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‘We believe in Cyprus, it’s clear we made the right decision’

These are exciting and ambitious times in the Eastern Mediterranean for those involved in the energy sector. It is a little over four years since international energy storage giant VTTI, established its VTT Vasiliko (VTTV) operation in Cyprus, making it the only oil and gas terminal of its kind in the Eastern Mediterranean. Keenly positioned as a hub between Europe, the Middle East and Asia, VTTV has ambitious plans to expand both its storage capabilities and exploration opportunities. South EU Summit talked to George Papanastasiou, Managing Director (MD) of VTTV, about the company's current growth and the potential the energy sector presents for the Cypriot economy.

George Papanastasiou is the Managing Director of VTT Vasiliko (VTTV), and has been at the helm of the company since VTTI first began investment in Cyprus in 2011. Under his leadership, the terminal has established itself as a regional leader in the petrochemical storage market, and upon implementation of Phase 2 of the development in Cyprus, will increase capacity by almost 50%.

“What we’ve established in Cyprus has no precedent, to have an opportunity to manage and keep the nation’s physical oil stock within the country, and to develop and support the regional energy trade from such a location, it was the right place for VTTI to invest, to encourage the development of the market and become a hub in the region.” The words of VTTV MD George Papanastasiou reveal both the ambition, and the opportunities of the company in the area.

The 300 million Euro development in the port of Vasiliko was completed in November 2014, a purpose built terminal that represented the first such facility in the Eastern Mediterranean, connecting Europe and the Black Sea with the Asian, African, and Middle Eastern markets. Currently, the VTTV facility comprises of 287 storage tanks, with a capacity of 544,000 cubic metres. It also has a deep water jetty and facilities for supplying road tanker freight. Although the development to date is significant, the second phase of VTTV’s investment in Cyprus will see a 46% increase in capacity, with the addition of a further 13 tanks, adding 305,000 cubic metres of storage. The investment is critical, both in terms of the company possibly working with the state to secure the island’s increasingly promising hydrocarbon reserves, and to put VTTV in a position where they can explore the significant natural gas resources in the region.

Further developments

“ The Phase 2 development is something that we had in our plans as we are here to stay,” said Mr Papanastasiou, “the addition of a further 305,000 cubic metres brings us to a storage capability of close to 1 million cubic metres. We are constantly looking for partners to work with us on Phase 2, they could be looking to supply into our facility, or they could be an end user seeking to obtain their supplies from VTTV.” He added that the performance of the Vasiliko terminal to date, has meant the bar is always set higher. “Financially, we exceeded the targets of our first three years of operation. The bar is always put higher, it’s a group, and we are looking into opportunities in order to further develop the terminal and increase our revenues.” He also believes that it is not the sole responsibility of VTTV to seize the opportunities that the terminal presents, pointing to the Cypriot Government having a sizeable role to play in securing energy opportunities in the region; “We believe that there are opportunities out there that need the support of the state in order to be captured and, of course, it’s a win-win situation for the company and the government. Our investment here is also designed to help Cyprus achieve its potential in this sector.”


VTTV Oil Storage Terminal Facilities. Copyright: VTT Vasiliko / www.facebook.com/vttvasiliko

Papanastasiou recognised that the commitment to the VTTV development has been strong from the government side, and was indeed instrumental in securing the investment, which faced considerable legislative challenges when the project was first mooted back in 2010 and 2011, a period during which Cyprus endured massive economic collapse. “There was a tough decision to be made by the company at that time, whether we continued to invest in Cyprus or not,” he explained. “But we believe in Cyprus, possibly we’re even a bit biased towards supporting Cyprus. However, putting on our business hat, rather than our Cypriot hat, I think it’s clear that we made the right decision. The investment here creates jobs and is based on stable foreign equity, it sent out the message that if a company like ours was investing in Cyprus during these difficult times, perhaps other companies would consider doing the same thing. Government were very supportive of this investment, but we faced challenges, because of the lack of appropriate legislation to support this type of investment, so we needed to influence and lobby for changes in legislation. We hope, and expect, the Cypriot authorities to liberalise the energy market and develop legislation that will support a more positive climate for inward investment into the country.”

Other opportunities

With their considerable investment entering an exciting growth phase with the onset of Phase 2 at Vasiliko, the climate is ripe for VTTV to look at the other considerable energy resources, and related opportunities that exist in the Eastern Mediterranean. Hydrocarbon fuels, such as natural gas, offer a significant growth strategy for major players such as VTTV. As the only private storage facility operating in Cyprus, would a move toward exploring hydrocarbon opportunities, such as natural gas, be a viable growth strategy in line with their objective of being a major linking point between global energy markets? “It’s a group aspiration that we will develop growth in this area, natural gas is a cleaner product, good for both domestic and power generation purposes,” Papanastasiou explained, but added that there are significant challenges, with global demand for natural gas below the rate of production, resulting in a depression of natural gas prices. He also noted that the method of tapping into the Cypriot gas reserves, via deep sea drilling, is an expensive method of exploration. “It’s expensive and it would be competing with countries such as Qatar and Saudi Arabia, who have considerable onshore natural gas reserves, which is much easier to exploit. However, I do believe that gas will be something which is very important for Cyprus, although current prices are not favourable to the investment which gas exploration requires,” he explained, adding that VTTV’s opportunities in this area need not be limited to natural gas exploration, but could also be pipeline operations or regasification, which is the conversion of liquified natural gas (LNG) back to natural gas.

Sustainability, business & regional geopolitics

The issue of sustainability was also explored, especially with the looming onset next year of IMO 2020 regulations, which will limit the sulphur content of stored, or bunkered fuel, to 0.5%. VTTV are exploring methods of meeting this as part of their Phase 2 development, and Papanastasiou said that the regulation is a necessary one, but must be monitored to ensure it is followed by operators throughout the industry. “In my opinion, it will not be implemented globally at the same level. Some countries will follow it strictly, as they should, but they will have to compete with regions which are not following the regulations. IMO 2020 adds a new dimension to the business, which will have a huge impact on shipping globally,” he said.

Touching on regional geopolitics, Papanastasiou also addressed the ongoing issues between Cyprus and Turkey, following the latter’s annexation of almost 40% of the island in 1974 – which has led to a virtual freezing of business between the two nations ever since. “If we can find a resolution, I believe we will see lots of growth. It is a huge challenge of course, but a resolution would open up a big market that is currently closed, although it’s only a short distance away. Cyprus is so strategically located, it could link the North African market, such as Egypt – which has lots of natural gas – and Turkey, which imports most of its fuel. Cyprus could be the intermediary for the entire region. I think a resolution, and the development of a climate of political stability into one that is attractive for commerce and business, would see the development of many opportunities for Cyprus, and the region in general,” the VTTV MD added.

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Editorial Staff

South EU Summit's editorial team is comprised of an international team of journalists and communication specialists with wide-ranging areas of expertise. We pride ourselves in developing firsthand content, and undertaking personal interviews with the most influential players in each market.

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