*By Dr Christos Christodoulides
The situation surrounding the natural gas terminal at Vasiliko is disastrous. There is no indication or official information on when, or even if, this failed project will ever be completed, despite potentially costing the Cypriot taxpayer close to €1 billion.
The foundation stone was laid in 2019. The contractor abandoned the project two years ago, and since then nothing has been done on site. The equipment installed at Vasiliko, including the unfinished jetty, is deteriorating, while the vessel Prometheus remains in Malaysia, costing significant sums each month for docking, repairs and maintenance.
Millions have been spent on legal and technical advisers. The EU has requested the return of the grant it provided, and the European Public Prosecutor has opened an investigation. Arbitration proceedings are under way in London, with the contractor seeking compensation worth millions of euros.
What more is needed for this project to be considered a failure, and possibly the biggest scandal since the founding of the Republic of Cyprus?
Even if the terminal is eventually completed, the natural gas it would supply would be extremely expensive due to the high capital cost as well as operational and maintenance costs.
Moreover, the entire process is costly: transporting gas to Egypt, liquefying it at Egyptian terminals, shipping LNG back to Vasiliko, storing it and then regasifying it.
Given the circumstances, there is no realistic likelihood of completion before 2030 or 2031, even if a new tender process were launched immediately. The possibility that the terminal may never be completed is considerable, as it will be difficult to find a contractor willing to assume responsibility for completing such a troubled project
Gas from Aphrodite
In this context, the only viable way forward for Cyprus to reduce electricity costs and avert serious risks of power shortages or blackouts after 2029 is to proceed immediately with an alternative solution: bringing natural gas in gaseous form via a small pipeline from the Aphrodite field.
This gas would come from Cyprus’s own share of the field’s confirmed reserves of 120 bcm (billion cubic metres).
Such a solution would not only ensure low-cost natural gas for electricity generation but would also deliver energy independence and significant geopolitical benefits. Cyprus would become one of the few countries globally — and the only one in the EU — with energy autonomy in conventional electricity generation.
The cost of not utilising natural gas is estimated at over €350 million annually.
As a result, the cost of constructing a pipeline from Aphrodite to Vasiliko, which would be fully owned by Cyprus, could be recovered in roughly two years. Thereafter, gas would be supplied at very low cost, as it would come from the country’s own reserves.
Is there any other country with natural gas just 160 kilometres off its coast, sufficient for over 200 years of electricity generation, that opts instead to build massive LNG import infrastructure?
Supply adequacy
Three years have been lost in negotiations with the operator of the Aphrodite field. Meanwhile, Cyprus continues to lose €350 million annually due to the absence of natural gas.
At the same time, the country faces a serious issue of generation capacity adequacy. Around 420 MW of capacity remains idle because it requires natural gas to operate, including a 160 MW unit of the Electricity Authority of Cyprus and a 260 MW private plant at Vasiliko.
The Aphrodite field holds 120 bcm of confirmed reserves. Why not allocate 100 bcm to Egypt and retain 20 bcm for domestic use — enough to cover Cyprus’s electricity needs for at least 40 years?
Failing to do so would be a major mistake, especially as the field’s development plan is now being finalised.
The annual gas requirement for domestic electricity generation, around 0.5 bcm, could easily be covered by Cyprus’s share.
The argument that a pipeline is not viable due to low demand must be challenged. Cyprus has a say in the development of its resources, particularly its own share.
The pipeline to Vasiliko would be state-owned, and Cyprus could bear the cost to avoid increasing overall development expenses or opposition from the operator.
Energy independence and geopolitical benefits are critical. Cyprus would have been shielded from volatile global fuel prices if such a system were already in place.
Actions, impacts and benefits
1. Construction of a pipeline transporting natural gas in gaseous form from Aphrodite to Vasiliko, along with onshore treatment facilities, supplying gas to the Electricity Authority of Cyprus and private producers. The investment would be recovered within about two years, given the €350 million annual cost of using fuel oil and diesel.
2. Construction of a subsea gas pipeline from Vasiliko to Dhekelia, along with a 160 MW or 220 MW combined-cycle unit to maintain Dhekelia as a base power station.
3. The 160 MW combined-cycle unit at Vasiliko, costing over €160 million, has remained idle for two years due to lack of gas. The 260 MW private unit also cannot operate without gas. Without gas, 420 MW of capacity remains unused.
4. Three oil-fired units at Vasiliko, totalling 390 MW, must be withdrawn after 2029 due to EU obligations. These units have already been modified to run on gas and could be utilised once gas becomes available.
5. After 2029, with six units at Dhekelia (360 MW) and the 390 MW Vasiliko units withdrawn, installed capacity would drop from 1,478 MW to 820 MW — insufficient to meet demand.
6. Authorities continue to pursue the LNG terminal at Vasiliko, a fundamentally flawed decision that will further increase electricity prices. Experience in Europe, particularly Germany, shows energy costs rise significantly when LNG replaces pipeline gas.
7. For Cyprus, using its own gas from Aphrodite would recover pipeline costs within two to three years, enabling the supply of low-cost gas. The state could set the price for power producers, resulting in cheaper electricity for consumers and state revenue.
Comparing the Vasiliko terminal with the proposed pipeline alternative:
- It is unclear when construction of the incomplete terminal will resume
- Completion timelines remain uncertain
- Certification of the Prometheus vessel as an FSRU is not guaranteed
- Operational safety and reliability are uncertain
- High operating and maintenance costs are expected
- Dependence on volatile LNG prices would continue
*Former director of the Cyprus Transmission System Operator
