Greece-based Energean Oil & Gas has protested to the Cypriot government over the recent opening of a tender to supply natural gas to the island.
The Cyprus Natural Gas Public Company (Defa), which is the sole entity authorised to import and distribute gas on the island, earlier this month issued a tender inviting bids for the installation of a FSRU and related infrastructure with a view to importing LNG. Defa intends to issue another tender inviting bids for the supply of LNG within coming months.
In July Energean had approached the Cypriot government with an offer to supply gas to the island via a 200-km subsea pipeline from its Karish/Tanin development offshore Israel, but was turned down. At the time, Defa’s chairman, Simeon Kassianides, described the Energean proposal as unsolicited and said once the tender was issued, the Greek company could submit its proposal.
Energean had said it could supply 0.5-1.0 bcm per year of gas to Cyprus from the FPSO that it intends to install at the Karish/Tanin development site. It suggested the price would be between US$4.50 and US6.00 per mmBtu and deliveries would begin in the first quarter of 2021. LNG imports, meanwhile, could cost up to US$13 mmBtu.
However, the Defa tender is for FSRU infrastructure, not a pipeline, meaning that Energean is not able to bid.
Cyprus needs the FSRU to be operational by the end of 2020 in order to avoid fines from the EU for failing to meet carbon emissions targets.
Energean said in a statement that the offer it was making carried “no upfront cost to the Cypriot citizens at a very competitive gas price.”
“Energean always respects the rules and regulations of every country it operates in and has obviously confirmed its option to supply natural gas to Cyprus in accordance with the proposal made,” the company said. “Free market principles should see the most competitive gas price to end customer be promoted, irrespective of the chosen infrastructure development scheme.”
Cypriot Energy Minister Yiorgos Lakkotrypis said Energean’s proposal could not be considered because the company does not have an export permit from the Israeli government. But the Greek company’s supporters in Cyprus argue that the fine print in its prospectus suggests an export quota could be obtained.
Once fully on-stream, the Karish-Tanin development will produce 8 bcm per year of gas. The company has already lined up 12 long-term gas sales agreements for a total volume of 4.2 bcm per year.
Energean is investing US$1.6 billion in developing the two gas fields which hold a combine gas resource of 68 bcm and 33 million barrels of condensate. Energean has stated that with its five exploration blocks offshore Israel there is 184 bcm of unrisked prospective recoverable reserves.
The Defa tender is valued at 500 million euros (US$579 million) of which 300 million euros (US$348 million) would be for capital costs and 200 million euros (US$232 million) for operating costs.
As an EU-backed PCI, the Cypriot gas project has received a 101 million euro (US$117 million) grant from Brussels as part of the Connecting Europe Facility.