Cyprus Adopts a Comprehensive Strategy to Develop its Oil and Gas Sector
Natural Gas Europe had the pleasure to meet with the Minister of Energy of Cyprus Yiorgos Lakkotrypis in his office in Nicosia to discuss the natural gas developments in Cyprus,. This article is the second of a series of articles related to the meeting with the Minister.
Recently hit by the financial crisis due to its banks exposure to Greek debt, Cyprus is implementing serious efforts to develop its oil and gas sector. Is the island solely dependent on its offshore riches to overcome its money problems? Will it succeed in finding sufficient amounts of hydrocarbon to incentivise major oil and gas companies, investors and neighbouring countries to participate in its path towards energy production? Does it have the right organs, tools and work forces to lead and direct the process? Is Cyprus dependent on the helping hand of its Eastern Mediterranean neighbours to become a net natural gas exporter?
Minister Lakkotrypis discusses Cyprus’ slow but certain path towards entering the offshore business. He notes that while it is important to move quickly enough to enter the natural gas market in time, hasty decisions are to be avoided. The hydrocarbon riches will certainly contribute in creating effective long term growth, he says. Cyprus is adopting a comprehensive strategy to stabilise the economy and allow it to prosper. Lakkotrypis adds that beyond developing its offshore reserves to generate revenue, Cyprus is working towards becoming a center for oil and gas expertise in the region. He stresses on the importance to build a long term knowledge-based economy around the oil and gas sector with specialised lawyers, accountants, auditors, technicians and engineers. He adds that when the sales of gas are long gone, the trained workforce would remain and continue to attract the professionals in the industry, to the benefit of Cyprus’ economy. Cyprus is a full member of the EU, enjoys a stable and transparent political system, implements EU law and offers a business friendly environment that is attractive to major oil and gas companies, elements that contribute in turning Cyprus into the Eastern Mediterranean energy hub it aspires to become.
Asked about the recent changes in Cyprus Hydrocarbon Company (CHC), Minister Yiorgos Lakkotrypis explains the reasons and the fundamentals behind the modification of the operations of CHC. Lakkotrypis told Natural Gas Europe that the Government of Cyprus has learned from the failure of its banking sector. The recent events of March 2013 revealed a lack of oversight and control over the banking sector that he says should not be repeated in the energy industry. Sufficient controls were introduced to the functions of CHC, that he considers to be the biggest company in Cyprus. The main idea was to appoint non executive members of the board of the CHC, implement control of the board of directors over the CEO, in addition to the control from the council of ministers and the monitoring of the company by the General Auditor.
Lakkotrypis adds that Cyprus maintains excellent diplomatic relationships with both Lebanon and Israel. He hopes Lebanon will move ahead with its first licensing round as soon as possible and overcome the political deadlock it is currently facing. Lakkotrypis reveals to Natural Gas Europe that Cyprus and Lebanon will very soon be conducting another series of talks around the unitization agreement on a date to be determined. He also comments that despite the fact Israel has not formulated its intention to participate in Cyprus’ onshore export LNG facility in Cyprus, discussions are ongoing and that Cyprus firmly believes that an LNG terminal on the island is the optimal way for the Eastern Mediterranean countries to export their natural gas finds to export markets.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Email Karen on karen@minoils.com. Follow her on Twitter: @karenayat