Cyprus's aspirations for energy independence and enhanced infrastructure are facing considerable headwinds, with several pivotal projects experiencing significant delays and outright standstills. The island nation's energy landscape is currently characterised by an escalating series of challenges, from protracted legal disputes and regulatory investigations to global supply chain disruptions, casting a shadow over the timely delivery of crucial energy infrastructure and jeopardising future energy security.
At the heart of these impediments lies the Vasilikos Liquefied Natural Gas (LNG) terminal, a cornerstone of Cyprus's strategy to diversify its energy sources. The project has ground to a halt, entangled in a web of legal disagreements and an ongoing probe by the European Public Prosecutor’s Office (EPPO) into the management of European Union funding. The ramifications are substantial, with Cyprus now actively pursuing the recovery of €67 million in EU funds earmarked for the terminal. The involvement of the EPPO underscores the gravity of the financial scrutiny, while ongoing arbitration proceedings in London further complicate the path forward. In an effort to salvage the project, Cyprus is reportedly exploring alternative contractors, with entities from the United Arab Emirates being considered.
Compounding these concerns, the Electricity Authority of Cyprus (EAC) is grappling with a protracted delay in the delivery of three new power generators from the German conglomerate Siemens, destined for the Dhekelia power station. Originally slated for a swift installation, the revised delivery schedule now pushes completion to 2030, representing a four-year deferral from the initial two-and-a-half-year projection. This setback is attributed to a confluence of factors, including an insatiable global demand for power generation equipment and the significant absorption of manufacturing capacity by the burgeoning data centre industry in the United States. The EAC chairman, Giorgos Petrou, has voiced apprehension, noting that a potential shortfall in electricity generation capacity looms in 2029, coinciding with the scheduled retirement of the station's existing fuel-oil units. He expressed hope that a transition to natural gas might mitigate this risk, though the timeline for such a shift appears increasingly uncertain.
Furthermore, the ambitious Greece-Cyprus electrical interconnector (GSI), a project designed to bolster energy connectivity across the region, is also encountering its own set of disagreements, hindering its progress.
Despite these significant hurdles in infrastructure development, there is a glimmer of progress in the exploration and potential exploitation of offshore gas reserves. The development of the "Kronos" and "Aphrodite" gas fields is moving forward, with a keen focus on securing future production and export agreements. The Final Investment Decision (FID) for the "Kronos" field is anticipated in April, with its development strategy intrinsically linked to regional export routes via Egypt's existing LNG infrastructure. Meanwhile, a long-standing territorial dispute between Cyprus and Israel concerning the "Aphrodite" field is expected to be resolved in March, paving the way for its development. Chevron's recent FID for Israel's Leviathan field, a move that unlocks a substantial $35 billion agreement, further underscores the region's growing importance in the global energy market.
However, the prospect of "Cypriot gas" reaching international markets and contributing to the island's energy exports is now realistically a post-2030 scenario. The cumulative effect of these delays is creating considerable financial strain for the EAC, which is projecting a substantial cash deficit of €349 million. The government, through its Energy Minister Michalis Damianos, has affirmed its commitment to seeing these stalled projects through to completion, stating, "The government’s priority is to complete the project from where it was halted." Nevertheless, the intricate web of legal complexities, regulatory scrutiny, and global supply chain pressures suggests that Cyprus’s journey towards a robust and independent energy future will be a protracted and arduous one.