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Cyprus Taken to Court by Golar Energy over Gas Law

Legal procedings against Cyprus have been made by a Golar Energy Ltd, a private energy company for barring it from importing and storing natural gas on the island

Legal procedings against Cyprus have been made by a Golar Energy Ltd, a private energy company for barring it from importing and storing natural gas on the island.

Golar Energy Ltd, a subsidiary of Golar LNG, listed on the Oslo bourse and Nasdaq, said the legal challenge was filed with the Supreme Court of Cyprus on 29 September.

Cyprus, now exclusively reliant on heavy fuel oil to fire its energy grids, passed legislation last year effectively excluding private players from the natural gas market.

It gave authority for import and storage to a new utility in which the state has a stake.

The legislation was passed by the Cyprus parliament in December 2007 in spite of misgivings from the island's former government, which said it could contravene competition regulations.

The present left-wing government, which won presidential elections in February, backs the law.

"We are not excluding anything… but it is our position that we are permitted to have a monopoly, we are allowed to have exclusivity, because we are an emerging market and are isolated," Commerce, Industry and Energy Minister Antonis Paschalides told the Cyprus Broadcasting Corporation.

Golar Energy said it had received two permits from the island's energy regulator to build and operate a plant generating some 240 MW of electricity in 2007.

Both licences were contingent on Golar getting another licence to import gas. Passage of the legislation later in the year effectively meant the company could not import the gas.

"We exhausted every time frame to avoid court action against the government and state services but there was no response on their part," said Frixos Savvides, a representative of Golar Energy and a member of Golar LNG's board.

Cyprus has said it plans to introduce gas into its energy grid by around 2013.

By law, the import and sale of gas is the responsiblity of a public utility known as Defa, with the government and the semi-government electricity authority EAC its shareholders.

"We had offered an alternative to give us a licence to import gas for our own use, and when Defa were ready we would stop (imports)," Savvides said. "They haven't accepted it."

Author: Jo Amey