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Cyprus enters LNG era with FSRU groundbreaking at Vassilikos


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Nicosia — Cypriot officials hailed the start of a new energy era for the island on July 9 with a groundbreaking ceremony marking the start of construction for a floating storage and regasification unit (FSRU) terminal at Vassilikos.

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A terminal and an FRSU, supplied by a Chinese-led consortium, are to be in place and operating by the end of 2022, enabling Cyprus to end its reliance on oil imports to fuel its main power generation plant at Vassilikos, where trading giant VTTI also operates a fuel storage and transshipment center.

It has taken Cyprus years to wade through numerous tenders, rounds of negotiations, and second guesses about its own offshore gas resources before agreeing last year to award a Eur289 million ($327 million) contract to China Petroleum Pipeline Engineering and partners Metron, Hudong-Zhongua Shipbuilding, and Wilhelmsen Ship Management.

The deal covers an FSRU that will be fitted out in Singapore as well as the construction of a jetty, mooring facilities, pipelines and infrastructure to convey the regasified LNG to the power station.

It is the most expensive project undertaken by the Cypriot government, but the use of gas is expected to reduce the cost of electricity to consumers, who currently pay some of the highest prices among EU member states.

The government will own the LNG terminal through the Natural Gas Infrastructure Company of Cyprus (ETYFA), a subsidiary of the Natural Gas Public Company (DEFA), and supply gas to the Electricity Authority of Cyprus (EAC), which will have six gas-fired generation units in operation by 2023.

Furthermore, the availability of gas on the island is also seen as giving rise to independent power producers. There are three companies in Cyprus with licenses to build generation stations and sell electricity.

DEFA, meanwhile, has opened a tender for the supply of LNG and has received expressions of interest from 25 international companies.

Diversified energy mix

Speaking at the groundbreaking ceremony, Cypriot President Nicos Anastasiades said the terminal would enable Cyprus to ensure energy supply, diversify the energy mix, promote competition in the electricity market, achieve environmental goals and strengthen the island's economy.

He added that the terminal will end the country's energy isolation, reduce its carbon footprint by 30%, increase the flexibility of energy production and cut consumer costs by up to 25%.

The project has received the political and financial backing of the European Commission and European institutions.

ETYFA has received a Eur101 million subsidy from the EC under the Connecting Europe Facility, loans of Eur150 million from the European Investment Bank (EIB) and Eur80 million from the European Bank for Reconstruction and Development (EBRD), and an investment of Eur43 million from EAC.