24/10/16
'No reason' for Cyprus gas monopoly: Cyfield
'No reason' for Cyprus gas monopoly: Cyfield
London, 16 October (Argus) — 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. By Brendan
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