Cyprus Mail
Cyprus Energy

Decision soon on interim gas supply

Meeting at the presidential palace on Friday

By Peter Stevenson

THE GOVERNMENT will make a decision within the next two weeks about importing interim supplies of natural gas in its attempts to reduce the cost of electricity.

President Nicos Anastasiades chaired a meeting between Energy Minister, Giorgos Lakkotrypis, the Electricity Authority (EAC), the Electricity Regulatory Authority (CERA), Natural Gas Public Company (DEFA) and the transmission system operator at the Presidential Palace on Friday.

“The main topic of the meeting was an interim gas solution in an attempt to exhaust all possibilities that exist, to be able to substantially reduce the price of electricity,” Lakkotrypis said after the meeting.

The minister told reporters that efforts were being made to ensure that no opportunity would be lost in the government’s efforts to substantially reduce the cost of electricity. He said a decision would be made one way or the other very soon.

“We discussed two essential parameters, one is the estimated quantities of electricity demand and the other is the length of the contract (offered by Russian company Itera). We looked at things realistically and have said that if we can reduce the price of electricity and provide substantial benefit to the state then we will go ahead with it,” he said.

Cyprus is seeking to secure a short-term supplier of natural gas not exceeding 1.2 billion cubic metres (bcm) per year as a stop-gap solution until it can bring ashore its own natural gas. The interim gas would be used for domestic electricity production.
Under the terms of the call for expression of interest, the supply of gas was to begin no later than early 2015 and last up until September 2018, when the island should be able to start using its own resources from the natural gas discovery in its Exclusive Economic Zone (EEZ).

Reports earlier this month claimed Itera’s offer would see gas sold to Cyprus just under $16 per million British Thermal Units (mBTU). Reportedly, DEFA is trying to get Itera to drop its final price a little more in order to clinch a deal.
But $15 or $16 per mBTU is not much lower than the electricity utility’s current cost of producing electricity from diesel, believed to be between $17 and $18 per mBTU.

“The issue of reducing the cost of electricity remains a priority for this government and we will pursue any policy that would bring about a substantial reduction,” Lakkotrypis said.

The minister revealed that a timeframe had been set and that a decision would have to be made within the next two weeks.

He added that the reduction in the cost of electricity would allow Cyprus’ economy to become more competitive and give some form of relief to households.

“We are making every effort to exhaust all possibilities,” he said.

It was leaked in early July that Noble Energy, which has a concession on offshore Block 12, had approached the government with its own idea for short-term supply of gas. For the time being Noble’s proposal is ‘informal’, in that it falls outside the bidding process conducted by DEFA.

Asked whether the government was considering Noble’s bid, Lakkotrypis told reporters that only official offers were being considered.

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