London — UK-listed Energean Oil & Gas has proposed building a $350 million pipeline to send gas from its Karish North field offshore Israel to Cyprus from 2021, it said Tuesday.
Energean is developing the Karish, Karish North and Tanin gas fields offshore Israel, with first production expected in the first quarter of 2021.
While gas from the Karish and Tanin fields -- with reserves of some 68 Bcm -- has been earmarked for use on the domestic Israeli market, Energean is now proposing to send gas from the 25 Bcm Karish North field to Cyprus.
"Energean's proposal offers Cyprus the option to switch to gas as soon as possible, and under the most competitive terms," Energean CEO Mathios Rigas said in a statement.
"Execution of the proposal will bring competition to the Cypriot gas market, decrease energy costs across the economy and result in enhanced diversity and security of supply," Rigas said.
Cyprus currently has no access to gas and has plans to install an FSRU to bring in LNG to the island in 2021.
"Our proposal...is supplementary to the LNG import procedures launched by the Cypriot government. We expect that Cyprus will take advantage of the options that the market offers for the benefit of the Cypriot economy and the consumers," Rigas said.
Energean has a dedicated, 8 Bcm/year floating production, storage and offloading vessel named Energean Power -- which last month floated out at its Chinese shipyard -- which will feed the gas into pipeline infrastructure, both to Israel and Cyprus, if approved by Nicosia.
The pipeline from the Energean Power FPSO to Cyprus will have a total length of 215 km (133 miles) and transport gas from Karish North, the company said.
The total investment of $350 million will be funded by Energean. "Cyprus will bear no upfront cost," the company said.
"Provided that there will be no delays in permitting procedures, the project will allow Cyprus to receive competitively priced gas from 2021," it said.
Energean has also already signed letters of intent with all three power producers that have been granted a license to construct combined cycle power plants in Cyprus. These are: Power Energy Cyprus, Lysarea Energia and Paramount Energy Corporation.
Power Energy Cyprus, part of the Cyfield Group, has under construction near the island's energy center at Vassilikos a 260 MW combined-cycle power plant designed to run on gas or diesel.
The plant is a Eur200 million ($222 million) investment designed to be in full operation by March 2021 when LNG is due to arrive at Vassilikos.
"We are watching very closely the gas situation in Cyprus," George Chryssochos, head of PEC, told S&P Global Platts Tuesday.
"We are watching [state gas company] Defa's efforts to bring LNG to the island and we are worried because there are some problems over the tendering process. We want to use gas in our plant and we welcome the move by Energean because we want to have more options," Chryssochos said.
"It will be good to have gas coming to the island either as LNG or by pipeline."
Chryssochos spoke to the facts that Cyprus needs more than one source of gas and that Defa has a monopoly to be the sole importer.
"We have spoken to the government about importing gas from Energean and we discussed the Defa monopoly, so we need to change the legislation before we can move forward on that," he said.
The monopoly relates to funding provided by the EU and the European Investment Bank for Defa's LNG import project, which requires the installation of a FSRU at a cost Eur300 million.
"They want the project to be 100% feasible, and so the best way to do that is to make it a monopoly and keep the gas price high so that Cyprus can repay the loan. Ultimately, PEC hopes that the monopoly issue will be resolved and there will be alternative sources of gas," Chryssochos said.
Rigas, speaking at an industry event in London in October, said Cyprus had been slow in monetizing its own gas discoveries, such as Aphrodite, adding that a pipeline from its fields offshore Israel was a good option given their proximity to the island.
Cyprus has pushed on with plans to import LNG, though and in September Defa released a list of 25 international LNG suppliers that responded to the company's June invitation for expressions of interest to supply LNG.
It was the government's fourth attempt to find an agreeable arrangement to bring gas to the country. Contracts are expected to be signed at the beginning of 2020.
Defa said in August it had selected a Chinese-led consortium as the preferred bidder to supply and install the FSRU.
The FSRU is to be installed within 24 months after the contract is signed, meaning it should be in operation before end-2021.
-- Stuart Elliott, firstname.lastname@example.org
-- Edited by Dan Lalor, email@example.com