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| Marios Demetriades: considering Cyprus' LNG options |
Karen Thomas
Greece, Italy and Cyprus have individual and collective plans for LNG-import and small-scale distribution infrastructure
Although it is a relatively mature LNG-import market, Europe is developing significant new import and small-scale capacity and new capacity is concentrated in the south and east of the continent.
Several factors are driving this shift. Falling prices and slowing demand from Asia’s mature importers have made LNG more competitively priced, compared with piped gas, for buyers in Europe.
That will continue, as new LNG comes to market from the US and Australia. Using LNG can boost energy security and, as a cleaner-burning fuel, is a way to meet tougher emissions targets. All these elements are driving demand for additional LNG in Europe in general, and in the newer markets of the south and east in particular.
Regional goals
European Union (EU)-led initiatives to make shipping and transport more sustainable provide an additional boost. Poseidon Med II is one such drive to develop south and southeast Europe’s LNG-import, bunkering and distribution infrastructure.
Lloyd’s Register (LR) marine and offshore manager south Europe Theodosis Stamatellos says the Poseidon Med II, Gainn4Mos and LNG Core as Hive initiatives have committed €125 million (US$134 million) to promoting LNG as fuel in southern Europe, bringing together more than 100 stakeholders.
“Poseidon Med II tasks include risk assessment, environmental-impact assessment, port installations and technical studies that examine each proposed LNG-bunkering scenario,” Mr Stamatellos says.
Poseidon Med II has drawn up a list of 10 vesssels to convert to run on LNG. The vessels include high-speed and ropax ferries, and service vessels that operate in at least one of the ports involved with the project.
Concept designs are in place for half the fleet while basic designs exist for two vessels, including general arrangements, safety drawings, control and electrical systems and financial studies.
Poseidon Med II includes plans to order an LNG feedership, subject to further LR studies on the risks and hazards. The vessel will be a feedership and bunker-supply ship with capacity for 6,000m³-8,000m³, built to deliver small parcels of LNG as marine fuel around the Adriatic and to Cyprus.
Meanwhile, LR is working with individual member states to develop national framework agreements for alternative fuels. “We are to holistically examine the LNG supply chain and demand,” Mr Stamatellos says.
“We have adopted a top-down approach, implementing the EU strategic plan for the region, by developing the optimum strategical solution for LNG bunkering, taking into account current and future trends and formulating an efficient regulatory framework that will support this.”
This means that Poseidon Med II is not a theoretical exercise, he says. “We aspire to preparing the ground for the setup of the LNG bunkering supply chain and the initial critical mass demand for LNG as fuel.”
Greek distribution chain
Poseidon Med II is positioning Greece, which has the region’s largest LNG-import terminal at Revithoussa, to become a regional LNG marine bunkering and distribution hub, having measured projected LNG demand in the eastern Mediterranean.
Five ports in Greece and Cyprus have been earmarked for new investment in LNG-supply infrastructure: Piraeus, Patras, Heraklion, Limassol and Igoumenitsa. Greek utility and project co-ordinator the Public Gas Corp (DEPA) is studying LNG demand in these ports.
It plans to position Piraeus, the region’s largest container port and a hub for ferries and cruiseships, as an LNG-bunkering hub for the eastern Mediterranean. Revithoussa will open a third LNG storage tank – increasing its capacity by 90,000m³ – early next year. It plans to add an LNG truck-loading station in summer 2018.
Poseidon Med II must also finance its ambitions, however. In late 2016, talks were under way with public and private finance sources.
“The most mature cases to mobilise investment are the ports of Patras and Piraeus, in combination with the Revithoussa LNG terminal installations,” Mr Stamatellos says. “For Patras, a public-private partnership for the investment seems to be the most suitable form of funding, considering the public value of this project.”
Late last year, GasLog put itself on course to station the first FSRU off Greece. It has bought a 20 per cent stake in Greece-based Gastrade, which is licensed to develop a floating import venture off Alexandroupolis.
