Cyprus finds itself at a critical juncture in its ambitious energy strategy, with a flagship Liquefied Natural Gas (LNG) import project at Vasilikos facing intense scrutiny and its broader gas export aspirations encountering a complex web of geopolitical and economic hurdles. The year 2025 is shaping up to be a particularly tumultuous period, as investigations by the European Public Prosecutor’s Office (EPPO) cast a long shadow over both the LNG terminal and the proposed Greece-Cyprus-Israel (GSI) electrical interconnector, while burgeoning gas field developments grapple with evolving market dynamics.
The Vasilikos LNG import facility, envisioned as a cornerstone of Cyprus's energy security and a gateway for regional gas, is now entangled in a probe into alleged fraud and corruption. This investigation has cast doubt on the project's trajectory, even as the Cypriot finance minister has publicly questioned the viability of the GSI interconnector, a project championed by other key stakeholders. Concurrently, the commercial exploitation of the Kronos gas field is progressing on schedule, with an estimated output of approximately five billion cubic meters annually. In a significant development, the Egyptian petroleum minister has extended an offer to facilitate the export of this gas to Europe, proposing its liquefaction at Eni's Damietta facility. This move aims to unlock international market access for Cypriot resources.
Despite these advancements, the path to realising substantial profits from these energy ventures appears fraught with challenges. The Aphrodite project, another key gas development, continues to be bogged down by unresolved issues, including a protracted gas unitisation dispute with Israel, known as the Ishai dispute. Furthermore, the commercial viability of Aphrodite hinges on the Egyptian government's willingness to significantly increase the price it pays to its gas suppliers, a condition that remains a substantial point of contention. The projected profitability of exporting Cypriot gas is further dampened by anticipated declines in European LNG prices. This downward pressure is attributed to a burgeoning supply in the global market and a recalibration of China's gas sourcing strategies. Industry analysts predict European LNG prices could hover in the range of $6 to $7 per million British thermal units (mmBTU), with an additional tolling fee of up to $1.50/mmBTU potentially levied on Kronos gas for the utilisation of the Zohr facilities.
The implications for Cyprus are significant. While the export of its gas would represent a crucial step for the island nation, the short to medium-term financial returns are expected to be modest. Projections suggest that Cyprus may not see substantial profits from gas exports until after 2030, with minimal contributions to government revenues anticipated in the interim. The recent commencement of commercial operation for the Competitive Electricity Market on October 1st also adds another layer of complexity. While intended to foster competition, its effectiveness is being scrutinised, with concerns that renewable energy providers might continue to secure super-profits, potentially selling electricity at prices marginally below those of the Cyprus Energy Authority (EAC). A new study, slated to be initiated by the Cypriot and Greek governments in early 2026, will aim to re-evaluate the GSI project's viability, with Israel potentially formalising 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.