THE MUCH-vaunted switch to natural gas as the primary fuel for the island’s electricity needs has been in the news lately. Who wouldn’t want to save 30 per cent on their electrical bill every month? It’s good news for consumers, and happy consumers translate into votes at election time.
What is being debated is the method by which the gas will arrive on the island. Currently, there are two main options: 1.Build a liquefaction plant and re-gasification terminals on land; 2. An offshore terminal with which ships carrying Liquefied Natural Gas (LNG) can dock, with an underwater pipeline leading to the terminal.
The investment necessary for a land-based liquefaction facility goes into the hundreds of millions of pounds. Though the cost is prohibitive, the conversion is expected to start paying for itself in the long run, as such projects have a timetable of at least 20 years.
The advantages include: dedicated storage space for the gas, an uninterruptible supply of fuel and the highest degree of safety.
The main drawback is, a land terminal would not be ready before 2014 or 2015. Inviting tenders and awarding the construction contract would take a full year alone. That means Cypriots would continue paying for the more expensive fuel oil for at least seven more years.
That appears to be the government’s main concern.
By contrast, a floating unit would take just three to four years to complete.
The Electricity Authority of Cyprus (EAC) has argued in favour of option 1. “Play it safe” seems to be their motto.
“It’s a tried and tested technology, with no great risk,” EAC deputy chairman Yiannos Valanides told the Mail.
Ultimately, he argues, the cost to the taxpayer from building a deliquefaction plant will not be dramatic.
“What mostly determines the cost is not the technology, rather it is the price of the raw material at the time you close a deal to procure natural gas. So when you agree to buy LNG, you agree on a set price for a specified number of years. That limits the unknowns to virtually zero.”
Professor Panos Papanastasiou, head of the Department of Civil and Environmental Engineering at the University of Cyprus, acknowledged the point was valid, but said it was only part of the story.
“Yes, it’s true that in the long run the cost to the consumer evens out. But try selling that to people, who for the first few years will see taxes punching holes in their pockets. And this when other options are available.”
For Papanastasiou, the debate is all about short-term vs long-term. And he unequivocally supports option 2, the offshore terminal.
“There are three significant advantages. First, it is a more flexible solution, because having an offshore terminal can accommodate the possible discovery of natural gas in Cypriot territorial waters.
“Second, an offshore facility could be converted so as to accommodate Compressed Natural Gas, which would be imported from Egypt.
“And third, there is the safety issue. Though the danger of an accident at the land-based terminal is small, nevertheless it would lead to a general blackout, with devastating consequences. There is also the possibility of sabotage, however remote.”
In his view, the EAC are against a floating unit not just because they are risk-averse.
“I believe the concern is over who will control the energy sector. The EAC has traditionally had a monopoly, but that is gradually changing with the opening up of the market three years ago. They do not want to be relegated to the position of simply processing the fuel – they also want a say in how the raw material reaches the island. An offshore terminal, on the other hand, would put them out of the picture. The EAC also says that building and operating a land plant will create jobs.”
With the Trade Ministry and the EAC getting nowhere due to their different agendas, President Tassos Papadopoulos has appointed a ministerial committee to tackle the matter.
Reports suggest the President has urged all concerned to make headway before the end of the year, by which time he would like to see some concrete ideas on how to proceed with natural gas.
“There’s a great deal of confusion when it comes to our energy policy. My guess would be that they haven’t done their homework, which inevitably leads to misunderstandings and pointless bickering,” offers Papanastasiou.
But although the debate has focused on the two LNG methods, there is a third way: Compressed Natural Gas.
The Mail has learned that Canadian company Sea NG have been in contact with the government and the EAC.
Based in Calgary, Sea NG Corporation are proposing their proprietary Coselle technology.
High-strength pipe is coiled into a reel-like structure, called a carousel. This carousel provides support and protection for the transportation and stacking of Coselles. The name “Coselle” originates from a contraction of the words “coil” and “carousel” and is a unique industry term developed a decade ago.
The complete Coselle CNG delivery system consists of a ship combined with loading and offloading facilities. The gas is compressed at a loading terminal (onshore or offshore) and loaded into a CNG ship. The ship then travels to the offloading terminal (onshore or offshore) where the gas is decompressed and delivered to market.
Gas can be loaded and discharged at simple port-side pipeline facilities, and this reduces environmental, land-use and financial concerns. The receiving side, which can be a buoy or a jetty, simply hooks up to the Coselle and a valve is opened. Because the gas on the ship is highly pressurised, it automatically flows to the lower-pressure receiver.
Sea NG’s Coselle CNG ships will be deployed to carry moderate volumes of natural gas – 30 to 500 million standard cubic feet – over medium distances of between 200 and 2,000 kilometres.
According to Sea NG, this storage system has significant safety and cost advantages over conventional large diameter pressure cylinders. The Coselle CNG System has been in development for a decade by a team of experienced gas and marine engineers, and recently received construction approval from the American Bureau of Shipping (ABS).
According to Adam Hedayat, advisor to the President at Sea NG, Coselle technology “makes perfect sense for Cyprus” due to the island’s size and its proximity to Egypt’s natural gas reserves.
“CNG is not in competition with LNG. Rather, it is complementary, in that it satisfies a niche in the market. It works well for countries that are not linked to natural gas pipelines or lack LNG infrastructure. Moreover, 85 per cent of the capital investment is in the ships, reducing local project finance requirements.
“It’s also faster to execute. Typically, an LNG project would take up to five years to implement from scratch. We can deliver within 30 months that the contract is signed. That translates into tremendous cost-saving for a country considering a switchover.”
And Ian Mallory, Commercial Vice President with Sea NG, told the Mail that the technology can easily match daily swings in demand.
“The customer is charged a steady tariff for transportation of the gas. We’re very much like a taxi service.”
He said an “ideal contract” with customers would be for 15 years, although they were flexible with the terms of the agreement.
Although no Coselle vessels are yet afloat, he said Sea NG have secured dockyard space in South Korea for the building of the ships.
Mallory said they are currently in “advanced talks” with at least six potential customers, though none from the Mediterranean area.
And Sea NG have partnered up with Marubeni and Teekay, leading shipping companies in the energy trade.
Coselle representatives have v
isited the island several times, meeting with the EAC, officials from the Ministry of Trade and energy regulatory authorities.
Mallory did not yet wish to comment on the outcome of these contacts.
Asked about the CNG option in general, Valanides of the EAC said they were “aware” of it.
“It’s an interesting but unproven technology… but we are keeping an open mind,” he added.
