2020 Cyprus Country Report

Recovering
from the
impact of
the Covid-19
pandemic our
expectations
are for the intensification of our
exploration and exploitation
activities in the coming period.
The discovery and exploitation
of Cyprus’ natural gas offshore
resources will be key in
unlocking cleaner energy for
Europe, the region and beyond.
With the upcoming Cypriot
offshore activities and regional
projects, Cyprus will continue
its growth as a safe and reliable
hub for hydrocarbon activities.
Demetris Fessas
Acting General Manager
Cyprus Hydrocarbons
Company Ltd
As a
fundamental
link in the
oil supply
chain in the
East Med,
VTTV provides logistics and
storage solutions to cater
for international and local
customers. Given the sectors
we service, the opportunities
and growth are in oil ship-toship
and LNG. The expectation,
despite the challenging and
uncertain global environment,
is to explore further these
sectors to offer safe, efficient
and cost-effective solutions
whilst also being able to
provide business opportunities
for our customers.
George Papanastasiou
General Manager and
Managing Director
VTTV
are on the results of the next drilling campaign,
expected in 2021-2022. Such a development
could completely transform Cyprus’ fortunes.
Currently, Cyprus is reliant on heavy fuel oil and
diesel imports for its electricity needs and spends
over 8% of its GDP to cover the costs. The option of
an LNG plant at Vassilikos would not only tip the
gas balance of the region, but would also come with
major add-on benefits for Cyprus – not just profits
from the sale of LNG, but advantages such as new
employment, more support industries and service
companies, the development of a downstream industry
using cheap gas as feedstock, and low-price
gas to the Electricity Authority of Cyprus (EAC)
bringing electricity prices down.
IMPROVING PORT FACILITIES
In order to support the increase in offshore drilling
activities resulting from the old and new
licences, a new support base has been set up in
Limassol Port to cater to the expanding needs
of the international exploration companies. The
government has also committed to establish a
dedicated industrial port at the energy centre at
Vassilikos, to become operational by 2023. The
port will operate as a service centre for the oil and
gas industry in Cyprus and the wider region, and
it will cost around €250 million to set up.
The decision to build the port was taken in
response to increasing demand from oil and gas
companies and those providing support services
to the industry, not only in Cyprus, but also
in neighbouring countries. It is an essential step
to support Cyprus’ drive to become a regional
centre providing support services to the Eastern
Mediterranean oil and gas industry.
EAST MED GAS FORUM
Given the geopolitical challenges the region
faces, respect of international law, and particularly
the United Nations Convention on the Law
of the Sea (UNCLOS), is crucial to the peaceful
exploitation of hydrocarbons in the East Med.
With this goal in mind, the energy ministers
and representatives from Egypt, Cyprus, Greece,
Israel, Italy, Jordan and the Palestinian Authority
met in Cairo in January 2019 and set up the
East Mediterranean Gas Forum (EMGF) – with
European Commission and World Bank representatives
attending the meeting as observers.
The Forum is based in Cairo, with the aim
to be an international organisation that respects
the rights of members in regard to their natural
resources in accordance with the principles of
international law, and supports their efforts to
benefit from their reserves and use of infrastructure.
This also includes a commitment to pave the
way for fruitful cooperation in the technical and
economic fields, with a view to efficient exploitation
of the gas potential in the region.
East Med countries who agree with the
Forum’s interests and objectives will have the
right to join the founding members. It will be
open to other countries or regional and international
organisations as observers, and will
work with non-members to help create dialogue,
mutual understanding and mutual benefit.
EMGF also underlines that the private sector has
an important role to play in these efforts.
EMGF could benefit regional gas development
through dialogue on natural gas policies,
including environmental considerations, leading
to the development of a regional integrated
market in a way that maximises the utilisation of
gas resources and transport infrastructure in the
region, and would contribute to further cooperation
in the East Med.
Gas export projects could also benefit from
such cooperation, especially with regards to
ensuring a conducive regulatory environment,
putting in place the required inter-governmental
arrangements and removing political risk.
Natural gas could make a crucial contribution
to the future of East Med countries and any
such initiatives that could promote its development
can only be helpful. The large gas discoveries
in the East Med could also have a major impact
on energy security and economic development
through the exploitation of the gas regionally. This
could be in power generation, but also in downstream
and petrochemical projects. Given global
energy developments, exploitation of natural gas
resources regionally is gaining increasing importance
– the Forum is well placed to facilitate this.
TRANSHIPMENT TERMINAL
Cyprus is fast developing into a regional fuel hub
for Europe, Asia and Africa, thanks mainly to
the successful operation of the sophisticated oil
storage terminal by Netherlands-based global oil
terminal company VTTI. The company’s €300
million project in Vassilikos became operational
in 2014, and was one of the biggest infrastructure
projects constructed in Cyprus in recent years
and put the island on the global energy map.
The company uses Cyprus as a transhipment
terminal, blending its raw materials and then exporting
them to the rest of the world, but mainly to
Lebanon and Israel. With large refineries operating
and more being built in the Middle East, the
international market expects more product-vessel
traffic through the Suez Canal, bound for European
and Mediterranean markets. These cargoes need
to be resized or blended with other products to
change specification and meet regional require-
Sector Profile
Country Report CYPRUS 2020 81