Cyprus Drops LNG Regasification Plan Amid Power Crisis
Consideration of a plan to build a LNG regasification terminal at the Vassilikos Energy Center has been discarded by Cyprus in the wake of an explosion at a nearby naval base on 11 July that killed 13 people and destroyed more than half of the island’s power generation capacity. MEES understands that as a result the gas potential of Cyprus’s offshore Block 12, where the US company Noble Energy will spud its first well later this year, has become more important to the island’s future energy supply prospects. Any natural gas discovered in the Cyprus A prospect, where Noble will be drilling, will potentially be piped ashore, processed and supplied to the new facilities that will be built to replace the hundreds of megawatts of capacity that was wrecked in the blast.
A government energy official contacted by MEES said dropping the regasification terminal plan and focusing on piped gas from the island’s own resources is the “logical assumption.” Noble Energy has previously informed the Cypriot government that it can deliver natural gas by pipeline to the island by mid-2014. Cypriot authorities have yet to determine when or how generation capacity at the Vassilikos site will be reconstructed and brought back online as they concentrate on finding temporary solutions to electricity supply problems. Insurance agents for the Electricity Authority of Cyprus (EAC), which operates the power generation facilities on the island, remain at the site evaluating the damage. MEES sources say that once they have compiled their findings, other experts will arrive at Vassilikos to determine what the next steps will be.
All Generation Capacity At Vassilikos Lost
A total of 793mw of generating capacity was lost at the Vassilikos power station as a result of the explosion, George Shammas, Chairman of the Cyprus Energy Regulatory Agency (CERA) told MEES on 21 July. Immediately after the blast the EAC proceeded to recommission all the old units at the Moni power station to the west of Vassilikos. “Together, the Moni power station and the power plant at Dhekelia are generating about 680mw of power, but we have a lack of around 400mw capacity during periods of peak demand,” he said. “We are now urging people to reduce their usage of electricity and we are interrupting power supplies to regions throughout the island for two and a half hours at a time. In addition to this we are trying to increase generating capacity with temporary measures.”
Mr Shammas went on to say that government bodies, including CERA, the Ministry of Commerce, Industry and Tourism, EAC and the Transmission System Operator (TSO) had moved swiftly in an effort to restore what power supply they could. “People are working hard to achieve what can be achieved,” Mr Shammas said, “but it is extremely difficult. It is the worst condition that people involved in the energy sector could face.” The EAC is struggling to cope with power outages that have affected every part of the Republic of Cyprus. Rolling blackouts have been implemented throughout the island, creating serious problems for some businesses and widespread inconvenience for the general population.
The EAC on 20 July announced that private suppliers from Cyprus and abroad would deliver temporary generators, beginning within the next two months. It said that power supply from temporary units could likely reach 250-300mw. The Cyprus Mail on 19 July reported that during the week prior to the explosion, electricity demand on the island had peaked at 863mw on 8 July. It said that available power on the island had been about “1.4gw, allowing for a comfortable surplus of over 500mw.” Mr Shammas told MEES that the EAC board was meeting on 21 July in order to evaluate prospective suppliers and to begin negotiations as soon as possible so that some additional capacity could be added to the system within the next 30 days – if possible.
The next step is to evaluate the situation at Vassilikos, Mr Shammas said. “We will evaluate the damage and prepare a plan to repair those units that can be repaired so that we have them during next summer’s peak,” he said, adding that the damage to Vassilikos Phase 1 capacity had been “significant.” He said it was too early to comment on how long it would take to bring the facility back to its pre-blast condition. “We need to evaluate this; without an evaluation, anything we say is subjective,” he said.
In August 2010, soaring temperatures on the island pushed demand to 1.0gw. According to the EAC Annual Report 2009, the Vassilikos power station has installed three 130mw steam units, a 220mw combined-cycle gas turbine (CCGT) and a 38mw gas turbine unit. At that time additional capacity was under construction. Also, at the time of the blast on 11 July, the fuel storage tanks located at the power station were damaged, but did not catch fire or explode.
Supply of electricity has also begun from the Turkish-controlled northern side of the island and will possibly reach as much as 80mw as improvements are made to transmission lines. Also, the Israel Electric Corporation (IEC) has sent portable generators capable of producing 10mw and the private Israeli company Delek Group has sent generators with a total capacity of 8mw. Another 70mw of power supplied from generators due to arrive from Greece will soon be installed near the Vassilikos site.
Cyprus Energy Center
Situated on the island’s southern coast, Vassilikos is the designated site for the island’s energy center. Apart from the power station and its auxiliary facilities, the government at some point in the future is to build its own fuel storage facility there. Vitol Tank Terminals International (VTTI) is in the process of construction Phase 1 of an import, storage and distribution terminal to the east of the power station. A VTTI representative in Nicosia told MEES that the construction site was not damaged by the blast. Little more than ground work has been completed at the site, where work began in January of this year (MEES, 24 January). The VTTI terminal will comprise a 340,000 cu ms tank farm requiring an investment of €100mn. It is scheduled for completion in late 2012. Phase 2 will expand the facility’s capacity to 550,000 cu ms, bringing total investment to €200mn.
Moreover, Vassilikos is the proposed location for a 15mn tons/year LNG plant that would process Israeli and Cypriot natural gas produced from the two countries’ respective exclusive economic zones (EEZs). In January of this year, Israel’s Delek Group approached the Cypriot government with an initial proposal to build the facility and in April, Delek’s partner Noble Energy presented a plan to the government proposing the construction of a 15mn t/y plant that would process gas from Israel’s Leviathan field, where reserves are put at 16 tcf of natural gas, and any discovery made in Cyprus A, where Noble hopes to find as much as 10 tcf.
In December last year, the Natural Gas Public Company (DEFA) of Cyprus reached an initial agreement with Shell for the importation of LNG to the island at Vassilikos, where a regasification terminal would be constructed. That plan was complicated just weeks later when Delek proposed building an LNG export facility. The Cypriot government was in the process of evaluating both proposals when the explosion occurred.
It appears that the idea of a regasification terminal, which would cost some €600mn to construct, is now off the table, considering the fact that the reconstruction of the Vassilikos power station is urgent and expected to cost more than €1bn. Furthermore, EAC is expected to run up millions of euros in costs as it works to install and operate temporary measures to restore electricity.
Copyright MEES 2011.
