Cyprus is currently at a pivotal moment concerning its ambitious energy strategy. A significant Liquefied Natural Gas (LNG) import project in Vasilikos is facing intense scrutiny. Furthermore, broader aspirations for gas exports are encountering a complex array of geopolitical and economic obstacles. The year 2025 is anticipated to be particularly turbulent. Investigations by the European Public Prosecutor’s Office (EPPO) are casting a long shadow over both the LNG terminal and the proposed Greece-Cyprus-Israel (GSI) electrical interconnector. Meanwhile, developing gas fields are grappling with evolving market dynamics.
The Vasilikos LNG import facility, intended to bolster Cyprus's energy security and serve as a regional gas gateway, is now involved in a probe concerning alleged fraud and corruption. This investigation has introduced uncertainty regarding the project's progress. Concurrently, the Cypriot finance minister has publicly expressed doubts about the feasibility of the GSI interconnector, a project strongly supported by other key stakeholders. The commercial development of the Kronos gas field is proceeding as planned, with an estimated annual output of approximately five billion cubic meters. In a notable development, Egypt's petroleum minister has offered to facilitate the export of this gas to Europe. This proposal involves liquefying the gas at Eni's Damietta facility, aiming to grant Cypriot resources access to international markets.
Despite these advancements, the path to substantial profits from these energy ventures appears fraught with difficulties. The Aphrodite project, another crucial gas development, remains hindered by unresolved issues. These include a prolonged gas unitisation dispute with Israel, known as the Ishai dispute. Furthermore, the commercial viability of Aphrodite is contingent upon the Egyptian government's willingness to significantly increase its payments to gas suppliers, a condition that remains a considerable point of contention. Projected profitability for Cypriot gas exports is further diminished by anticipated declines in European LNG prices. This downward trend is attributed to increasing global supply and adjustments in China's gas sourcing strategies. Industry analysts foresee European LNG prices potentially settling between $6 and $7 per million British thermal units (mmBTU). An additional tolling fee of up to $1.50/mmBTU may also be imposed on Kronos gas for utilizing the Zohr facilities.
The implications for Cyprus are considerable. While exporting its gas would represent a significant step for the island nation, short to medium-term financial returns are expected to be modest. Projections suggest that substantial profits from gas exports may not be realized until after 2030. Minimal contributions to government revenues are anticipated in the interim. The recent launch of the Competitive Electricity Market on October 1st adds another layer of complexity. Although designed to promote competition, its effectiveness is under review. Concerns exist that renewable energy providers might continue to achieve excessive profits, potentially selling electricity at prices only slightly lower than those of the Cyprus Energy Authority (EAC). A new study, scheduled to commence in early 2026 by the Cypriot and Greek governments, will re-evaluate the GSI project's viability. Israel might formalize its participation in 2026. However, the overarching impact of the EPPO investigations on the immediate future of both the LNG import project and the GSI interconnector remains a paramount concern.