Energy industry shaky lands in Cyprus

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ENERGY industry experts agree on one thing about their industry – its fickleness. A small change in the price of gas or oil could lead a company to change well-laid plans overnight or abandon projects for decades. This is no surprise given that gas and oil companies have to make investment decisions worth hundreds of millions of dollars and therefore try to minimise the risk, which is affected by a variety of factors political as well as economic.

We are beginning to learn about this fickleness in Cyprus as well. Last January, the French gas and oil giant Total announced that it would close down its Cyprus operations because its surveys had not identified any potential drilling targets in Blocks 10 and 11 in which it had concessions. It had no intention of proceeding with exploratory drilling, as per its contract with the government that was scheduled for this year and was prepared to pay the penalty stipulated in its contract.

The Anastasiades government, terrified of the negative publicity for Cyprus which was being billed as an energy centre, bent over backwards to persuade Total to stay. It offered to tear up the concession contract – described at the time by the Attorney-general as a ‘political decision’ – allowing Total not to carry out any drilling as long as it maintained its presence on the island.

Ten months later Total is back and displaying, what the government described as a ‘lively’ interest in Cyprus’ EEZ. Its interest was re-kindled by the discovery in August by Italian company ENI of vast quantities (30 TCF)of natural gas in Egyptian waters, just 6.5km from the border with Cyprus’ Block 11. This gave rise to speculation that the prospect could extend into the Cypriot EEZ.

On Tuesday the company’s representatives met President Anastasiades to discuss the renewal of its licence for Block 11 as its exploration programme expires in February. According to energy minister Giorgos Lakkotrypis, the company also wanted to discuss its potential participation in other blocks. This was the same company that in January gave up Block 10 without drilling any well and negotiated its release from its other drilling obligations.

This is an illustration of how things change in the energy industry, which is why our government has also been constantly modifying and altering its plans, often looking amateurish. But Tuesday’s comments by government spokesman Nicos Christodoulides suggested some lessons had been learnt. Asked if Total would drill in the near future, he declined comment and explained his reasons.

“Once there are specific developments and specific decisions are taken we shall announce them. When it comes to such serious issues we have to be careful what we say in public – we need to do more and say less.” He was absolutely right.

 

Source: Cyprus Mail