Cyprus cannot consider itself an energy hub despite its deposits of offshore hydrocarbons, and as long as the gas remains in the ground, it will never generate the wealth associated with such natural resources, Energy Minister George Papanastasiou said on Friday.
Papanastasiou made the comments when he addressed delegates at the Economist conference ‘Cyprus Investment Summit – A New Chapter Ahead’ at the London Stock Exchange where energy was on the agenda along with banking and investment opportunities, and the Cyprus issue.
The minister spoke alongside John Ardill, Vice President, Global Exploration at ExxonMobil and was candid in some of his remarks, both in his address and during a subsequent Q&A.
“Cyprus has no gas infrastructure. We have a few (offshore) discoveries but without infrastructure these can’t be developed and get to a destination where they can be liquified,” he said.
“If Cyprus has an aspiration to become a contributor to Europe, we need infrastructure but it’s just not there.”
Asked by a delegate if Cyprus would ever become an energy hub, the minister added: “I will be realistic. To me a hub is where the infrastructure is. Cyprus will not become a hub but can become a contributor to Europe’s energy needs.”
Answering a further question about the spin the Cypriot public had been put through for the past ten years over gas discoveries, Papanastasiou admitted that previous governments had possibly overstated how much wealth the island’s gas reserves might bring.
“Wealth only has a value as long as it’s on the market,” the minister said. “As geology, it does not constitute wealth.”
But he said by reducing the cost of energy on the island, would benefit the economy and help generate wealth and growth. This can come about if Cyprus’ gas finds can be brought onshore and used to replace the heavy cost of fossil fuels, and also as a means to help transition to a future based on renewable energy (RES).
“The high cost of electricity from a single source is unsustainable and any economy that does not have cheap energy will be short-lived, so we need to create a platform for a sustainable economy,” he said.
“The grid is suffering, and certain investments have to be made. We need to create storage coming from renewables. They are all over the place on the grid, so we first need to prepare the grid.”
Papanastasiou described natural gas as a transitional solution. To go to renewables you have to go through the traditional.” On RES solutions, he also made a passing comment that wind farms might not necessarily be a solution for the island as opposed to photovoltaic parks.
He said there was a huge need to reduce emissions as the cost of EU penalties this year would come close to €300 million “unless we do something to reduce our footprint.”
The minister also raised the issue of Turkey and the tensions over Cyprus’ gas finds. He said it was a sensitive issue “but with the new government’s approach to energy we want to provide solutions that are attractive to Turkey so that energy can become a catalyst to resolving the island’s political problem.” He said it could be a tool so that the two parties could sit together, while reconfirming that the gas finds belonged to both communities in Cyprus.
Since taking office, the new government appears to be taking a totally new approach to energy with plans for regional pipelines and other means of ensuring energy independence, including connecting the electricity grid with Europe. Papanastasiou did not get into details during the London conference but said feasibility studies were underway to look at all the options.
Speaking after the minister, ExxonMobil’s Ardill said the company was offshore in Cyprus last year and would be back by the end of the year. The company has interests in blocs 5 and 10, southwest of the island.
“We are in the data acquisition phase,” he said, adding that the next step would be to map that data that would be coming in the next year or so. The company is “hopefully” planning to drill in 2025 and to make more discoveries during this drilling.
“After drilling the next step would be to set up the infrastructure. Once you’ve got the geology figured out, you can move at a fast pace,” said Ardill. “We have big plans and are absolutely invested in Cyprus,” he said.
The summit opened with a keynote address from President of the Republic of Cyprus Nikos Christodoulides. In a recorded message, the President outlined his vision for Cyprus to become an attractive destination for foreign investors.
“My vision for Cyprus is to become a modern state for attracting investments and cultivating entrepreneurship, a country that implements bold reforms and becomes more competitive, by fully exploiting the benefits of technology and innovation.”
He added that the goal is for Cyprus to be able to respond quickly and effectively to future challenges and noted that the Cypriot economy has proven its resilience during the pandemic.
The ambitious government program ensures that Cyprus is well equipped to face the challenges, he stressed.
“Our goal is to strengthen the competitiveness and extroversion of the Cypriot economy on the basis of a new modern growth model, remaining committed to fiscal discipline within the framework of our European obligations,” he added.
Referring to the recent secondary sanctions by the US and the UK, the President pointed out that the government is determined to fully investigate the cases and take all necessary action.
In this context, he said, the government has fully cooperated with the relevant US and UK authorities and is proceeding with the establishment of a fully developed sanctions enforcement unit with technical support from the UK government. The purpose, he explained, is dual, on the one hand to act proactively when relevant information is provided by competent foreign authorities and on the other hand to ensure that the imposed sanctions are properly implemented.
He added that in recent years, Cyprus has taken important steps to strengthen the rules against money laundering and financing of terrorism.
The President also referred to the government’s reform agenda, including comprehensive tax reform, as well as reforms in public administration, justice and local government, and exploiting EU funding opportunities for green investments.
Furthermore, he referred to Cyprus’ multifaceted foreign policy, which focuses on strengthening international partnerships and highlighting Cyprus’ strategic position.
“This multithematic policy can contribute to the reunification of Cyprus with a comprehensive solution, in full agreement with international and European law, in a sustainable, functional and modern state that will give impetus to economic development and prosperity,” he concluded.
Other participants at The Economist event included Lord Hannay of Chiswick, Greek Cypriot negotiator for the Cyprus problem, Menelaos Menelaou, Special Advisor to the President on economic affairs, Chris Patsalides, Chairman of Invest Cyprus, Evgenios Evgeniou, Bank of Cyprus Chief Executive Officer, Panicos Nicolaou, Head of Europe Primary Markets at London Stock Exchange, Ayuna Nechaeva, Chairman of Cyprus Securities and Exchange Commission, George Theocharides, Partner at CVC Capital, Alex Fotakidis, Partner at EY Cyprus, Stelios Demetriou, President of Cyprus Hydrocarbons Company Toula Onoufriou, non-executive Director of Green Energy Group, Stefanos Koutsakos, Chairman of UKCEC, Peter Droussiotis, Head of Consulting Services at EY Cyprus, George Tziortzis, Global Head of global markets risk & control assessment at BNP Paribas, Marina Antoniou and Founder & Managing Partner at INVEL Cyprus, Christophoros Papachristophorou.