2020 Cyprus Country Report

Energy: Oil & Gas
Sector Profile
ments. VTTV’s strategic location makes it the first
terminal of its kind in the Eastern Mediterranean
offering these services and connecting Europe and
the Black Sea with markets in the Middle East and
Asia. The industry has tremendous growth prospects
with Cyprus’ determination to establish itself
as a key energy hub and a stronghold of stability
in the region.
LNG IMPORT TERMINAL
Until it is able to develop its own gas, Cyprus is
planning to import LNG to replace heavy fuel oil
and diesel in power generation. Not only is this
expected to bring the cost of electricity down,
but it will also lead to a substantial reduction
in carbon dioxide emissions, helping Cyprus
achieve its Paris Agreement pledges.
In December 2019, Cyprus signed a landmark
deal with a Chinese-led consortium to build a
€290 million LNG import terminal at Vassilikos.
The project has secured a €101 million grant from
the EU under the Connecting Europe Facility
(CEF), with the EAC contributing €43 million
securing a 30% stake.
The terminal will include a floating storage and
regasification unit (FSRU), a jetty for mooring
the FSRU and related infrastructure. The attractiveness
of Cyprus to gas companies is confirmed
by another offer to import LNG. This is under
consideration by the Cyprus Energy Regulatory
Authority (CERA). Construction of the terminal
started in July 2020, with completion expected by
2022. It is Cyprus’ largest project.
CONNECTING POWER GRIDS
Another important regional energy project is
the EuroAsia Interconnector, which will link the
power grids of Cyprus with Greece and Israel via
an undersea cable. The 2,000-Megawatt (MW)
Interconnector, is the only North-South electricity
interconnection in the Central Eastern
and South Eastern Europe Priority Corridor.
Licenced Blocks
Block Licensors Year
2 ENI, Kogas 2013
3 ENI, Kogas 2013
6 ENI, Total 2017
7* ENI, Total 2019*
8 ENI 2017
9 ENI, Kogas 2013
10 ExxonMobil, Qatar Petroleum 2017
11 Total, ENI 2013
12 Noble Energy, Delek Drilling,
BG Cyprus Limited 2008
* Formal licence approval still pending
The permitting procedure started in 2019 and
is expected to be completed by December 2020
for the construction of the first power ‘corridor’
with a capacity of 1,000 MW costing €3.5 billion.
The Crete-Attica link is expected to commence
in September 2022, and the Cyprus-Crete and
Cyprus-Israel links in December 2023.
The Interconnector will end the energy isolation
of Cyprus and contribute to achieving the
EU Energy Union’s goals of connecting European
energy networks, achieving the electricity interconnection
target for 2030 of at least 15%. It will
also contribute to the internal energy market integration,
increase security of energy supply, and
support sustainable development by integrating
renewable energy sources across the EU.
The project is progressing to plan, with the
selection in March 2020 of Siemens AG as the
preferred bidder for the award of the contract for
the construction of the ‘VSC Converter Stations’
of the EuroAsia Interconnector.
An important milestone was achieved in
July 2020, when the government of Cyprus
issued the Interconnector with the final building
permit to construct a high voltage direct current
(HVDC) converter station in Cyprus, with a capacity
of 2,000 MW. Construction is planned to
start before the end of 2020.
This has since been followed by a framework
agreement to also set up an EuroAfrica
Interconnector to link the power grids of Egypt,
Cyprus and Greece through subsea HVDC cables
with the capacity to transmit 2,000 MW. The
Interconnector is a VSC-HVDC scheme which
will allow the bidirectional transfer of 1,000 MW
(Stage 1) between the converter stations, with an
estimated cost of €2.5 billion. Completion of the
project is planned for December 2023.
KEY ENERGY HUB
Cyprus is well positioned to further strengthen its
role as a stable and attractive location in which
to base energy infrastructure projects and headquarters
for international companies servicing
the region. The country’s EU status and beneficial
business operating environment provides the
island with unique advantages to establish itself
as a strategic player and facilitator in the EMEA
energy market. With increased regional cooperation
and the unfolding discoveries in the Eastern
Mediterranean, the growing potential of the developing
oil and gas sector offer expanding opportunities
for investors, and has established
Cyprus as a stable and secure location for companies
to manage their operations from. n
Discover more at www.cyprusprofile.com
This year we
have the start
of the Cyprus
LNG Import
Project. A
significant
transformational project
for Cyprus that will have a
broader impact on the Eastern
Mediterranean region. Through
the project, we will achieve
the opening of the power
generation from conventional
sources with the activation
of IPPs. Competition coupled
with a cleaner and lower cost
fuel will drive a reduction
of electricity costs for all.
Symeon Kassianides
Chairman
Natural Gas Public
Company (DEFA)
New
discoveries
and the
plans for
more drilling
bode well,
prospects for more
discoveries are excellent
and hopefully increasing
gas reserves will bolster
export viability, especially
through a liquefaction
plant at Vassilikos but
also to regional markets.
The longer-term future of
hydrocarbon development
in Cyprus looks good,
despite regional geopolitical
challenges. With unit costs
continuing to drop, including
those of storage batteries,
the potential to expand
development of renewables is
strong and can bring Cyprus’
high electricity costs and
carbon emissions down.
Charles Ellinas
CEO
E-C Natural Hydrocarbons
Company Ltd (e-CNHC)
82 Country Report CYPRUS 2020