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Our View: Ten years and still no closer to powering EAC units with gas

THE COLLAPSE of negotiations for the supply of natural gas, between the Natural Gas Public Company DEFA and Russia’s bidder Itera, is the latest in a long list of failed attempts to bring natural gas to the island and end the exclusive use of costly liquid fuels by the EAC’s power stations. Indecision, prevarication and, we suspect, vested interests have all conspired over the years to prevent the EAC from using the much cheaper and environmentally cleaner natural gas to power its generators.

Plans to use natural gas were first formulated by the Clerides government, which left office more than 10 years ago, but proved nothing more than an exercise on paper. No action was taken – even the requisition of land for the creation of a terminal for LNG was put on hold. The Papadopoulos government, a few months before the end of its term, decided to get round this problem by negotiating a deal with a company prepared to set up a floating terminal to receive the LNG. However, the plan was abandoned when it was revealed that the late president’s law office was representing the firm and the deal was seen as a scandal.

Then we had the EAC unions insisting that the Authority was granted the monopoly of the sale of natural gas to the island and forcing the political parties to pass legislation satisfying their demand. This led to the creation of DEFA – more well-paid jobs – which for years had very little to do. Under the Christofias government, the EAC was on the verge of signing a contract for the supply of LNG with Shell, but strong political opposition to the duration of the proposed contract scuppered the deal. The Mari explosion, inevitably, gave rise to more delays, but the previous government eventually invited tenders for securing intermediate supplies of natural gas until Cyprus’ reserves could be used.

After months of negotiations, DEFA rejected the offer made by the lowest bidder Itera on the grounds that the reduction of the EAC’s power production costs would not be adequate. A cost-analysis report by Itera, leaked to the media showed that the saving from 2015 to 2021 would be in the region of €800 million, if all plants were run on natural gas, an amount that represents a 25 per cent saving. However the figures have been contested by the EAC, which insists the saving would be negligible, according to its own calculation that it refused to make public. A frustrated Anastasiades has now asked the Auditor-General’s office to do its own cost calculations to establish which side’s figures were accurate.

DEFA has now initiated talks with the second-ranked bidder of the tenders’ procedure. The natural gas saga continues and, after 10 years of failed efforts, we are still no closer to powering EAC’s Combined Cycle Gas Units (which cost close to €500 million and have been in place for four years) with natural gas and thus reducing electricity costs.

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