ENERGY: Cyprus nearing transition to a new LNG era

Cyprus Natural Gas Public Company (DEFA), announced Friday it has successfully completed the first step of its troubled tender procedure for the installation of a Euros 250 mln LNG Import Terminal plus infrastructure.

Three international consortia comprising of industry leaders are bidding for the multi-million contract. The bidders are;

1. Joint Venture China Petroleum Pipeline Engineering CO, Ltd CPP, AKTOR S.A., METRON S.A.

2. Consortium Samsung C and T, Posco E and C, Mitsui O.S.K. Lines, Osaka Gas

3. European Consortium (DAMCO Energy S.A., ENAGAS Services Solution S.L.U., GasLog LNG Services Ltd., SNAM Spa, TERNA S.A.)

DEFA said the wider range of companies expressing an interest highlighted the importance of the tender at an international level as well as its viability.

Chairman of DEFA Symeon Kassianides said: “The great interest shown for this important Cyprus energy project by European and international players of the gas market, is just the first milestone for the realization of a long-term project that is directly linked to the country’s energy upgrade and energy pluralism.

He said the great challenge for all parties involved, is to complete the evaluation process and start the work for the immediate implementation of the project at Vassiliko.

The primary objective of DEFA is to lay the foundations for a functioning natural gas market in Cyprus that ensures security of reliable gas supply, initially for power generation, said Kassianides.

He said the aim was also to offer domestic consumers the lowest possible cost with minimum environmental impact.

The LNG Terminal will include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU, a jetty-borne gas pipeline and related infrastructure.

It is scheduled for completion in 2021 and has secured part of the required funding of the CAPEX, as a grant from the EU under the Connecting Europe Facility (CEF) financial instrument.

DEFA’s tricky tender process launched last year – closed on July 12, its fourth attempt to nail down a supplier of natural gas.

It had extended the deadline several times to allow companies interested in bidding sufficient time to put together top-quality proposals.

But as this process unfolds, Greek firm Energean Oil and Gas is lobbying hard to be allowed access to the Cyprus market so it can sell its Israeli gas via pipelines to Vassiliko by early 2021.

Officials from Energean have visited Cyprus to make their pitch to supply gas via a pipeline from Israel which it claims will be cheaper and quicker.

Although the government has rebuffed Energean’s unsolicited offer the Greek firm insist they can deliver quicker than the FSRU project and that competition should be allowed for the benefit of the end-user.

Even if the figures add up financially, Nicosia is reluctant to abandon its plan as it doesn’t want to be dependent on a single supplier and forsake the construction of an LNG terminal.

Energean has submitted to the Cyprus Energy Regulatory Authority (CERA) an updated proposal to supply the island with natural gas through an FPSO, which will commence operations in March 2021 in the EEZ of Israel.

There have even been some suggestions the Greek firm could seek legal action to force its way into the Cyprus supply chain.

CEO of Energean Mathios Rigas said in May: “We have submitted a comprehensive Plan to supply the Republic of Cyprus with natural gas through the infrastructure that Energean is constructing and will be operating in Israel.

We are at the disposal of the Cypriot Government and the Cypriot Authorities to discuss how this plan could be implemented so that Cyprus will be able to start using affordable natural gas in March 2021, provided there are no delays in permitting procedures, said Rigas.

Complicating matters is that the government has declared the natural gas market in Cyprus as isolated and emerging.

It effectively means that DEFA is not only the sole importer and distributor of natural gas on the island but also the solitary entity allowed to supply the fuel.

The LNG terminal will be completed in 2020 and has secured a funding of 40%, or up to Euros 101 mln in EU grants.

Source: The Financial Mirror