There is "no reason" for the gas market monopoly given to state-owned Cygas to continue given sufficient private-sector interest in investing, the chief executive of construction and energy conglomerate Cyfield, George Chrysochos, has told Argus.
Cyprus gave Cygas the monopoly thinking that it was the only feasible way to cover the large cost of developing the Vasilikos LNG import terminal, but the government has since been "extremely slow and inefficient in completing the terminal", Chrysochos said. And since 2019, private investors — notably regional producer Energean — have shown increasing interest in Cyprus' gas market, "indicating that there is no reason for the monopoly to exist", he said, adding that a competitive liberalised market would reduce the price of gas imports and therefore also domestic electricity production.
The Vasilikos project is currently under investigation by national and European authorities on suspicion of procurement fraud, misappropriation of EU funds and corruption. The project's shared liability between disparate companies made it "impossible for many parties to show interest", Chrysochos said.
Completing the project is a priority for Cyprus and that can be done in one of two ways, he said. Either state-owned developer ETYFA could issue a new construction tender using EU and Cypriot funds, which could potentially be completed within a year, or ETYFA could "give the terminal as a concession" to a new operator that finances all remaining work, operates the facility and pays annual rights to Cygas, Chrysochos said.
The "ideal scenario" for bringing gas to Cyprus would be to build a pipeline directly to existing Israeli offshore fields, and if funding for a pipeline to Israel's Karish field were available, that would "definitely bring cheaper gas to Cyprus", he said. "All redundancies are welcome," he added. But with Vasilikos already 80pc complete and its floating storage and regasification unit (FSRU) purchased, completing the terminal is the "most reasonable option", Chrysochos said.
Cyprus has made several large gas discoveries in its exclusive economic zone, but has been unable to develop them commercially. "Cyprus is a small market and cannot serve as a starting point that will make this extraction feasible," Chrysochos said, meaning that "the viability of the project depends 100pc on the sale of these quantities abroad." Because of this, the only "feasible way" for Cyprus to utilise its discoveries is to pipe the gas to Egypt, where it can be liquefied and then exported back to Cyprus or elsewhere, he said. Alternatively, a pipe could be built to bring gas directly to Cyprus from the Aphrodite field. The consortium developing Aphrodite submitted plans to pipe processed gas to Egypt in September, with similar plans for production at Cronos.
Cyfield subsidiary Power Energy Cyprus has been building a 260MW combined-cycle gas turbine (CCGT) plant, which had been intended to be fully operational by early 2025. The construction works are almost complete, but if delays to the Vasilikos terminal prove "significant", the firm might opt to modify the plant to run on diesel, which would require "significant" capital expenditure, Chrysochos said. In any case, Cyfield supports the government in completing Vasilikos and hopes that the CCGT will be operational with either gas or diesel in the next 12 months, he said. Considering the small size of the Cypriot market and that the Electricity Authority of Cyprus is building another power plant, Cyfield now plans to gradually shift its focus for the future to storage and renewables, he said.
The proposed 1GW Great Sea electricity interconnector with Greece, approved by the Cypriot council of ministers last month, poses a "greater threat" to local generation than it offers in terms of opportunities, Chrysochos said.
Because the scale of energy projects in Greece and Europe is much larger than in Cyprus, the levelised cost of energy is lower, so "it is almost impossible at this stage for Cyprus to export electricity to Europe", he said. The Great Sea line would probably make Cypriot generation redundant and would also be "extremely expensive for the Cypriot consumer, which means that any benefit from importing electricity from Greece will never outweigh the cost", he said.
