Shipping and Energy in Cyprus: Paths Intertwined

Shipping and Energy in Cyprus: Paths Intertwined

By Reginos Tsanos, Chairman of the RPT Group and CEO of Lavar Shipping


The recent discoveries of natural gas in the Eastern Mediterranean – with exploration and production ongoing – have raised hopes that the region can become an important energy source. The exploitation of the Tamar and development of the Leviathan fields offshore Israel, coupled with the upsurge in exploration activity in Cyprus’ Exclusive Economic Zone (EEZ) are evidence that, at the very least, regional supply can meet regional energy demand. On a worldwide scale, it is expected that oil and natural gas will account for 60% of global energy demand in 2030, with the number of offshore platforms also set to grow significantly. And all this is happening against the backdrop of falling global oil prices, and a global economy going through what can only be described as an anemic recovery. The Eurozone continues to struggle, while certain emerging economies, like India and China, are showing signs of economic slowdown.

The burgeoning Eastern Mediterranean energy sector cannot and should not be seen in isolation from other industries. The aforementioned discoveries – coupled with the global increase in demand for liquefied natural gas (LNG) – will facilitate an increase in vessels carrying the fuel, both at the global and regional levels. In recent years LNG has become one of the most profitable sectors in the global shipping industry. This is just one example of how shipping is playing, and will continue to play, a very important role in servicing the energy sector. The shipping industry operates in a continuously evolving, highly competitive global environment. Despite the fact that the industry is experiencing a very large supply of tonnage in most market segments, which has put both freight rates and vessel values under severe pressure, seaborne trade volumes will double from nine billion tonnes per annum to close to 20 billion tonnes by 2030. Total deliveries of bulk carriers, tankers, LNG carriers and container ships across the world are expected to remain close to 2010 levels.


From a shipping to an energy hub

Cyprus can play a central role in facilitating regional development in the energy sector, and has what it takes to become the most important port and energy hub in the Eastern Mediterranean. Since the early 1960s, Cyprus has successfully established itself as a maritime centre with the infrastructure and services required to meet the growing demands of a globalized industry. At present, the Cypriot maritime registry is the third largest in the EU and ranks 10th worldwide, and it is also the biggest third-party ship management centre in the EU.

Despite the disappointing results delivered by the exploration activities of both Total and the ENI-KOGAS consortium, the discovery of hydrocarbons by Noble Energy in the Aphrodite field in Block 12 of Cyprus’ EEZ and the impending Field Development Plan due to be submitted to the Cyprus Government both offer huge potential for Cyprus. Once concluded, Cyprus’ energy plans will unlock Cyprus’ most important, yet controversial advantage – its geographical position. Through careful management and the establishment of strategic partnerships, new and vibrant projects can come to fruition with great financial benefits for the Cypriot economy. The island geographical location makes it an important transit axis for ships arriving from both the Suez Canal and the Black Sea. Prospective customers include those with container and oil transit needs, while the newly inaugurated Vasiliko terminal is ideal for attracting and supervising ship-to-ship operations, which are currently taking place off the coast of Limassol.


Leading the way

Having been at the forefront of the shipping industry since 1965, we have been well-placed to foresee the shipping and energy sectors crossing paths. The flagship company of the RPT group – Lavar Shipping – is celebrating its 50th anniversary this year, having been established as one of the very first shipping companies in Cyprus, and having played a leading role in the evolution of the industry and the establishment of Cyprus as a shipping hub. Of all its achievements however, perhaps its greatest success has been to lead the way in connecting the shipping activities of the RPT Group with the energy sector.

In recent years, the Group has sought to diversify its services and we have specialised in the onshore and offshore logistics of oil and gas, and have engaged in diverse areas of customized business solutions, continuously refining our core shipping activities to take full advantage of Cyprus’ strategic location. It was this pioneering mindset that led, in 2006, to the licensing of the largest private Oil Terminal in Cyprus, and the first of its kind in the Eastern Mediterranean region, at Vasiliko. The project, bought in June 2010 by VTTI, saw an investment of over 200 million Euros for the development of the now full-operational terminal. Moreover, in 2014 we have been assigned by Halliburton – the leading oil and gas support service provider – for the development and implementation of supportive warehousing and office facilities in Cyprus.


A Cyprus solution is a regional solution

Despite the political stability provided by the Republic of Cyprus, that inspires trust in an area where a general sense of uncertainty and insecurity prevails, a resolution to the long-standing Cyprus Problem would have wide-ranging positive ramifications for both the energy and shipping industries. The Turkish ban on Cypriot-flagged vessels, in addition to the overt and covert embargo imposed on vessels docking in Turkey, represent a ‘lose-lose-lose’ situation for Cyprus, Turkey and the European Union (EU). If the ban was to be lifted it would lead to the complete use of all Mediterranean ports, with all parties able to benefit. Moreover, the recently-announced EU Energy Strategy – aimed at diversifying the Union’s energy sources and achieving greater energy security – would have far great chances of success should a just and viable resolution to the Cyprus Problem be achieved.


A bright future, if…

Cyprus has a bright future ahead. However more adjustments to be done to help reverse the recent stagnation of the shipping sector, in part due to the increasing competition that Cyprus faces from other maritime centers, and measures need to be put in place to attract major investment into the country’s energy infrastructure. Through the close collaboration between the private and public sectors, we can ensure that Cyprus fulfills its potential in the Eastern Mediterranean.

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