Cyprus Cabinet two-tongued over gas storage decision

The government decided on Wednesday to invite tenders for the construction of an inland liquefied natural gas (LNG) storage facility, while at the same time seek tenders for the supply of natural gas using offshore floating units for up to five years as a stop-gap option for the seven-year goal to build land facilities.

This will help meet the 2009 deadline for the introduction of LNG for power generation and the insufficient time ahead to build a land unit.

The Cabinet decision is expected to defuse, for now, the row between the Trade Minister Antonis Michaelides and the Electricity Authority Chairman Charilaos Stavrakis, over two opposing views on the matter, with EAC staff even calling for the minister to resign if the Cabinet were to opt for a floating storage unit.

Speaking after a five-hour Council of Ministers meeting, Government Spokesman Vassilis Palmas said the Cabinet unanimously decided to bring forward the opening of tenders for the land terminal for the supply of LNG to be used primarily at the Vassiliko power plant.

Palmas noted that the government’s aim was to involve the EAC in the whole process of procuring natural gas.

”The government’s duty is to secure the best possible benefits for every household and the Cypriot economy in general. In order for this to happen, the import of natural gas must take place the soonest possible with the lowest possible price,” he said.

 

— Tenders by year-end

 

Cyprus may open tenders by the end of this year for the storage of natural gas as it attempts to switch to cleaner forms of energy, but the government will also explore through the tender process the establishment of offshore gas storage facilities which EAC experts claim will cost the taxpayer too much.

“We will have to appoint a consultant to draw up the [tender] specifications, I expect that to occur in about eight months, the end of the year,” Antonis Michaelides had previously told Reuters.

Cyprus relies on heavy fuel oil firing its power grids but must start introducing renewables to its energy mix under European Union obligations.

Solar energy represents 4% of the island’s energy balance but the total contribution of renewables must be raised to 9% by 2010.

The EAC is against a floating storage unit, arguing that the technology is untested and could result in wastage of taxpayers’ money.

EAC Chairman Charilaos Stavrakis has described as “unrealistic and extreme” the estimated cost of CYP 607,9 mln up to CYP 780,1 mln from a delay in bringing natural gas to Cyprus between 2009-2015.

Stavrakis said the estimated cost is based on extreme assumptions, such as import of very expensive equipment by EAC which will burn natural gas while the land terminal is being built.

Government spokesman Vassilis Palmas added after Wednesday’s cabinet decision that “only after Cyprus introduces cleaner fuels, such as LNG, will it be considered a developing market economy.