Cyprus Mail
Cyprus

Tenders opened for supply of LNG

Existing oil storage facility at Vassiliko where the government also hoped to locate an LNG terminal

The Natural Gas Public Company (Defa) on Tuesday invited expressions of interest for the supply of liquefied natural gas (LNG) to import facilities currently under development at the Vasilikos area.

Defa, by law the sole importer of natural gas, said it is inviting “prospective LNG suppliers to express an interest in supplying LNG to the LNG Import Terminal.

“Prospective LNG suppliers who respond… must fulfil several pre-qualification requirements in order to be added to Defa’s list of pre-qualified LNG suppliers.”

The statement added that Defa intends to procure its LNG requirements through a combination of medium and long-term supply via one or more LNG Sales and Purchase Agreements, and supplemental cargos via multiple Master Sales Agreements and a bidding process.

The deadline for submissions of interest is September 6, 2019. The documents are available to interested parties through the governmental portal for Public Procurement Processes (www.eprocurement.gov.cy).

Inviting bids for the supply/purchase of the actual fuel is the second part of the project to import LNG for electricity generation purposes.

The project has been broken up into two separate tenders: one for the infrastructures (receiving facilities, a floating re-gasification unit, storage) and one for the purchase of natural gas.

The first tender concerning the infrastructures was already running.

Speaking to the Cyprus Mail a few months ago, industry sources said it was odd that the infrastructures tender was launched before the process for acquiring the natural gas itself.

At the very least, they said, the two tenders should have been running concurrently.

That is because the final cost of generating electricity from natural gas will include both the cost of the infrastructures as well as the fuel costs. The stated goal of importing LNG is to bring down the cost of electricity.

The cost of the infrastructures alone is estimated at €300m, while another €200m will be spent on operation and maintenance over a 20-year period. Among the €300m are included the €101m in European Union co-funding.

According to energy analyst Charles Ellinas, Defa’s plan to import LNG will prove to be costly.

He has argued that by the time the gas arrives at the Electricity Authority of Cyprus (EAC) not only it will have to pay for the cost of imported LNG but also for the recovery of the cost to build and operate the necessary installations – floating storage regasification unit, gas storage and regasification, jetty, port facilities, as well as the profit.

Cypriot authorities have meanwhile snubbed a separate offer made by Greek energy company Energean (outside the Defa tender) which, according to Ellinas’ calculations, could result in substantial savings.

Recently Energean updated its offer to supply gas to Cyprus by pipeline by March 2021 from its gasfields Tanin and Karish in Israel.

 


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