Cyprus signs landmark deal to build €290 mln LNG terminal

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Cyprus on Friday signed a landmark deal with a Chinese-led consortium to build a €290 mln terminal for the import of liquified natural gas for electricity generation, said to be among the biggest energy projects.

At a ceremony in Nicosia, Cyprus’ natural gas infrastructure company (ETIFA)) signed a contracted to build its first LNG terminal with the multinational consortium led by China Petroleum Pipeline Engineering.

The consortium also includes METRON (Greece), Hudong-Zhonghua Shipbuilding (China) and Wilhelmsen Ship Management (Norway).

The LNG terminal to be completed by end 2021 or early 2022, will include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU, a jetty-borne gas pipeline and related infrastructure.

At an estimated cost of €290 mln, the project has secured a €101-million grant from the EU under the Connecting Europe Facility (CEF) while the Cyprus Electricity Authority will contribute €43 mln securing a 30% stake in ETIFA.

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 infrastructures operational expenditure (Opex) is estimated at €10.5 mln per annum.

DEFA has launched an additional tender for the LNG supply, attracting expression of interest from 25 suppliers.

Cyprus intends to import approximately 0.5 bcm of LNG through Gas Sale Purchase Agreements (GSPAs) with a duration of three to four years, maintaining the option to purchase LNG also from SPOT markets.

Energy Minister George Lakkotrypis said bringing natural gas to Cyprus will “safeguard energy supply, diversify the energy mix and promote competition in the electricity market through the involvement of independent producers, who are expected to reduce energy costs for households and businesses.”

Cyprus had three unsuccessful attempts to import natural gas in the past due to its small size and energy needs, said Lakkotrypis.

He said securing a deal was made possible due to the separation of the contract in two, one for infrastructure construction and the other for LNG supply.

He said the use of natural gas will reduce Cyprus’ carbon footprint by 25% to 30% in replacing oil-burning for electricity generation.

Based on conservative estimates, electricity generation cost savings will range between 15% to 25% from 2022-2025.

Natural Gas Public Company (DEFA) chairman Symeon Kassianides said the signing of the contract marks Cyprus’ transition to a new gas era with cleaner energy for electricity generation and energy efficiency.

Duan Bingquan Deputy Managing Director of China Petroleum Pipeline Engineering, said: “This is a significant project that ushers Cyprus in the natural gas era.”

Nikos Papaoutsis, Managing Director of Metron, said this project paves the way for the import of natural gas marking a new era for Cyprus’ energy plans.

Greek oil and gas producer Energean has made a pitch to sell its Israeli natural gas to Cyprus via pipeline at a competitive price while Nicosia is opting for LNG.

Energean’s proposal envisages the import and supply of natural gas to Cyprus by 2021 at “highly competitive prices”.

The company registered with the London and Tel Aviv stock markets recently filed applications with the Cyprus Energy Regulatory Authority.

The plan includes the development of a gas pipeline from the Energean Power FPSO, which will operate within Israel’s EEZ, to Vassiliko in Cyprus.