Cyprus signs contracts for LNG terminal

China Petroleum Pipeline Engineering Co Ltd and Cyprus government sign agreement

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Cyprus signs contracts for LNG terminal

Cyprus and a consortium led by China Petroleum Pipeline Engineering Co Ltd signed a contract for the construction of the nearly €300 million infrastructure for the import of liquified natural gas (FSRU) for electricity generation, a project described as the biggest ever in the field of energy in Cyprus.

The contract was signed in a ceremony by 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.

The LNG Terminal will include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU, a jetty bore gas pipeline and related infrastructure.

The project with an estimated worth of €290 million has secured a €101-million grant from the EU under the Connecting Europe Facility (CEF) financial instrument, while the Cyprus Electricity Authority will contribute €43 million securing a 30% state at ETIFA. 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 or Reconstruction and Development, with state guarantees. The infrastructure’s operational expenditure (Opex) is estimated at €10.5 ml per annum.

Furthermore, DEFA has launched an additional tender for the LNG supply, attracting expression of interest from twenty-five suppliers, among the most dominant in the global LNG market. DEFA intends to import 0.6 bcm of LNG through Gas Sale – Purchase Agreements (GSPAs) with a duration between three to four years, maintaining the option to purchase LNG also from SPOT markets.

Addressing the signing ceremony, Energy Minister Yiorgos Lakkotrypis said the inception 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.

Recalling that Cyprus had three unsuccessful attempts to import natural gas in the past due to Cyprus’ small size and small energy needs, Lakkotrypis said securing a deal was made possible due to the separation of the contract in two, one for infrastructure construction and one for LNG supply.

The Cypriot Minister said that according to studies, with the use of natural gas, Cyprus’ environmental footprint will decline by 25% to 30% compared with the current fuel used for electricity generation, while based on conservative assumptions electricity generation cost savings will range between 15% to 25% in the period of 2022 – 2025.

Symeon Kassianides, DEFA Chairman, said in his address the signing of the contract marks Cyprus’ transition in a new era with the use of cleaner sources of energy for the industry and electricity generation and energy efficiency.

He added that the project is expected to be completed between end-2021 or early 2022.

On his part, Duan Bingquan Deputy Managing Director of China Petroleum Pipeline Engineering said it is a great honour for the corporation to partner with the rest consortium participants for this significant project.

This is a significant project that ushers Cyprus in the natural gas era, he said.

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.

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