Many will have been surprised reading the report that Power Energy Cyprus (PEC), which is building a power station in Vassiliko, and Greece energy company Energean signed a letter of intent by which the latter will supply the former with natural gas, by pipeline. According to the report in Friday’s Phileleftheros, Energean would pay the cost for a pipeline from Israel’s Karish gas field, where it operates a floating production storage and offloading (FPSO) unit, to PEC’s Vasiliko power station.

Energean has the licence of several gas fields in the Israeli EEZ and supplies the country’s energy market. It had also unsuccessfully tried to reach a deal with the Cyprus authorities to supply the country with gas. Interestingly, the head of PEC told Phileleftheros that the construction of the pipeline would take about 14 months while he believed that the price of the gas for power production would be about 30 to 40 per cent lower than that paid for the re-gasified LNG, which will be brought by ship to Vasiliko, whenever that happens. The PEC boss also said that the pipeline specs would allow the transport of additional quantities of gas for other producers.

Nobody can say how accurate the claims about the lower costs, in relation to LNG, are, but there is no doubt that natural gas, brought directly from an Israeli gas field by pipeline would cost much less than gas that has been liquefied, put on ships to be brought here and then re-gasified so it could be used by the power stations. Why had the idea of bringing natural gas for our power stations from Israel’s gas fields via pipeline never been properly explored? Was the infrastructure – FPSO – that makes this possible not available when then president Anastasiades decided to bring LNG for the EAC power stations?   

Apart from the possibility that corruption could have determined these uneconomical decisions, we should not ignore the fact that state initiatives in the open market invariably end in failure. The government, pressured by the EAC unions secured permission from the EU to set up a gas-importing monopoly in Cyprus which was classed as an emerging market. Since then, we have been witnessing the consistent failure of the state import monopoly to import any gas, the state companies responsible for this – Defa and Etyfa – being nothing more than farcical operations.

This monopoly is still enshrined in law, so how PEC will import its own gas remains to be seen. This ‘emerging market’ nonsense that justifies the monopoly should be scrapped, because the state has proved beyond any doubt that it is incapable of bringing gas to Cyprus. The gas import market should be opened up as supply and demand always offers more economical solutions, benefiting the public, than state monopolies.