Cyprus Mail

Energy minister off to Israel for gas talks

Energy minister Giorgos Lakkotrypis

By Elias Hazou

ENERGY minister Giorgos Lakkotrypis may be making a trip to Israel next month for talks regarding the possible supply of limited quantities of Israeli natural gas for power generation here.

Daily Politis said some such agreement has been gaining traction over the last few weeks, with Nicosia receiving positive signals from Tel Aviv on the idea of exporting gas to Cyprus.
The minister’s visit to Israel would crystallize behind-the-scenes talks between the two sides on the subject, the paper said.

It’s understood that Cyprus is seeking to import relatively small quantities of natural gas – 0.5 to 0.7 billion cubic meters per annum – as a stopgap until it can monetize its own offshore hydrocarbon reserves.

The electricity utility already has the infrastructure in place to burn natural gas for power generation.

The talks with the Israelis would concern either the import of natural gas from the Tamar field, or alternatively a proposal by the Israel Electric Corporation to lay down a submarine cable between the two countries to provide Cyprus with cheaper electricity.

Given that Israel does not have liquefaction facilities, any gas imports would likely not be in LNG (liquefied natural gas) form.

Rather, the fuel would be imported in its gaseous form – cheaper because no liquefaction costs are involved.

This could presumably put compressed natural gas (CNG) back into play.

Already, as part of an ongoing natural gas tender here, Canadian company Sea NG has proposed a ‘taxi service’ for bringing Israeli gas to the island. The Canadians proposed securing gas from Tamar and shipping it to Cyprus in compressed form aboard specially-built vessels.

Israeli currently pays around $5.8 per mmBTU for electricity from its own gas. Assuming a slight mark-up on that price were the Israelis to sell to Cyprus, and with Sea NG adding another $5 for delivery, that would bring the tariff to between $10 and $11 per mmBTU.

The current cost of fuel for the Electricity Authority of Cyprus (EAC) is not known precisely, but estimates place it anywhere between $18 and $20 per mmbtu.

Meanwhile, according to Politis, the import of Israeli electricity via a subsea cable should likewise lead to a reduction in electricity bills.

The Israel Electric Corporation has reportedly offered to charge Cyprus around 10 cents per kilowatt-hour, compared to the EAC’s current average rate of 13 cents per kilowatt-hour.

But any move on the Israeli front would only come about if and when Cyprus terminates an ongoing tender on interim gas supplies, an official told the Mail.

The tender – invited by the Natural Gas Public Company DEFA – has received a lot of media scrutiny after a recent decision to abandon talks with the preferred bidder and initiate talks with the second-ranked tenderer.

The tender was launched in September 2012, and was aimed at securing a substantial drop in electricity prices for the consumer by generating power through natural gas. Currently, the island produces all its power from liquid fuels – mazut and diesel.

Talks with Israel on possible provision of natural gas began last year under the previous administration. Apparently, the negotiations at the time did not go anywhere, which is why the then-government instructed DEFA to launch its tender.

Earlier this year, the Netanyahu government formulated a policy to export around 40 per cent of the country’s estimated gas reserves, but that decision is being challenged in Israel’s High Court.

Should the Israeli government lose the court battle, it could potentially impact Cypriot plans to import gas from the neighbouring country – although that’s unlikely as the gas quantities sought by Cyprus are negligible compared to Israel’s overall reserves.

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