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Cyprus Energy: 2024 Outlook

ellinas global demand for crude oil is predicted to increase by between 2 2.5million barrels per day, keeping prices high, in a range between $80 $90 per barrel
Global demand for crude oil is predicted to increase by between 2-2.5million barrels per day, keeping prices high, in a range between $80 - $90 per barrel

Global energy will continue to be driven by security concerns in 2024, ahead of climate goals, as wars, conflicts and threats to supplies continue. Renewable energy systems (RES) will carry on growing, but with intermittency remaining a challenge, fossil fuels will be needed to provide resilience and reliable back-up.

With most analysts expecting the world economy to grow by 2.4%-2.8% in 2024, global demand for crude oil is predicted to increase by between 2-2.5million barrels/day, keeping prices high, in a range between $80-$90/barrel.

This is higher than the last two-month average of below $80/barrel and is likely to lead to an increase in current petrol prices in Cyprus.

However, the biggest unknown in 2024 is China’s economic and oil demand growth. Should OPEC and IEA forecasts of Chinese oil demand materialize, global oil prices could go even higher.

There are also other uncertainties that may influence global economic growth, such as persistently high interest rates, the threat of energy price increases and geopolitical tensions.

With 2024 being an election year, the European Commission (EC) is urging member states to reduce their public spending to avoid further fuelling inflation, and in particular not to grant energy aid to households.

The EC is warning that for Cyprus “risks are skewed to the downside” in 2024, “especially given that Cyprus is highly dependent on oil imports and that important sectors such as construction, tourism and trade may be sensitive to higher interest rates.”

Another consequence of its high oil dependence, is exposure to EU’s emission allowance prices. These are forecast to average about €90/tonne CO2 in 2024, in comparison to less than €80/tonne CO2 now. The total cost of emission allowances to Cyprus could exceed €350million in 2024.

For Cyprus’ long-suffering electricity consumers this means that the cost of emission allowances added to their electricity bills will rise in 2024. Combined with higher oil prices, this means that not only electricity costs will remain high, but, with no hope of switching to gas this year, they will increase even further.

Cyprus’ energy

Cyprus made a number of important pledges at COP28, the UN global climate summit in Dubai in December. It would be good to expedite implementation and let these guide us in 2024.

The key ones are to triple RES -to 50% of electricity- and to double energy efficiency by 2030, combined with a transition of electricity production to natural gas. And to deal effectively with energy poverty.

Let’s start with the much-talked about natural gas. A big fuss was made in 2023 about development of the Aphrodite gasfield. Chevron is insisting on optimizing the 2019 development plan, meaning it will consider alternative ways of developing the gasfield, with the primary goal of reducing costs. Cyprus’ minister of energy expects only a simple update of the design, without changes to the basic infrastructure. A different choice of words, but crucial.

When the new deadline expires on March 31, there is a good chance that differences will remain. I hope we are ready and make decisions that combine and balance both techno-economic and geopolitical parameters and interests. The important thing is that the negotiations do not end-up in an unwanted collapse, with even more delays and with political dimensions.

Eni is expected to complete appraisal drilling of the Cronos gasfield early 2024, with the expectation that it will be positive. Depending on the outcome, it is possible that Eni will also carry-out appraisal drilling of Calypso. Eni will follow this by the submission of a development plan, very similar to that of Chevron, i.e. no FPU, but a pipeline connection to the underutilized Zohr gasfield facilities in Egypt.

It would be strange to accept Eni’s plan and reject Chevron’s. Closer coordination between the president and the energy ministry will be needed to avoid any misunderstandings.

Before we leave the EEZ, there is also the issue of Turkish intervention. The aggressiveness we saw in previous years is not expected in 2024, but Turkey will put natural gas at the forefront of any discussions, with difficult demands that will cause dilemmas, when and if negotiations on the Cyprus problem begin. The Cypriot side will need to be ready with positions and arguments that stand up to scrutiny.

With some flexibility, and barring any unexpected geopolitical developments, 2024 could be the year development of Cypriot natural gas sees progress.

Unfortunately, it will not be the same for the liquefied natural gas import terminal at Vasilikos. Delays will continue. Even though the floating regasification vessel (FSRU) will be ready, delivery of the terminal and facilities at Vasilikos will be delayed.

Further, with the ongoing delays in awarding construction of the natural gas pipelines that will connect the terminal to the power plants of EAC, Paramount Energy Corporation and PEC will not be ready in 2024. And with the complex processes that need to be completed before electricity generation switches to natural gas, we will be lucky if this is achieved by 2025.

As a result, Cyprus will continue to be plagued by high carbon emissions and increasing emission allowance costs. The inordinate delays in completing this project are costing Cyprus, and energy consumers, hundreds of millions of euros. It is imperative that this is investigated by the auditor-general.

These delays exacerbate energy poverty. With the EC and European Bank discouraging energy subsidies, vulnerable consumers will continue facing problems with unaffordable prices. Taxing the huge surplus profits from RES -in the last two years and in 2024– and using these to assist vulnerable consumers could help, but there seems to be no political will to implement it.

Something constructive in 2024 is that there could be positive developments in RES, residential photovoltaics, electricity storage batteries, and perhaps also upgrading of the grid and the EuroAsia Interconnector. Disbursement from the Recovery and Resilience fund will help develop green energy projects.

But given our abysmal history regarding implementation of energy projects by government, it may not be certain that any of these will actually be launched in 2024. Any successes so far have been in the private sector.

The challenge in 2024 will be that these projects must be awarded on the basis of truly competitive tenders. Otherwise, Cyprus will risk continuing to be plagued by restrictive, uncompetitive, practices that have so far led to high RES prices, contributing to the unbearable electricity prices at the expense of consumers.

The most important thing in 2024 will be to move away from words and into action. But don’t expect miracles. But even without miracles I expect we will have some positive developments.


Dr Charles Ellinas, @CharlesEllinas

Senior Fellow

Global Energy Center

Atlantic Council

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