By Elias Hazou
The Natural Gas Public Company (DEFA) has invited tenders for the supply of natural gas for a period of up to 10 years beginning January 2016.
Interested parties are required to submit a financial proposal for a supply term of seven years which may be extended at DEFA’s option for 12 months on three occasions, as well as a financial proposal for a fixed term of 10 years.
DEFA will open the financial proposals for the first option first. In the event DEFA determines that if no proposal for the first option is attractive, or is unable to agree terms for a gas sales agreement (GSA), it will proceed to open the financial proposals for the second option (up of 10 years).
The date of the first gas supply must fall between January 1, 2016 and June 30, 2017. The minimum and maximum gas requirements for 2016 are, respectively, 19.45 million mmbtu and 30.41 million mmbtu.
The deadline for submission of proposals is March 24, 2014. Interested parties are required to sign a confidentiality agreement.
Bidders are required to submit proposals for complete solutions, covering gas supply, infrastructure and transportation. Proposals for incomplete solutions will be rejected.
DEFA said it will apply a set of “pass/fail criteria” to all proposals it receives. The criteria cover financial standing, creditworthiness, experience and technical capability and technical suitability of the proposal. Proposals which fail any of the criteria may be rejected. DEFA is also not bound to accept any proposal made to it.
“The effectiveness of the upstream GSA between DEFA and the gas supplier will be conditional on, inter alia, DEFA entering into a downstream GSA with the Electricity Authority of Cyprus on terms satisfactory to DEFA,” according to the announcement posted on its website.
“For the purposes of evaluation DEFA will assess the likelihood of a reduction in overall generation costs. DEFA will also consider the price of gas, the proposed date of first gas delivery and the response to DEFA’s term sheet for the upstream GSA.”
The government hopes to obtain a price of $10-11 per mmbtu in the present tender. The island, totally dependent on diesel for power generation, has the highest household electricity prices in the EU.
The new tender follows the cancellation of a previous tender, which was won by Russia’s Itera Group, in late 2013. Itera was due to supply liquefied natural gas (LNG) at $14.75 per mmbtu via a floating storage and regasification unit.