Energy as Catalyst - Exclusive Interview with Yiorgos Lakkotrypis, Minister of Energy, Commerce, Industry and Tourism, Republic of Cyprus

7 July 2016

Yiorgos Lakkotrypis, Minister of Energy, Commerce, Industry and Tourism, Repulic of Cyprus  ©Business Intelligence Unit

The Cypriot Minister of Energy, Yiorgos Lakkotrypis, will visit Houston, USA, on the 7th and 8th of July 2016 in a bid to attract investors in energy for the country’s off-shore gas reserves third licensing round ending July 22nd. The new gas discoveries bring important investment opportunities to the region and the potential for nations to come together in the Eastern Mediterranean. Said cooperation and energy developments as a whole in the area are key talking points, together with the aim of the government to put Cyprus on a new, sustainable growth path. 

BIU: The major gas discoveries in the Exclusive Economic Zone (EEZ) of Cyprus make energy a hot topic for the region and your portfolio. How do you see the regional cooperation in this sector moving forward?

Yiorgos Lakkotrypis: There are a few initiatives in the region with regard to energy. As the Minister of Foreign Affairs already explained, Cyprus has excellent relationships with its neighbors, including those that traditionally have had conflicts among themselves. We have a very open dialogue with each of these countries and delimitation agreements with Lebanon, Israel and Egypt. We have a unitization framework agreement with Egypt [a unitization agreement establishes hydrocarbons reservoirs that extend across the delimitation line between two countries, defining the deposit, the total amount of reserves and apportionment] and we’re negotiating with Israel and Lebanon.
These agreements go far in showing the stability that we want to foster in the Eastern Mediterranean so that we can make it even more attractive for companies to do business here. Beyond the discovery of natural gas, there are also two projects of common interest. One is an electricity interconnector between Israel, Cyprus and Greece, and a natural gas pipeline between the same three countries. These are common interest projects, a special group of projects approved by the European Commission as eligible to receive funding. The funding has already been approved for the feasibility studies which will determine the technical and financial feasibility of the project.
A number of Memorandums of Understanding (MOU) have been signed so that the Cypriot gas, and potentially the Israeli gas, reaches the LNG terminals in Egypt so we could use that infrastructure to export to Europe. It is good to see cooperation taking place at multiple levels – political, economic, and technical – and all the countries agree that the more stable the environment we create, the bigger the investments that we can attract, especially in oil and gas.
Last year we inaugurated a large tank farm which was done through an investment of VTTV consortium led by the big Dutch group Vitol. This farm was designed for trading liquid fuel, which in the regional perspective, coupled with the opening of the new Suez Canal [on August 6th 2015], is a major development as the increased traffic flowing through the new canal will find its way to Cyprus, the closest landmass outside of Egypt.
BIU: There were MOUs signed with Total, ENI, Noble Energy for gas exploration. What is their status now?

Yiorgos Lakkotrypis: Our first plan was to construct an LNG terminal in Cyprus. The first round of exploration didn’t reveal enough quantities to make it financially feasible, so for the time being we have put those plans on hold until we have more discoveries. Our biggest discovery is the Aphrodite field. It’s about 4.5 trillion cubic feet (TCF). For its own domestic needs, Cyprus requires about 0.5 TCF for 25 years; therefore most of that quantity will be exported.
On our side, at the ministry, we are trying to lower the cost of electricity to make the country more competitive horizontally. We have made significant efforts and we work with the Electricity Authority of Cyprus to restructure it and make it more cost effective, trying to replace the fuels mix with more natural gas.
BIU: What about renewable energy?
Yiorgos Lakkotrypis: We are today at about 8 percent penetration of renewables, wind and solar, in our electricity mix. We have a target of 13 percent by 2020 and we want to meet and even exceed it. We are now focusing on enabling households to use photovoltaic panels since their recent drop in prices has made it financially feasible for them to compete with the conventional electricity generation. According to our estimates, if you install photovoltaic panels at your house today, for about 3 kW, you’ll have about 80 percent saving on the electricity bill, which means you can pay back your investment in 5-6 years.
BIU: Can they feed energy to the grid?
Yiorgos Lakkotrypis: They are connected to the grid and we have a program called “net-metering”, through which we calculate the balance between what they produce and what they consume, and they only pay for the difference. We have almost 9.000 households [Cyprus has a population of around 850.000] that are already part of the program. We are now examining how to invest in storage and we have seen recent technological advancements in the field of batteries, which are now more affordable.
BIU: Moving to the commerce, industry, and tourism side of your portfolio, where do see the opportunities that will put the country on a sustainable development path?
Yiorgos Lakkotrypis: The strength of Cyprus has always been in professional services and this sector has proven very resilient during the crisis, just like tourism and shipping did. The fundamental reason for that is that these sectors have never experienced the bubble. They’ve always been based on a solid professional background, excellent lawyers and accountants, and a top-level shipping management service. If you look at the macroeconomic numbers for each of these sectors, you will see how they have bounced back very quickly and they are the basis of our recovery.
I would like to point out that after last year’s 1.6 percent Gross Domestic Product (GDP) growth rate, Cyprus has, according to Eurostat, posted for the first quarter of 2016 a quarter to quarter growth rate of 0.9 percent. Compared with the same period of 2015, Cyprus’ GDP has in fact risen by 2.7 percent.
We are continuously enhancing and expanding our offer for foreign companies wishing to set up in Cyprus. We are expanding the number of our double tax treaties, currently at 60. We have also made significant structural reforms in terms of company registration – the process used to take several weeks, now we have reduced it to 1 to 3 days, depending on whether the registration takes place online or physically. This is the first contact of the investor with our institutions and it is very important that we don’t portray the image of a bureaucratic country, so cutting red tape is a priority for us.
Regarding tourism, it’s no secret that over the last 10-15 years we have lost competitiveness. We have not invested enough in infrastructure to diversify our product and to actually differentiate ourselves from the competition. Cyprus needs to do more. We have been investing a lot of energy and resources in attracting special interest tourism, like sports tourism, rural, and cultural tourism.
We have invested resources to expand our infrastructure. We inaugurated the Limassol Marina, have launched the project for the marina of Ayia Napa and are in the final stages for the Paphos and Paralimni marinas. We inaugurated a few golf courses. The greatest milestone for the country comes from the process that is well underway to build an integrated casino resort. This for us is a key tourism infrastructure project. It is a concept which has not been implemented before in Europe and we certainly hope that it will be a major addition to the experiences that Cyprus has to offer to foreign guests. I note here that the two-stage licensing procedure for the casino resort was initiated in September 2015. As a result of the first stage, three candidates have been selected to submit their final proposals and we expect that the single license will be granted by the end of 2016.

Born in Nicosia in 1970, a graduate of Keele University, UK, holding an MBA degree from the University of Colorado, USA, Yiorgos Lakkotrypis assumed a political office for the first time in 2013, as Minister of Energy, Commerce, Industry and Trade. He has a private sector background, having held multiple managerial positions with Microsoft Central & Eastern Europe between 2003 and 2013. He also served as a board member with Cyprus Investment Promotion Agency and Cyprus’ Natural Gas Public Company.

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