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Cyprus slipping on LNG plant

Cyprus may be letting plans slip for an onshore LNG plant, according to the Cyprus Mail. The Cyprus newspaper quotes Charles Ellinas, former head of the national oil and gas corporation Kretyk who notes that a confluence of developments leads one to conclude the liquid natural gas project is becoming increasingly unlikely.

The statements and article come after a report by Reuters, this week, claiming that Israel may have put on the backburner earlier plans to pump its gas reserves into a future export plant in Cyprus.

“Israel’s new plans throw Cypriot developments into doubt as investors would require more gas than Cyprus has on offer to make returns on multi-billion dollar investments,” said Reuters.

Reuters quoted one unnamed source involved in developing Cyprus’ gas reserves as saying: “If Israel has really ditched Cyprus as a partner to develop the region’s gas resources, then we (Cyprus) really do have to find quite a lot more gas if we want to become a viable exporter, and that would inevitably throw our plans back by several years.”

According to the same news story, energy companies with concessions in Israeli gas fields are actively exploring a twin-track export policy: piping gas to idle LNG terminals in Egypt, and building floating liquefied natural gas (FLNG) platforms above the Leviathan field to ship LNG to Asian and South American markets, where gas fetches better prices. At the same time, talks are underway between Israeli and Turkish companies on a pipeline from the Leviathan field to Turkish shores.

Cypriot Kathimerini has also suggested the Israeli government as well as energy stakeholders feel Cyprus is not serious about pooling its own resources with Israel’s into an LNG terminal on the island, as Nicosia has not done anything for a year.

According to Kathimerini, the Israelis, feel the Cypriots are stalling due to ongoing peace talks and the possibility of energy collaboration with Turkey once and if a settlement to the Cyprus question is achieved, despite public assertions by President Anastasiades.

During an investors’ conference held in the United States late last year, Noble Energy floated – as one option – a plan to divert some of the gas in Israel’s Leviathan field to a mooted LNG terminal at Vassilikos.

But as Charles Ellinas was quoted by Cyprus Mail the Americans and the Israelis have not got any feedback from Cyprus. It also seems that the so far proven field reserves are below the 5.5 trillion cubic feet (tcf) that are required to render viable such a facility

To date, Cyprus’ proven reserves are insufficient for an onshore LNG plant. At least 5.5 trillion cubic feet (tcf) are required to render viable such a facility. Proven reserves are around 4 ctfs, which makes an LNG plant uneconomical, but, according to Ellinas it's ideal for an FLNG vessel.

“Unless something happens fast – and it doesn’t look like it – Cyprus may de facto be forced to abandon the LNG project and switch to FLNG instead,” he said.

Meanwhile, state gas company DEFA said it has received four proposals to supply natural gas to the island, in response to its January invitation for an interim solution for power generation before Cypriot gas reserves come on line. The bid is for a supply line of seven to 10 years, starting in January 2016.

DEFA is by law the sole importer and distributor of natural gas in Cyprus. Once it clinches a deal for natural gas with a supplier, DEFA would then sell the fuel to the Electricity Authority of Cyprus. Any contract therefore requires back-to-back agreements – one between DEFA and the supplier, the other between DEFA and the EAC.

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