"I believe that in order to attract the additional investments needed for the oil and gas industry in the region, the countries of the Middle East should join forces and work together to promote their interests," Cypriot Minister of Energy, Commerce, Industry and Tourism Yiorgos Lakkotrypis told "Globes." "That's the only way to develop the regional energy sector, and create stability and security in this none-too-stable region. There's a lot of potential in the region that can fulfill the domestic energy needs, and can also affect the entire European energy sector."
For Lakkotrypis, the basis for this cooperation should be an agreement defining the marine borders. "An agreement should be reached defining the marine borders between Cyprus and Israel, and also the marine borders between the Middle East and Europe (for example, the marine borders between Israel and Lebanon are not defined; there is a dispute about 850 sq.km. of water, H.C.).
"These legal agreements will give oil and gas companies confidence that the relations between the countries in the region are strong, and that they can conduct thorough exploration there" Lakkotrypis says. He is wary about comparing the gas sectors in Cyprus and Israel ("You can't compare the countries,, because the Israeli gas industry is more advanced than that of Cyprus. In Israel, gas is already flowing from the Tamar reservoir to the local economy, while in Cyprus, no gas is being produced yet."), and emphasizes that they are not competing with each other, for example over Egyptian gas.
Last year, the partners in the Leviathan gas reservoir signed a letter of intent with British gas giant BG to export 105 BCM to BG's liquefaction facility in Egypt. Following Antitrust Authority director general Prof. David Gilo's decision to liquidate the Leviathan monopoly, however, negotiations have been suspended. Meanwhile, Cyprus and Egypt are discussing the export of gas to Egypt from the Aphrodite reservoir (this reservoir, which contains 125 BCM, is owned by Noble Energy (70%) and Delek Group Ltd. (TASE: DLEKG) (30%)).
"Cyprus is in the advanced stages of negotiations with Egypt, and the objective is to sign an agreement soon, but Cyprus is not competing with Israel to supply gas to Egypt. First of all, Egypt's energy needs are large enough to include gas from both countries. But more importantly, the negotiations for exporting Israeli gas and Cypriot gas to Egypt are taking place simultaneously. Taking into account that the partnerships in the Aphrodite and Leviathan reservoirs are composed of more or less the same companies, and that the two reservoirs are close to one another, I hope that development of the two reservoirs takes place concurrently. I want to take advantage of this interview to send a message to the next Minister of Energy - the entire government of Cyprus, including myself as Minister of Energy, wants to work closely with him in order to promote development of the gas reservoirs, thereby supplying the energy needs of the Middle East," Lakkotrypis says.
How to break the electricity monopoly
Like Israel, Cyprus is currently confronting the question of how to encourage competition in the electricity sector. Cyrus also has a single electricity company - the Electricity Authority of Cyprus, which controls 100% of the electricity transmission and distribution chain, and 92% of electricity production. The rest is produced from renewable energy. "In an effort to open the sector to competition and encourage electricity production from renewable energy, the regulator in Cyprus proposed a new model designed to encourage the entry of new players already in 2016," Lakkotrypis explains.
"Globes": The opening of the sector to competition has been subjected to more than a little criticism. Some assert that private power stations enable large customers, not home consumer, to buy electricity more cheaply than from Israel Electric Corporation (IEC) (TASE: ELEC.B22), so that competition causes IEC to lose revenue, without affecting the price for the home consumer. How will you deal with this?
Lakkotrypis: "Before Cyprus makes any decision affecting its electricity company or the electricity sector, it plans to hire external consultants to consider what model is best. On the one hand, we're full of desire to encourage competition and lower electricity prices in the country (electricity prices in Cyprus are currently the highest in Europe, H.C.). On the other hand, in a small and isolated economy like Cyprus, it is very important for the electricity company to be healthy and stable, so that it can ensure a regular supply to the domestic economy."
Published by Globes [online], Israel business news - www.globes-online.com - on April 12, 2015
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