Cyprus Implements Changes to its Energy Sector
The government of Cyprus is making fundamental changes related to its energy sector. The Cypriot cabinet approved the minister of energy’s proposal made on Wednesday 16 October to make amendments to the articles of association of the Cyprus National Hydrocarbon Company (CNHC) that will as of now be known as the Cyprus Hydrocarbon Company (CHC). The changes essentially touch upon the structure of the company, accountability, transparency and reporting. The ministry also submitted a proposal to introduce Total on board the LNG project.
Texas-based Noble Energy encountered substantial amounts of gas when undertaking the Aphrodite field appraisal drilling in Block 12 of Cyprus’ exclusive economic zone. Although the quantities were less than originally estimated, the downsizing of the Aphrodite field to a range of 3.6 to 6 tcF will not deter Cyprus from moving ahead with its LNG project and energy hub ambitions. The quality of the gas (98% methane) encourages such efforts as well as further exploration activities within Cyprus’ EEZ.
The ministry of energy’s proposal included the abolishment of the current posts of executive officers so that the board comprises seven non-executive (solely Cabinet-appointed with no involvement of the Parliament). The changes also added increased auditing both on the financial results and the management of the company. The Parliament will receive reports on the company’s annual budget and maintains the right to question the company’s officials on the company’s activities. The cabinet will receive a bi-annual plan from the CHC. The CHC will represent the government in the LNG project and the future sales of natural gas.
The government intends to sign an MOU with Total in the coming weeks regarding the French company’s participation in the LNG project. Total SA was granted exclusive exploration rights for blocks 10 and 11 in the Cypriot Exclusive Economic Zone (EEZ). In the event of successful natural gas encounters by the French giant, Total might invest in an additional train that will serve the purpose of selling the natural gas to foreign customers.
Cyprus remains interested in a collaboration with Israel. Energy minister Giorgos Lakkotrypis has confirmed rumours that the island is offering Israel the opportunity to pool costs and partner up with Cyprus in joint exports of natural gas via the Vassiliko LNG plant on the island. Gas from the Leviathan would be transported to Cyprus for processing and sale. Lakkotrypis also added that Cyprus was even considering importing gas from Israel to satisfy the country’s needs as an interim measure until the country reaches self-sufficiency. Noble plans to bring the gas from Aphrodite offshore in the next three years. Cyprus plans to reach export phase by 2020. Charles Ellinas warns that Cyprus must not stall the process at the risk of losing the tight window of opportunity of entering the LNG market and finding customers. The island’s good intentions and considerable efforts to transform its cash-strapped economy will prove rewarding. Ellinas stressed on the need to develop an exhaustive master plan that will put the country on the right path towards becoming an exporter of natural gas and diversifying Europe’s energy portfolio.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean. Twitter: @karenayat | Email: ayat_karen@hotmail.com