Natasa Pilides, minister for energy, commerce and industry, has kindly conceded to Dr. Charles Ellinas and Andrew Rosenbaum a major update on energy policy and legislation. The Minister addresses nearly every important issue in the sector. Her reply will be published here in two parts.
Q: Cyprus’s energy sector appears to be fragmented. Your Ministry in not in full control of all energy-related functions and activities on the island. This surely affects efficiency and effectiveness. Are there plans to lead to more effective coordination, or even more centralised planning and control?
A: I would say that the organisation of the energy sector at the state level is fairly sound, in that policy setting and implementation lies with the ministry, while the all-important role of the Regulator is kept separate and independent, in the hands of CERA. Having said that, energy is necessary and present in all aspects of life, from our homes to every type of business and industry, and as such, it should be, and is, at the heart of strategy formulation, much more so in recent years when the transition to a green economy has become our primary focus. To this end, I completely agree that coordination with other government services such as the Ministry of Environment and the Ministry of Transport, is crucial. A high level of coordination in both policy planning and implementation is maintained through our newly revised Integrated National Energy and Climate Plan 2021-2030 (NECP), which is the outcome of the collective work by all competent Ministries and authorities. The NECP maps out the action plan for the implementation of our national energy efficiency and renewable targets for the next decade and lays the foundation for an ambitious long-term strategy aiming towards the elimination of greenhouse gas emissions by 2050. In November 2020 the Council of Ministers established a National Governance System for the European Green Deal, which consists of a 5-member Ministerial Committee including, of course, the Ministry of Energy.
At the level of the Ministry of Energy there are a number of reforms in the pipeline which will not only simplify the current regulatory framework but will also increase competitiveness and reduce pollution:
- Both new draft bills for the regulation of electricity and RES provide for the set-up of a one-stop licensing process. This will expedite the implementation of new projects in electricity and RES and will contribute to the achievement of our energy targets. Of course, Parliament’s role is crucial in passing such key bills.
- At the same time, our Ministry is in the process of carrying out a Strategic Environmental Impact Assessment Study, due to be completed this summer, for the design of a sound siting plan for RES projects.
- Together with CERA and the Transmission System Operator (TSO), the Ministry is working very hard to complete the liberalisation of the energy market. As of 1 January 2021, we have already entered a transitional phase and a number of new entrants have entered and are planning to enter the market. The process is expected to be completed in early 2022 with the roll-out of the relevant software. Again, Parliament has an important role to play in voting through the relevant regulatory framework.
- Crucial to the opening of the market is the completion of the FSRU facility through the EU-funded project “CyprusGas2EU”, which will allow natural gas to be introduced into our energy mix, reducing both pollution and the price of electricity.
- Both storage and electricity interconnectors are important in increasing RES penetration. For storage, the relevant framework under preparation by CERA has been included in the RRF, while a funding scheme for projects is in the pipeline in collaboration with the Directorate General for European Programmes, Coordination and Development (EPSA).
Of course, energy also affects the competitiveness of business and industry in Cyprus. For this reason, the transition to a circular economy and green energy is a crucial element built into all our funding programmes for businesses and industry. Our Ministry is in the process of designing funding programmes in excess of €400 million for the period 2021-2027 (some of which have already been announced), with more than half those funds devoted to green growth.
Q:When do you expect resumption of exploration and drilling activities in Cyprus EEZ? Are all international oil companies (IOCs) expected to resume their obligations this year? What happens if any IOCs do not stick to the timetables envisaged in their production sharing contracts (PSCs)? What can Cyprus do to ensure these are followed?
A: As you very correctly note, all operators are acting under the provisions of the production sharing contracts (PSCs) they have entered into with the Republic of Cyprus. All operators in Cyprus’s EEZ are planning to continue exploration and drilling activities in the 4th quarter of 2021 and within the timelines set out in the PSCs. In this regard, our Ministry has designed, in collaboration with the Ministry of Health and the Shipping Deputy Ministry, a protocol for people involved in such activities, whether it be crew working on drilling platforms or persons working onshore. The Contracts signed by our licensees provide for steps that the Republic can take to ensure that timeframes and obligations are followed, but also allow for a certain degree of flexibility when needed, in order to mitigate any risks that may arise. Our aim is to work with the operators in close collaboration to ensure progression of the projects in a way that benefits all parties.
Agreement with Israel
Q: The agreement of a framework with Israel to settle the Aphrodite/Ishai unitization dispute is a positive development. What are the next steps and by when do you expect agreement to be reached?
A: Indeed, the joint proposal to the Aphrodite and Ishai licensees, signed by my colleague the Energy Minister of Israel and myself, is a positive development which provides a flexible yet defined framework for the licensees’ discussions, including specific timelines and expert participation, if needed. A joint letter has been sent to the licensees, who have since been in touch with each other in order to commence the discussions. The letter proposes a 6-month period of discussions with the aim of reaching an agreement based on the available technical data that resulted from the wells drilled in both EEZs. If said discussions do not reach a conclusion in the set timeframe, the companies should make use of an expert consultant in order to resolve any remaining issues. At the end of the day, any agreement between the companies will be subject to approval by the two Governments.
Q: With this out of the way, how are the negotiations to sell Aphrodite gas to Idku progressing? Are these going to plan and do you still expect exports to start by 2025? If not, what other plans are you considering to monetize Aphrodite?
A: The development of the “Aphrodite” field is based on the agreed and approved Development and Production Plan that provides for a specific timeframe. The field’s consortium is now in the process of conducting the necessary appraisal work and technical studies, which together with international gas prices and prevailing conditions in the oil and gas industry, will lead to the eventual Financial Investment Decision. To facilitate their work, we have agreed with the Egyptian Petroleum Minister, during our bilateral meeting held on the sidelines of the recent EMGF meeting, to activate the joint technical working group provided by our pertinent intergovernmental agreement and tasked to go over the details of the construction of the gas pipeline from “Aphrodite” to the Idku LNG Plant.
East Mediterranean Gas Forum
Q: How important is and how can EMGF contribute to the development of regional energy markets?
A: The EMGF is a regional forum aiming to design and implement a comprehensive strategy for the development of regional natural gas resources. The forum has succeeded in bringing together many countries of the region (Cyprus, Egypt, Greece, Israel, Italy, Jordan and Palestine) which, putting aside their differences, are now sitting around the same table for a common purpose. That in itself is important. But beyond that initial success, the level of attention and support that the Forum has attracted internationally, from countries such as the USA and France – now members of the Forum – the USA as observer and France as a full member – indicates its great potential.
During last month’s Ministerial Meeting in Cairo, the seven Founding Members reaffirmed their commitment to unlock the full potential of gas resources in the Eastern Mediterranean, developing them in the most environmentally responsible way and in full respect of Members’ rights over their natural resources, in accordance with international law. In this respect, the EMGF’s Gas Advisory Committee is in fact currently working on a very useful study on Gas Supply and Demand in the East Mediterranean. Other EMGF activities include working towards Gas Decarbonisation and LNG as a fuel for vessels. In addition, a dedicated working group has been mandated by the Ministers to develop a Long-Term Strategy to achieve the objectives of the EMGF.