Greek oil and gas company Energean, which has offered to pipe gas to Cyprus from its Israeli offshore leases at a highly competitive price, has responded to the energy minister who said the company does not have an export permit from the Israeli government and that therefore its proposal is invalid.
In a press release last Friday, Energean Oil & Gas Plc said it has submitted to the government a proposal “to supply Cyprus with natural gas as of the first quarter of 2021, without the investment cost burdening Cypriot taxpayers, and at a particularly competitive price”.
It added: “The company respects and complies with regulations and the regulatory framework in each country where it operates and, evidently, we have confirmed our capability to supply Cyprus with natural gas on the basis of the already-submitted offer.”
Energean was responding to energy minister, Giorgos Lakkotrypis, who a day earlier appeared to dismiss outright the company’s offer.
Lakkotrypis said the company’s proposal was not feasible as Energean lacked a permit from Israel to export natural gas from the reservoirs in question.
He was referring to the Karish and Tanin gas fields.
Backing up his argument, Lakkotrypis cited a paragraph from the company’ prospectus – issued upon its listing on the London Stock Exchange – which states that “Under the terms of the applicable leases and those of the sale and purchase agreement pursuant to which the Group obtained its lease interests in the Karish and Tanin fields, the Group is prohibited from exporting gas produced from the Karish and Tanin fields and is limited to selling this gas solely to the domestic Israeli market.”
But elsewhere in the prospectus, the company also states: “Whilst all production from the existing Karish and Tanin discoveries is earmarked for sale in Israel it is possible that additional volumes, or volumes in nearby leases, could enjoy an export quota.”
The back-and-forth between Lakkotrypis and the company unfolded just days after the government launched – after repeated delays – a tender for the on-land infrastructures that will receive and treat liquefied natural gas (LNG).
The tender calls for the construction of a floating storage and regasification unit (FSRU) and other infrastructures at Vassilikos, with a completion deadline of November 30, 2020. Tankers will bring LNG to the FSRU, converting the fuel into its gaseous form and connecting it via a short on-land pipeline to the nearby power station.
Lakkotrypis also called Energean’s offer “unsolicited,” in that it was submitted outside the tender.
But energy analyst Charles Ellinas said that referring to the company’s proposal as unsolicited is somewhat disingenuous.
The reason Energean did not submit its offer as part of the tender, he explained, is because the company is proposing to sell natural gas to Cyprus, whereas the government tender is confined to LNG.
“So they couldn’t take part in the tender,” Ellinas told the Cyprus Mail.
What troubles the expert most is the government’s disinterest in Energean’s proposal.
“Let’s say that the energy ministry doesn’t believe Energean has a permit to export gas to us. Fine, then why don’t they quite simply invite the company here for a presentation to have these questions answered?”
Moreover, Ellinas argued, if one reads the company’s statement carefully, it’s clear that they do in fact have the consent of the Israeli government to export gas.
He was alluding to this sentence from Energean’s statement: “The company respects and complies with regulations and the regulatory framework in each country where it operates…”
He added, the current managing director of Energean’s subsidiary in Israel is none other than Shaul Tzemach, who years ago had chaired a committee that issued guidelines for Israel’s gas export policy.
“It’s inconceivable that Tzemach – who knows the Israeli regulatory landscape inside out – would rubberstamp a press release by Energean that was in any way false or misleading, that is to say, without being confident that the company can indeed export to Cyprus.”
Ellinas stressed that based on his own calculations, under Energean’s offer Cypriot consumers will pay half compared to what electricity bills will look like if the island imports LNG per the tender.
He estimates that Energean can deliver the gas at less than $6.50 per million btu. Whereas under the government tender (LNG imports), the price tag could be anywhere from $13 to $14 per million btu.
Further, under the tender Cyprus would be locked into a 10-year contract.
“By contrast, with Energean’s offer savings could be as much as $1.4bn over this time period,” said Ellinas.
At the end of the day, importing LNG – rather than natural gas – would likely end up being more expensive for consumers than the rates they are currently paying for electricity.
Source: Cyprus Mail