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Our View: New energy plan sets realistic objectives

energy minister papanastasiou
Minister of Energy, Commerce and Industry George Papanastasiou

After a decade of high-sounding declarations, timelines that fell by the wayside, alliances that came to nothing and ambitious projects on paper – government ambitions for our natural gas reserves have been drastically lowered. Talk of becoming an energy hub and upgrading our geo-strategic role has been exposed as hot air, underlining the lamentable failure of the Anastasiades government’s energy policy.

For ten years, the Anastasiades government was undertaking initiatives, forging energy alliances with neighbouring states like Egypt and Israel only to see them sign gas deals from which Cyprus was excluded. The previous government was not even able to reach an agreement with Israel on the unitization of the Aphrodite gas field in these ten years, a pre-requisite for the extraction of natural gas. In short, for ten years gas policy amounted to a big zero.

The appointment of a new energy minister after the elections signaled a departure from the ‘big words, no action’ energy policies of the past decade. George Papanastasiou introduced some much-needed pragmatism, announcing that energy policy would focus on smaller projects, like bringing natural gas to the island in order to reduce electricity prices and make the economy more competitive. This was a big departure from the grandiose plans of the past, but the minister seemed to have decided to set attainable targets.

A few weeks later, it became clear what was playing when Israel’s prime minister Benjamin Netanyahu announced that natural gas from the Israeli fields would be transferred to Cyprus by pipeline for domestic use. He also spoke about the setting up of a liquefaction plant that would export LNG to Europe. Papanastasiou confirmed this and said he would be going to Israel in mid-June with a delegation of technocrats to draft an agreement. He believed that within 18 months of signing the agreement, natural gas would arrive in Cyprus.

Why had this option never been explored by the Anastasiades government? Instead, it signed an agreement with a Chinese consortium to set up facilities for the importation of natural gas at a cost of €300 million. The completion of the project is long overdue, and it would become redundant if gas is brought by pipeline from Israeli fields. Had the minister not considered this and the obligation to buy gas from the contractor for a set number of years, which would also provide us with cheaper electricity?

Although bringing gas from Israel is a significant downscaling of our ambitions, we suspect this project – which has come under some criticism because we would not be using gas from our own EEZ – is aimed at eventually overcoming most difficulties for utilization of Cyprus’ natural gas. At present, the oil companies with the concessions for Cyprus’ gas fields do not seem very interested in extracting gas because fields are far apart, quantities are not as big they would like and there is no infrastructure, investment for which, would affect the marketable price of the gas.

Papanastasiou had even wondered whether taking gas by pipeline to Egypt’s liquefaction plants was economically viable given the lack of infrastructure. The earliest gas could be pumped from the Aphrodite field, according to an announcement on Thursday by NewMedEnergy, was 2027, but experience has shown that timeframes are constantly changing because the market conditions are changing.

There is also the Turkey factor to consider, which must have an influence on the plans of the oil companies. Why would they invest in costly infrastructure, given the continuous threats made by Ankara and the general instability it systematically ferments in the East Mediterranean? This concern was articulated by Claudio Descalzi, CEO of Italian oil giant ENI, who said last month in the Italian parliament that it was “inconceivable that Israel, Cyprus and Greece can move forward on an agreement without Turkey,” in reference to the EastMed pipeline. As the pipeline project has been abandoned, it is understood he was making a more general point about Turkey’s role.

Papanastasiou, it appears, is trying to make the best out of a situation in which Cyprus has little control. Bringing natural gas from Israel would be a start. Turkey would not interfere in such a project and once the pipeline operates the setting up of a liquefaction plant would become a realistic possibility. It has also been said that, eventually the Israeli pipeline, which would be 60km from the Aphrodite field, could bring gas from there as well but that would be for the experts to decide.

This government, in stark contrast to the previous one which had used natural gas for political exploitation purposes, has a clear and pragmatic strategy that focuses on actions rather than big words. For once attainable goals – rather modest, some would argue – have been set and there is a plan for achieving them. Whether the new approach succeeds remains to be seen, but it was necessary after a decade of big words and big plans that never materialised.

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