewable Energy Sources (RES) for own use, which includes installations of net-metering photovoltaic (PV) systems with capacity up to 10 kW for all consumers, residential and non-residential, net-billing RES systems, mainly PV and Biomass, with capacity 10 kW to 10 ΜW for commercial and industrial consumers and off-grid RES systems with no limit in total capacity.

For some of these, the Government is offering subsidies to consumers, intended to encourage further RES installations by reducing the recuperation period of their investments. Moreover, following a very successful support scheme for the installation of RES systems that will operate in the competitive electricity market – approximately 100 MW PV systems, 2.3 MW Biomass and 12.5 MW from a wind park have been approved – and in April 2019 a new scheme was announced for another 150 MW. The major difference from its predecessor is that for this new scheme producers will now need to form bilateral contracts with independent suppliers. In both cases, the RES systems that enter these schemes are expected to be operational before the end of 2020.

The professional and financial services sector is a significant economic driver, what do you see as Cyprus’ key strengths over other jurisdictions and how can the country attract more international business?

Cyprus is an excellent investment destination and a highly competitive international business centre, whose many comparative advantages set it apart from most jurisdictions. These advantages include, amongst others, one of the most competitive corporate tax rates in Europe at 12.5%, a significant network of Agreements for Avoidance of Double Taxation with 64 countries, a highly qualified workforce and a robust and attractive tax and legal system, fully harmonised with EU and international best practices.

As an EU and eurozone member, our Mediterranean island offers investors an attractive platform for operations and preferential access to markets in Europe, the Middle East, North Africa and Asia. In fact, the return of our economy last year to investment grade, mainly due to the ongoing public sector reforms, prudent fiscal policy and recent moves to strengthen the banking sector, has resulted in renewed substantial inward investments in a wide range of sectors. Among these are investment funds, the oil and gas industry and large tourism infrastructure.

The economy of Cyprus is expected to grow at a healthy pace over the long term. The budgetary surpluses created in recent years have enabled the Government to offer a range of tax and other incentives to attract foreign investment to the productive sectors of our economy, especially boosting entrepreneurship by placing emphasis on innovation and start-ups, higher education and headquartering.

What other key targets have you set to be achieved in 2019?

Given the broad range of economic sectors that fall under our Ministry, we have a number of key targets that we aim to achieve this year. Regarding hydrocarbons exploitation, we are expecting to conclude in 2019 an agreement with the ‘Aphrodite’ gas field contractor, to unlock its development and begin gas production as soon as possible. We expect to issue an Exploration Licence for Block 7 of Cyprus’ EEZ to the Total/ENI consortium, and, at the same time, that our current licensees proceed with their exploration programmes in order to make additional gas discoveries.

In 2019 we are also launching a new National Industrial Policy to 2030, with a vision to create a robust, flexible, intelligent and technologically advanced industry with relevant services, contributing substantially to the growth and competitiveness of the Cypriot economy and the well-being of its citizens. In this context, we are introducing two new grant schemes in 2019, aimed at helping small and medium sized enterprises create strategic clusters and engage in their digital transformation.

What are your expectations for Cyprus and its economy and what message would you like to convey to the international community?

Cyprus today offers what foreign investors are looking for: one of the fastest growth rates in Europe, a favourable fiscal and legislative framework, professional services of the highest level and, above all, an economy with real prospects.

To maintain momentum, our Government plans to remain focused on the careful management of state finances, as well as on forging forward with our ambitious reform program, which have led to successive budget surpluses, a dynamic growth rate of around 4% over the past years and the successive upgrades by international rating agencies that have brought our economy back to investment grade. The positive outlook created for Cyprus enhances the trust of existing investors and, at the same time, sends a strong message to new investors to explore our country’s significant potential.

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