Italy thinks small-scale
Meanwhile, Italy is pressing ahead with its own LNG-import and small-scale projects, as a partner in Poseidon Med II and with other regional initiatives. Italy plans to build five marine LNG-bunkering stations by 2020 and to double the number by 2025. It is also positioning the Port of Gioia Tauro, a leading regional hub for container transhipment, as an LNG fuel-supply hub.
LNG Med Gas has studied demand for an LNG terminal outside Gioia Tauro. It plans to build LNG Med Gas Terminal to regasify an estimated 14.2 million tonnes a year (mta), to handle LNG carriers from 70,000m³ up to Q-flex size, with up to four tanks that could also support trucking and other small-scale deliveries.
Mooted for years, the project has progressed at a glacial pace. Nevertheless, sources in Italy maintain that the venture is going live. “It will be the largest plant in the Mediterranean,” a source told LNG World Shipping.
Progress is more evident at Livorno, where the port authority has worked with local industrial partners including Gas & Heat and ENI-Costiero Gas and with the EU to complete a series of studies on alternative fuels, on demand for LNG as marine fuel and on dual-fuel port equipment.
Livorno was also the focus of an Italian study on LNG logistics, examining opportunities for ISO tank containers across the north Tyrrhenian region. This has led to a new effort to identify a storage area at the port.
Anchor project
Livorno is home to FSRU Toscana, the floating storage and regasification unit (FSRU) operated by OLT Offshore LNG Toscana. OLT has carried out a pre-feasibility study on transferring smaller parcels of LNG to smaller carriers for domestic and regional redistribution.
OLT and the port are working with Italy’s national GAINN-IT initiative to develop small-scale infrastructure, reporting to two ministries – one governing transport and infrastructure and the other economic development. A TEN-T pre-feasibility study concluded that FSRU Toscana can reload from the port side “with minor modifications”.
An OLT spokesman said: “OLT Terminal will play an important role for Italy and for Europe, offering a wide range of regasification services with high send-out flexibility, allowing high trading value to its customers.
“FSRU Toscana is authorised to receive most LNG carriers with a cargo capacity between 65,000m³ and the new Panamax class and is equipped with a Wobbe Index corrector that allows it to receive almost all the LNG produced in the world.”
A third notable Italian LNG project centres on Sardinia, which is a priority for small-scale LNG investment as the island has no connection to mainland Italy’s national grid. This project is led by Stolt Nielsen.
Cyprus choices
Cyprus, meanwhile, has import and export options, thanks to its sizeable offshore gas reserves. Block 12 holds some 4.3 trillion ft³, as yet untouched. The island nation’s minister of transport, communications and works Marios Demetriades told LNG World Shipping that the country should start production in 2020.
Three oil and gas majors – Noble, ENI and Total – will start drilling in 2018. At the time of writing, Cyprus was due to conclude a third round of exploration proposals from major international players including Statoil and ExxonMobil. This could position Cyprus to export surplus gas as LNG, if future exploration delivers the expected results.
“Our current preference is to build a pipeline to Egypt and to export surplus gas from Block 12 from the existing LNG liquefaction terminal at Idku,” says Mr Demetriades. “We believe this is a cheaper way for us to get our LNG to market, but we also see an opportunity to meet Egypt’s domestic demand for natural gas.”
How much gas Cyprus can sell as LNG is uncertain, as it has yet to determine its own domestic gas needs. In the meantime, it plans to import LNG to switch its electricity production from oil-fired to gas.
Meanwhile, it also wants to become a hub for LNG in the Mediterranean, according to Cyprus Department of Merchant Shipping acting director Ioannis Efstratiou.
“The expansion of the LNG market within the Cyprus exclusive economic zone (EEZ) has moved apace,” he says. “Although still in the early stages, it has already generated interest from oil majors including ENI, Total, Noble Energy Statoil, Exxon Mobil, Qatar Petroleum and Cairn.”
Cyprus is also working with the EU’s Poseidon Med II initiative to identify opportunities for gas as marine fuel.
“Everyone has made the commitment to reducing emissions from shipping and we are expecting to see growth in demand for LNG as marine fuel in the next few years,” Mr Demetriades concludes. “We have worked with this port-development project for the last three to four years and we see an opportunity for LNG bunkering in Cyprus.”
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