EIB approves Cyprus LNG import facility

The European Investment Bank on Thursday approved a project proposed by Cyprus Natural Gas (Defa) for the import of LNG to the island.

The government monopoly for natural gas had proposed a plant for LNG regasification at the port of Vassiliko at a total cost of €550 million of which €150 million will be covered by a grant from the EIB – with the first instalment of €100 million to come through without delay.

The award of the tender to China Petroleum Pipeline Engineering had raised controversy, as critics claimed the proposal was more expensive than required and that the Chinese company did not have sufficient experience in the industry.

On Sunday, the French newspaper Libération published an article that is sharply critical of the project, warning that it is “causing a stir” within the EIB. However, apparently not a sufficient ‘stir’ to bring the board of the EIB to withhold approval.

The Libé article additionally expressed concerns about costs beyond the usual market value, and notes that the Cyprus Auditor-General had expressed objections about the project.

A spokesperson for Cyprus Natural Gas declined to comment.

There were serious questions, raised by industry observers, about a number of aspects of the project.

The fact that competition for the tender was reduced to a single bidder, after the two other participants were disqualified, raised concerns. Then, the import of LNG would not be sufficient to help Cyprus achieve its 2030 climate-change target, so the very considerable investment in LNG should be questioned as well.

However, the approval of the project by the EIB does mean that LNG, converted to natural gas, will be used to power the electrical grid, and that will reduce Cyprus’s dependency on oil to some extent. It will also mean a significant reduction in carbon emissions.