INTERVIEW: Cyprus pushing ahead with LNG import terminal despite headwinds

Cyprus is pushing ahead to finish its long-delayed, first LNG import terminal, even as the recent trade disruptions from the war in the Middle East sharpen the EU's resolve to cut down dependencies on energy imports, Cyprus Energy Minister Michael Damianos told Platts, part of S&P Global Energy, in a recent interview.

Speaking June 15, the minister stressed that while the East Mediterranean nation is also focused on building out renewable capabilities, it will also need natural gas for years to come to complement intermittent solar output.

"Gas is definitely going to be a bridge fuel, and it's going to be a bridge fuel for maybe three decades -- if not three, then it's going to be two," Damianos said.

Nicosia has devoted about a decade to developing the terminal at the southern port of Vasilikos. The effort has been mired in delays and disputes, including the termination of the initial EPC contract with a consortium led by China Petroleum Pipeline Engineering, according to an S&P Global Energy CERA analysis.

The project sits in a sort of limbo, half-built. The government aims to select a new contractor for the remaining work by the end of 2026, Damianos said, though he did not provide further details on when the Vasilikos terminal could be completed.

Cyprus faces a degree of energy isolation unique among EU member states, with no direct connection to external electricity sources. A major project to develop a subsea interconnector with Greece is not expected to link the state to the wider EU grid before 2031, the minister said.

In the meantime, some 85% of Cyprus' energy supplies came from imported oil and oil products in 2023, which fueled about 80% of its electricity generation the same year, according to the latest data from the International Energy Agency.

Damianos is determined to deliver the planned regasification facility, in part, because he sees it as the quickest route to switch out part of those imports for a cheaper, cleaner alternative.

"The political decision is actually to finish [the terminal] because we need gas and the fastest way of actually having gas in Cyprus is to finalize the project," he said.

The government, the minister added, is not prioritizing another private proposal to develop a gas pipeline linking Israel with Cyprus.

"It's not something that we're pushing for at this point in time," he said.

The pipeline proposal would face, among other hurdles, the fact that Cyprus' status as an emerging gas market under the EU's Gas Directive allows the publicly owned Cypriot gas company DEFA to serve as the sole permitted importer and distributor of gas in the country.

The minister signaled little appetite to change that status due to the country's relatively limited gas demand, pegged late last year around 0.6 billion cubic meters/year by Damianos' immediate predecessor.

"I would leave things as they are and then we'll see 10 years down the line what we should do," Damianos said. "I think the state needs to control things."

Gas production

Cyprus' minor gas needs belie its potential importance to the wider European gas market, thanks to several offshore gas discoveries anticipated to bring new volumes to continental consumers over the coming years.

Damianos said the expectation is that the most advanced of these projects -- Cronos -- will reach a final investment decision by the end of June. Pending that, the field, which boasts an estimated 3 Tcf of gas in place, should begin production in the first half of 2028, he said.

Italy's Eni, which operates the Cronos field, and its partner TotalEnergies did not reply to a request for comment.

The Cronos gas is planned for processing and export as LNG via Egypt's Damietta terminal. Damianos insisted "the intention" is for "at least 80%" of the volumes to go to Europe, though he acknowledged Eni and TotalEnergies could take the gas anywhere once liquefied.

"This [export to Europe] is politically what we will be pushing for, but it's not completely up to us, of course," he said.

Damianos anticipates the field next furthest along -- the Chevron-operated Aphrodite site -- will reach FID around the summer of 2027 and first gas early next decade.

A Chevron spokesperson did not comment on the Aphrodite development timeline in response to a request for comment from Platts.

"We are making steady progress towards delivering a technically robust and commercially viable project," the spokesperson said.

Damianos said he expects first gas from other Cypriot fields operated by ExxonMobil further into the 2030s. The US energy company did not immediately reply to a request for comment.

More finds could emerge in the coming years. Cyprus is targeting another exploration licensing round in 2027 or 2028, according to the minister.