Nicosia, Cyprus. The first two articles in the series concluded that Cyprus must determine whether the Vasiliko LNG import project remains the most economical option for supplying natural gas. While gas retains strategic benefits, the available options and the project’s economics have changed.
Natural gas objectives
Natural gas would reduce carbon emissions, improve electricity-generation efficiency, diversify fuel supplies and strengthen energy security. These strategic objectives remain valid.
However, Cyprus’ offshore gas discoveries have moved closer to development, new regional pipeline proposals have emerged, and the economics of the Vasiliko LNG import project have changed significantly.
The article says Cyprus should compare realistic alternatives using consistent criteria, including cost, security of supply, flexibility and implementation risk.
Completing the Vasiliko project
One option is to complete the existing Vasiliko project. The remaining engineering work is challenging but considered manageable, while the main difficulties involve procurement, arbitration, financing and project management.
Based on risk-based estimates developed in the previous articles, total project costs could reach €1 billion to €1.2 billion. With LNG priced at about $8 per MMBtu and annual gas demand of around 0.7 bcm, the cost of gas delivered to EAC could reach $15.5 to $17 per MMBtu after capital recovery, operating costs, financing and terminal utilisation are included.
At current oil prices, this could result in electricity prices that differ little from current levels.