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Cyprus has faced a protracted and troubled effort to introduce natural gas to its internal market for electricity generation over the past two decades. Despite numerous attempts, the most recent effort to establish a terminal at Vasilikos ended in failure, mirroring the numerous failed initiatives since 2005.
The island nation remains isolated in terms of energy within the EU, with some of the highest electricity tariffs in Europe. Cyprus, along with Poland, is one of the few EU countries still relying on fuel oil for power, incurring millions in annual costs for pollutants and struggling with an unquantified financial burden over the last 20 years.
The first significant push for natural gas came shortly after Tassos Papadopoulos' election, aiming to build an LNG terminal at Vasilikos. Despite high expectations, the project faltered due to political disagreements, regulatory issues, and the cost of compensating consultants who left the project.
In 2007, the government established the Public Natural Gas Corporation (DEFA) to advance the gas initiative. Although preliminary procedures progressed, the deal with KOGAS and SHELL collapsed in early 2011 amid political opposition and concerns over long-term contracts.
In September 2012, another effort was made, attracting 17 proposals. After narrowing down to two contenders, Russian Itera was eliminated due to cost, and Vitol failed to meet requirements, leading to another cancellation.
The financial crisis in 2013 halted progress for two years. When the initiative was revived, it was under a new interim framework. Multiple tenders between 2014 and 2019 failed, leading to a reversion to the Vasilikos terminal plan. By December 2019, a contract was signed with a Chinese consortium, but the project was abandoned by the contractor in May 2020.
The financial repercussions of these failed attempts are significant but difficult to quantify precisely. A report indicated that the collapse of the Vasilikos terminal alone cost the economy €624 million last year. Former CERA President Giorgos Siammas noted that the lack of cohesive energy planning and political interference has led to substantial financial losses. Siammas estimated that if the gas import efforts had succeeded, electricity costs could have been reduced to 7.5 cents per kWh instead of the current 30 cents, saving over €500 million annually.
Cyprus' protracted struggle with natural gas imports highlights the complexities and challenges of energy infrastructure development amid political and economic hurdles.
[Summary of Apostolis Tomaras' original story in Greek published in Kathimerini's Cyprus edition]
