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| Cyprus’s Vasilikos gas-fired power station(J&P Group) |
Verity Ratcliffe
Cyprus is preparing to launch an independent study into importing LNG as Nicosia looks to revive plans for an LNG purchase tender.
State-owned Natural Gas Public Co. (DEFA) has invited consultants to submit bids to carry out the research. Up to 10 bids are expected from companies including Gaffney, Cline & Associates, KPMG, Wood Mackenzie, DEP Levant Oil & Gas, DNVGL, Arntzen de Besche and Genesis Oil and Gas.
"The objective of the study is, based on the analysis of the various options of LNG supplies, to identify and propose an option/project, an appropriate process and a timetable for the supply of gas to Cyprus [as soon as possible] and before 2020," the tender documents say.
The consultants will be responsible for proposing the necessary infrastructure requirements. The study will also outline commercial structures and state potential sources of financing for the project.
DEFA intends to award the contract soon so the consultants can start work in November and complete the study by February 2017 at the latest. The deadline for bids is 31 October.
The bids will be assessed according to the competencies of the companies and proposed study costs. DEFA has earmarked €250,000 ($272,900) for the study.
Cyprus’s previous LNG import plans have failed. DEFA cancelled its last initiative on 7 February after a meeting attended by Cypriot Energy Minister Yiorgos Lakkotrypis, the Cyprus Energy Regulatory Authority, DEFA and the Electricity Authority of Cyprus.
The organisations rejected the proposed LNG supply agreement offered by Vitol on the basis that the company wanted to sell about one-quarter more than the quantities originally proposed, said independent energy consultant Charles Ellinas.
Cyprus cancelled the tender, partly because it feared it would end up with more LNG than it needed but also because it could have caused a backlash from other bidders as the country may have been accused of bending the rules for Vitol.
Old idea, new times
Cyprus first considered importing LNG more than 10 years ago, with the aim of helping the country switch from oil to gas in its electricity sector. Golar LNG applied for a licence to build a floating power plant in 2005, but the plan was cancelled. The company claimed Cyprus did not have an LNG strategy.
Having held two LNG import tenders that were later ditched, Cyprus will need to find a way to convince suppliers it is worthwhile for them to participate this time around. Low global energy prices may work in Cyprus’s favour.
As well as wanting to secure competitively priced LNG imports, another reason Cyprus wants to move ahead with its plan as soon as possible is to meet its emissions targets under the COP21 agreement signed in Paris last year. The country may also hope to create a market for gas to assist in the future development of its own resources.
Although Cyprus has its own gas reserves, they will not be exploited within the next few years, and the island state wants to switch its power plants to gas by 2018. The development of the Aphrodite field, Cyprus’s biggest gas find to date, has stalled because of low energy prices, the lack of an obvious route to market and the hunt for much bigger discoveries.
Noble Energy, a joint licence-holder in Aphrodite, is also a partner in Israel’s Leviathan gas field, and the company is prioritising the development of the Israeli project. More importantly, it is unclear who would buy gas from Aphrodite and how it could be transported to market.
Cyprus has considered a number of export options and may decide to build a liquefaction plant if there are many more discoveries. It recently received bids from IOCs for its third licensing round, which the country offered in the hope that other discoveries would be made that would warrant building LNG export infrastructure and/or pipelines.
Six bids were submitted in the latest round by ExxonMobil, Qatar Petroleum and Statoil as well as from IOCs that already hold Cypriot acreage.
Eni and Total entered a joint bid for Block 6 to Cyprus’s Ministry of Energy, Commerce, Industry and Tourism. Block 8 drew two bids – one from Eni and another from a consortium of Capricorn Oil, Delek Drilling and Avner. Three bids were entered for Block 10: one from Eni and Total, a second from Exxon with Qatar Petroleum, and a third from Statoil.
Total, which holds a licence to explore Block 11, had intended to drill exploratory wells from April 2017. However, its schedule has been hit by delays in establishing an onshore services base at Limassol because of a dispute between the government and logistics companies DP World and GAP Vassilopoulos, which hold a contract to operate the port.
In the meantime, the task of securing ‘interim’ LNG supplies will be a challenge. Much remains unclear about when Cyprus will produce gas from Aphrodite, which means it will be difficult to determine how the country should import LNG. The chosen supply consultants will have their work cut out.
SOURCE
