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.
"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
