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Our View: Short-sighted Larnaca rejecting lucrative gas role

Larnaca should be focusing on becoming a hydro-carbons servicing centre

A VERY important point was raised at the Sixth Mediterranean Gas Conference that was held in Nicosia this week. At a panel discussion, top executives of the companies that have exploration licences in the Cypriot EEZ – ENI, Total, ExxonMobil – all referred to the potential Cyprus had for becoming a centre offering support services to companies dealing with hydrocarbons. They underlined, however, the need for the country to go ahead with all the necessary measures to gain ground on its competitors.

Cyprus had comparative advantages in the region, such as its geographical position, its membership of the EU and its attractive tax regime, said ENI’s boss on the island Alessandro Barberis. On the minus side, the island was lacking the necessary infrastructure, particularly areas for the companies in ports. He pointed out that neighbouring countries like Egypt were moving at a different speed and if Cyprus did not act decisively it was certain to lose out.

The government recently announced the construction of a new port in Vassiliko that is to be ready by 2023, but anyone who knows how slowly government projects are implemented can only laugh at this. The process for even awarding the project might not be completed by 2023 given the snail’s pace at which the public sector operates and the delays caused by litigation that inevitably follows a tenders’ procedure. It might be 2033 before a port is built at Vassiliko, by which time companies will have set up operations in other countries.

The managing director of ExxonMobil, Varnavas Theodosiou, said that even if the port was ready by 2023, in the meantime companies should be able to use existing ports. This could be done by expanding Limassol port or allowing companies to use Larnaca port. Of course, apart from the bureaucracy that makes things as difficult as possible for foreign companies that want to establish operation in Cyprus, there are also the local residents. Oil companies were kicked out of Larnaca port and had to relocate at significant extra cost at Limassol port where they had to start everything from scratch. (Should we also mention the court case won by residents of Aradippou against the operations of Halliburton, which provides support to oil companies, in their area?)

Larnaca’s residents have decided they want to build a marina at their port and presumably sell luxury properties. The municipal council voted by small majority that it did not want oil companies at the port. The government has a big share of the responsibility for bowing to this pressure and failing to fight for what would hugely benefit the economy. There is a very strong case for turning Larnaca port into a base for support services of oil companies, as it could turn the town into a thriving centre for the oil and gas industry, with multiple economic benefits. Many new businesses would set up, many jobs created, and a strong demand for all types of professional services and real estate.

Larnaca could still become a regional hub for the oil industry, if the government showed real commitment to such a project, instead of giving in to a bunch of short-sighted municipal councillors. Not all coastal towns have to become tourist resorts with a big marina and luxury apartments, and it has to be made clear that this is not the only growth model for the economy. Economic reason, in fact, dictates that we do not put all our eggs in the same basket. Demand for marina berths is not unlimited and with the completion of Ayia Napa we will already have two marinas here. Do we really need another one, in between the two?

What Larnacans and the government for that matter should consider, is that Limassol has not become a thriving and prosperous town just because of tourism and the marina. The major reason for its economic success is that it has attracted big shipping companies, financial services, forex businesses and major recruitment firms which provide local jobs directly and indirectly through the use of the town’s ever-expanding professional services.

It would be very stupid if Larnaca did not seize the opportunity being offered to be a hydrocarbons business centre. The government needs to take the initiative and be forceful in explaining to the town the prosperous future it cannot see. The port is there, oil companies are eager to use it and it would be criminal to give up this fantastic opportunity for the folly of building a marina that might take years to complete with no guarantee of success, given the sharp competition.

Also speaking at Thursday’s panel discussion, the general manager of Total Cyprus, Yves Grosjean said there was an urgent need for a centre of support services for hydrocarbon operations in the region. Whether Cyprus became a regional centre for hydrocarbons will depend on how much gas was found over the next five to 10 years, but he had little doubt it could become a centre offering services to the industry now.

It would be criminally irresponsible for the government not to seize this opportunity for new business and growth.

 

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