Cyprus signs with Chinese-led Consortium to build LNG terminal

Cyprus signs with Chinese-led Consortium to build LNG terminal

On Friday, 13th December 2019, Cyprus signed a deal with a Chinese-led consortium, in order to build the island’s first natural gas import terminal, and enable the country to generate cheaper and cleaner energy (https://www.nytimes.com/aponline/2019/12/13/business/ap-cyprus-gas-import.html).

As stated by the Energy Minister, Mr. Georgios Lakkotrypis, the floating terminal, which will cost EUR 289 million, will aid in Cyprus’ objective to reducing its carbon footprint from electricity generation by up to 30% (http://www.ekathimerini.com/247559/article/ekathimerini/news/chinese-led-consortium-to-build-cyprus-gas-import-terminal).

The LNG terminal, which is due to be completed by early 2022, is designed to convert imported liquefied gas back into gaseous form for use in Cyprus’ main plant.

It will include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU, a jetty borne gas pipeline and related infrastructure (https://in-cyprus.com/cyprus-signs-contracts-for-lng-terminal/).

The contract for the project was signed by the Natural Gas Infrastructure Company (ETIFA, a subsidiary of Natural Gas Public Company) and the multinational consortium of JV China Petroleum Pipeline Engineering Co Ltd, Metron S.A., with Hudong-Zhonghua Shipbuilding Co. Ltd and Wilhelmsen Ship Management Limited (https://in-cyprus.com/cyprus-signs-contracts-for-lng-terminal/).

The Cypriot state will wholly own the terminal and will, therefore, provide authorities with flexibility for spot purchases of lower-cost gas on the international market, while allowing for future use of natural gas from gas fields discovered off Cyprus’ shores (http://www.ekathimerini.com/247559/article/ekathimerini/news/chinese-led-consortium-to-build-cyprus-gas-import-terminal).

Three gas fields have been discovered within Cyprus’ Exclusive Economic Zone, thus far – namely, Aphrodite gas field in Block 12 (containing circa 4.1 trillion cubic feet of gas, Calypso gas field in Block 6 (containing circa 6-8 trillion cubic feet of gas), and Glaucus gas field in Block 10 (containing circa 5-8 trillion cubic feet of gas). ExxonMobil and partner Qatar Petroleum, as well as Italy’s Eni and France’s Total are licensed to search for gas off Cyprus (https://www.nytimes.com/aponline/2019/12/13/business/ap-cyprus-gas-import.html).

The project has secured a EUR 101 million grant from the EU under the Connecting Europe Facility (CEF) financial instrument, while the Cyprus Electricity Authority will contribute EUR 43 million, securing a 30% stake at ETIFA (https://in-cyprus.com/cyprus-signs-contracts-for-lng-terminal/).

Furthermore, ETIFA will cover the remaining part of the cost with funding from international lenders such as the European Investment Bank and the European Bank for Reconstruction and Development, with state guarantees. The infrastructure’s operational expenditure (Opex) are estimated at EUR 10.5 million a year.

The Energy Minister stated that the facility is expected to help reduce the cost of generating power by an estimated 15-25%, for the period of 2022-2025, by substituting natural gas for crude (https://www.seatrade-maritime.com/ports-logistics/china-consortium-build-cyprus-lng-terminal).

He further proclaimed that the introduction of natural gas in the Cypriot market serves the government’s plans to achieve the security of energy supply, to diversify Cyprus’ energy mix and to promote competition in the electricity market, fostering the reduction of electricity prices of business and households (https://in-cyprus.com/cyprus-signs-contracts-for-lng-terminal/).

The significance of this deal is further depicted by what the deputy managing director of China Petroleum Engineering, announced that “This is a significant project that ushers Cyprus into the natural gas era” (https://www.brecorder.com/2019/12/14/553112/cyprus-signs-landmark-lng-deal/).

On parallel lines, the Managing Director of Metron, Mr. Nikos Papaoutsis, stated that this project paves the way for the import of natural gas, marking a new era for Cyprus’ energy plans (https://in-cyprus.com/cyprus-signs-contracts-for-lng-terminal/).