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Cyprus Energy

Storage move threat to retail fuel prices

The refineries in Larnaca: the government has already moved its stocks to Vasilikos

By Elias Hazou

PRIVATE fuel companies intimated yesterday that they may be ‘forced’ to raise their retail prices to compensate for the cost of relocating their storage facilities from the Larnaca beachfront to Vasilikos, Limassol.

The companies cited technical complexities in dismantling their liquid gas and liquid fuel facilities and moving them to Vasilikos.

Under a Larnaca municipality decree, the deadline for the relocation of the private fuel facilities is January 30, 2017.

During discussion in parliament, energy minister Giorgos Lakkotrypis countered that the companies can find a way to minimise the cost of relocation.

“I believe that the state reserves have shown the way…not only has their relocation not increased costs, but on the contrary costs have dropped as we have been able to repatriate some strategic reserves which we kept abroad,” Lakkotrypis said.

As part of the same scheme to free up the Larnaca seafront, the state’s strategic oil reserves are likewise to be transferred, to VTTV’s facilities in the Vasilikos area. The bulk of these reserves has already been moved.

This is understood to be a temporary arrangement, until KODAP (Cyprus Organisation for the Strategic Management of Oil Stocks) can construct its own storage facility at Vasilikos.

Cyprus is obligated to maintain national fuel stocks of up to 90 days consumption. This responsibility was assigned to KODAP. The reserves are stocked by the state fuel storage company (KETAP), which is to be denationalised.

The move is expected to save the state – which currently keeps most of its strategic reserves abroad – millions.
The previous government decided to establish a petroleum products import and storage terminal at Vasilikos, as part of a planned energy centre there.

The Vasilikos terminal will include facilities for the storage of operational oil reserves, facilities for the storage of strategic oil reserves, and facilities to allow it to operate as an oil trading and transit hub.

Responding to the noises made by the private fuel companies, Lakkotrypis said that, for one thing, under a government policy statement, taxes on liquid gas are to be maintained at the lowest level allowed for by EU law for at least seven years.

Moreover, he added, the government has earmarked land in the Vasilikos area to be leased to the private companies, at “favourable rates.”

In addition, land owned by the companies in Larnaca is expected to gain in value once the fuel facilities are removed.

“Therefore I feel that if the companies demonstrate good will, they would be able to keep their costs at current levels,” the minister noted.

The state has already appropriated land in the Vasilikos area, a number of objections have been overcome, and “we have reached an accommodation with the local communities, more or less.”

On August 5, the government made the private fuel companies a proposal for leasing land in the Vasilikos area.

The companies asked for a 60-day extension to respond. The government agreed, provided that the absolute deadline for relocation (end-January 2017) is adhered to.

KETAP has awarded a contract for the preparation of an environmental impact study on the dismantling of the fuel facilities in Larnaca. KETAP will need to restore the area.

The department of Town Planning is meantime at work drawing up a preliminary zoning plan for the area to be freed up in Larnaca. Department officials said that the final plan should be ready for publication in early 2017.

DIKO MP Angelos Votsis said parliament would monitor the fuel companies – who are invoking the costs of relocation – to ensure they do not unjustifiably raise retail prices.

“The companies should seriously take into account the whole emerging situation, since as a result of the relocation many of them, who already own land in the Larnaca municipality, stand to benefit, especially if the [Larnaca] zones will allow for development.”

Relocating Larnaca’s oil-based industry to Vasilikos was the subject of a cabinet decision in July 2014, in response to a long-standing demand by Larnaca residents.

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