Filenews 24 July 2025 - by Chrysanthos Manoli
The import of natural gas into Cyprus for cheaper, cleaner and more electricity production is gradually moving from the short-term to the medium-term goals of the state. The information widely circulated yesterday in energy circles converges as follows:
The Government, through DEFA and ETYFA, has taken the preliminary decision to proceed with the announcement of new tenders for the completion of the pier and the onshore infrastructure project at the Vassiliko terminal, abandoning the multi-month efforts to reach an agreement with VPSM's subcontractors for the direct assignment of the pier project, so that the projects can proceed faster.
It is unofficially reported by DEFA and ETYFA that the project manager (the French Technip Energies) who was recently hired, evaluated the state of the terminal, the remaining projects and recommended to ETYFA the abandonment of negotiations with the consortium of contractors and the announcement of a new -single- tender for finding a contractor (EPC - Engineering, Procurement, Contracting) for the remaining projects on the pier and the onshore infrastructure.
The unofficial information that exists states that in the context of yesterday's meeting under the Minister of Energy and executives of the board of directors and the service of ETYFA, it has been decided, on the recommendation of ETYFA, following the suggestion of Technip Energies, to suspend the negotiations with VPSM for direct award and to announce new offers for the entire project. A new meeting will follow on Monday, after which these decisions will likely be formally announced.
It is not known how ETYFA will manage the equally big issue of choosing a company that will manage the Prometheus FSRU and dehydrogenation for 10 or more years. A direct award will be made to the company chosen by the Chinese CPP (the Norwegian Wilhelmsen, which is now on board in Malaysia) or new offers will be announced for these services as well. With an even longer delay?
What happens now?
Yesterday it was leaked from the consultants of DEFA – ETYFA that preparatory work has been done in recent months and they have the terms for the new offer ready. Questions are raised about the ability of the confirmed inadequate - due to inadequate staffing and limited know-how - DEFA and ETYFA to prepare valid and appropriate tender terms for such a project, provided that the project manager did not work for such a service. while ETYFA's relations with the previous Owner's Engineer (Hill International) have long since been shaken.
Even if the terms of the new tender are indeed ready and will be published soon, the Government's new choice (regardless of whether it is correct or not) is certain to cause a long delay in the completion of the projects, the import of natural gas and the utilization of the Prometheus ship. For which we already pay about 400,000 euros per month.
Even if a new tender is announced tomorrow - something impossible, as consultation will have to be made with the Ministry, the General Accounting Office and the Auditor General - interested parties will need to be given a significant amount of time to study the terms of the tender, the previous plans, the current status of the project and thousands of documents concerning the terminal, in order to submit proposals. And then it will take many months to evaluate the proposals and make a decision. Which will be subject to appeals to the Tender Review Authority.
In addition, there is great concern among the legal advisors of the two organizations about the risk that the new procedure and the new technical decisions will cause problems for the Republic of Cyprus in the arbitration that is underway in London.
Even if the completion of the pier and the onshore infrastructure were to start tomorrow, their completion would take about 18 to 24 months. With a difficult tender in the meantime, the goal of completing the infrastructure is postponed, under the best conditions, towards the end of 2028 or 2029. Without counting the time for DEFA to complete the procedures for the purchase and import of liquefied natural gas and the completion of the pipeline network for transport of the gas to the EAC station and the PEC station.
What does it mean for electricity?
The new development, if confirmed in the next few days, which is very likely, leads to the following:
- Natural gas for electricity generation seems impossible to import within the next three years.
- Conventional production by EAC will continue to rely on more expensive diesel and fuel oil, along with the very serious burden of the cost of pollutants.
- The utilization of EAC Unit 6 (160 megawatts), which burns only natural gas, and the three PEC units (260 megawatts), is postponed indefinitely.
- Problems of adequacy in electricity production are prolonged indefinitely and pressure on the state for costly alternatives is increasing.
- The expensive electricity from EAC is perpetuated for the next few years - due to expensive fuel and pollutants - and the chances that the opening of the competitive market on October 1, if the target is finally achieved, will have a positive effect on residential consumers.
- Conditions are created for the continuation of the super-profit production phenomena by the operators of photovoltaic commercial parks, as they will continue for a number of years to sell their electricity - at long periods of time of day or night, if they install storage - at prices similar to the EAC, although their own production costs will remain much lower. It is known that the (EU) Target Model that will be implemented, provides that when the EAC will necessarily participate in covering the demand for electricity per half hour (to meet the demand), the wholesale price will be set at the level of the EAC price and not at the level of the cheapest photovoltaics.
- Given the delays – and geopolitical obstacles – for the electricity interconnection, the postponement for 2-3 or more years of the import of natural gas and the development of new production units in Vassiliko increase the need for an urgent increase in conventional energy production, at a very high cost for consumers. The adequacy problems that the electricity system is already facing will become, inevitably, much more serious in the coming years.
- The above-mentioned consequences of the planned new delay in the implementation of the major goal (from 2006-7) of the import of natural gas are not related, we repeat, to the correctness or not of the decisions of DEFA-ETYFA, which we cannot evaluate techno-economically, at least at this stage.
