By Stefanos Evripidou
BUILDING a liquefied natural gas (LNG) terminal at Vassilikos is the best option for Cyprus, according to a preliminary report by the Massachusetts Institute of Technology (MIT) and the Cyprus Institute (CyI).
Speaking at the start of a two-day workshop in Nicosia looking at ways to maximise the long-term value of natural gas for Cyprus, CyI chairman Professor Costas Papanicolas said the conclusions of the report were extremely important as they provide the government with the necessary technical facts, not political points, so that it can make the best possible decisions.
“The preliminary conclusions of this study are basically that we are on the right track, that LNG is the first choice and this view appears to be correct. What we will work on in greater detail is the risks involved, which are many,” he said.
“We are on the right track. We need a thorough study to avoid the pitfalls that such choices pose,” he added.
The workshop’s participants who will discuss and exchange views on the report over the two days include professors from MIT, CyI, University of Cyprus, University of Nicosia, University of Athens, German Marshall Fund and PRIO Institute.
MIT released a statement last month regarding the preliminary findings which showed that building an LNG terminal would cost up to a quarter of Cyprus’ GDP, far more than the cost of building a pipeline.
The study notes, however, that LNG offers greater flexibility to adjust production to changing natural gas prices and market supplies – perhaps outweighing the upfront costs.
The researchers also highlighted the “large amount of uncertainty” surrounding the rapidly changing global gas market.
Addressing the workshop, Energy Minister Giorgos Lakkotrypis said the government aims to proceed with the exploration and exploitation of offshore resources in a sustainable way, in order to maximise their long-term value.
“We are fully aware of the excellent prospects created for natural gas exports and the major transformation of the country’s energy mix, through both the proven discovery in block 12 of our exclusive economic zone (EEZ), of the third largest natural gas field in the deep water Levant Basin, as well as the expected future discoveries,” he said.
“In addition, given Cyprus’ strategic location at the crossroads of three continents, as well as the exploration activities of our neighboring countries, the potential exists for transforming our country into an important regional energy hub. In fact, Cyprus provides an ideal environment for logistics, services, petrochemicals and other oil and gas companies, to set up operations and service the offshore activities in the entire Eastern Mediterranean region,” he added.
Lakkotrypis reiterated the government’s plans to carry out all the necessary steps for the construction of an LNG plant at Vassilikos, adding that Memoranda of Understanding have already been signed for reaching a project agreement with Noble Energy, Delek and Avner who own the offshore concession for block 12, and Total, which has concessions for blocks 10 and 11.
“The LNG plant is the solution we have selected, after weighing all available options and data, for the monetisation of our indigenous gas reserves. We are confident that it is in fact the best option in terms of achieving economies of scale, maximising profits and access to the most attractive global markets, with the flexibility offered by its operation, also allowing for the potential processing of natural gas from other countries in the region,” the minister said.
Exploitation of Cyprus’ natural gas reserves will have a two-fold impact on the economy, by reducing electricity costs on the one hand, and on the other, using exports to give the economy a boost, he argued.
Former commerce minister Neoclis Sylikiotis also welcomed the interim report’s conclusion that building an LNG terminal was the best option for the utilisation of natural gas and urged the government to speed up the process.
“There is an intensely competitive environment and it’s important to move fast so we don’t lose the world markets,” he said.