Cyprus Decides on "Interim Gas Solution"

Cyprus is set to make decisions for an interim natural gas solution.  More specifically, the selection of an international company from which it will import LNG, until its offshore reserves are mature enough for development.  Thus far, Cyprus has scheduled to make use of its newly discovered natural gas fields after 2019, and until that period it has strategically decided to switch its fulfillment of energy needs by importing gas.

Since mid-2012, an international competition was held with 17 companies participating primarily 8 of them have qualified so far. Although the state agency responsible for the competition, DEFA, declined to name the companies interested, data was leaked, which indicated the following are to proceed with submission of binding offers: Dutch Vitol that is also in the process of investing hundreds of millions of euros for an oil terminal in the Island. Russian Itera is included, which also has its corporate headquarters in Cyprus. Spanish Gas Natural Fenosa is applying, as well as, the French GDF Suez. The rest have not been named yet.

The contract sought calls for the importation to the Island of around 0.8 billion bcm of gas annually up to a total value of 4 billion euros, until the offshore reserves are ready for exploitation. The Cypriot Energy Ministry has relayed that the process will finish soon, with a short list out of the 8 remaining being made over the coming 2 weeks. Thereafter the price offer of each company will play the determining role, since DEFA will take into account prices of 90 percent offer value of the prospective investor's application file.

It is of interest that the gas imported will be in LNG form and as such proper installations for said form of imports should also be made by the investor.  Due to time pressures and for reasons of cost-effectiveness, it is expected that Floating, Storage and Regasification Vessel (FSRU) will be used or a Shuttle and Regasification Vessel (SRV). In each case the company that acquires the contract will certainly have leverage in Cyprus, as it will be the first to enter the market and create basic facilities. Moreover, the company will be also able to play its role in the ongoing bilateral talks between Cyprus and Noble Energy, which mainly revolve around the costs of creating an LNG terminal and for their joint exports to world markets. An international company that has already set up an import base on the Island would be a major asset for both of them, since it could be used also as an export platform. In any case the interim gas solution is another point forwards the final exploitation of the East Mediterranean natural gas reserves.