MASTER PLAN OF THE VASILIKOS AREA (UPDATE) EXECUTIVE …

Vasilikos Area Master Plan Update 2013

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REPUBLIC OF CYPRUS

Prepared for Noble Energy International

on behalf of the

Ministry of Energy, Commerce, Industry and Tourism

MASTER PLAN OF THE VASILIKOS AREA (UPDATE)

EXECUTIVE SUMMARY 31 October 2013

Executive Summary


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Noble Energy International

Master Plan of the Vasilikos Area

NOTICE:

The Vasilikos Master Plan (the “Master Plan”) has been prepared by Poten &

Partners, Inc. (“Poten”) and ALA Planning Ltd. (“ALA”) for the Government of

the Republic of Cyprus and paid for by Noble Energy International Ltd (“Noble

Energy”) within the context of the necessary planning in the area, in order to

host an LNG Plant. Noble Energy has not participated in the preparation of the

Master Plan and it is not the work product of Noble Energy.

No representations or warranties, however, either expressed, implied, or

statutory are made by Poten, ALA or Noble Energy with respect to the Master

Plan, or any of the contents thereof, including any representation or warranty

with respect to (i) the condition, quality or suitability of the land upon which

the Facility is intended to be constructed, (ii) the condition, quality, or

suitability of the architectural, engineering, or technical designs, or (iii) any

other information that is made available or communicated herein. Poten, ALA

and Noble Energy furthermore disclaim any representation or warranty,

express or implied, of merchantability, fitness for a particular purpose,

conformity to models or samples of materials of any equipment, or condition.

In no event shall Poten, ALA, Noble and/or any of their respective affiliates

have any liability to any party in connection with this Master Plan.

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Executive Summary

1.1 BACKGROUND In 2003 and 2008, the Government of Cyprus expropriated land at Vasilikos for the construction of the Vasilikos Energy Centre (VEC), which was to comprise an onshore LNG import terminal by the coast east of the Vasilikos power station and storage for white and black oil products in the north of the VEC site closer to the Larnaca-Limassol motorway. The gas import policy would benefit EAC by eliminating the need to retrofit flue gas desulphurization (FGD) at two heavy fuel oil-fired units at Vasilikos power station and also by reducing CO2 emissions because the availability of natural gas would permit the construction and operation of more efficient gas-fired combined cycle gas turbine (CCGT) power plants.

The original plans of the Cyprus Government for the design of the VEC have changed since the discovery of natural gas. Noble Energy discovered gas in significant quantities in late 2011 in deepwater Block 12. Recent results of the appraisal of the Aphrodite gas field indicate gross mean reserves of 5 trillion cubic feet (Tcf), with a range of 3.6 to 6.0 Tcf. The Cyprus domestic market will consume some of this gas, particularly for power generation where it will replace expensive fuel oil and gasoil, but the bulk will need to be sold in international markets to justify the large investment in developing the field and building a gas pipeline to shore. Noble Energy and its partner in Block 12, Israel’s Delek Group, signed a Memorandum of Understanding with the Cyprus government in June 2012 to develop a LNG liquefaction plant within the VEC site. The government awarded Production Sharing Contracts for additional Blocks in early 2013 to consortia led by Total (Blocks 10, 11) and Eni (Blocks 2, 3, 9), and further gas discoveries are expected.

1.2 THE 2013 MASTER PLAN STUDY The government commissioned a Master Plan for the Vasilikos area in 2009; the Vasilikos area is the only coastal heavy industry zone available in Cyprus. Given the potential for further gas discoveries, however – the government has estimated 39 Tcf of possible gas reserves offshore – this update of the 2009 Vasilikos Area Master Plan has to take account of the additional space requirements to enable construction of several LNG liquefaction plants as well as government policy to move hydrocarbon importation and storage from Larnaca to Vasilikos.

Poten & Partners has been engaged by Noble Energy to update the 2009 Master Plan, together with Nicosia-based ALA Planning Partnership to provide local planning expertise and capability. ALA Planning was co-author of the 2009 report. Poten & Partners is a consultant with specialized knowledge and capability relating to natural gas and LNG, including extensive project development and energy master planning experience.

The objective of the Master Plan study was to provide a framework that would enable the optimum industrial development of the area taking account of the potential discovery of further significant gas reserves, relocation of oil storage facilities from Larnaca to Vasilikos and ongoing operation of existing businesses1. In particular, the Master Plan should allocate land for the possible construction of five or more LNG liquefaction plants (LNG trains), LPG and oil products storage and gas-based industry such as methanol or ammonia/urea. In developing the Master Plan the Project Team has taken account of existing establishments, planned developments, safety considerations, potential environmental constraints

1 The full Terms of Reference and list of planned projects can be found in Appendix A.

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(ambient air quality, noise, emissions) and need for additional infrastructure (roads, berths for import/export, pipelines and utilities).

The area under study is the greater Vasilikos Area located on the south coast of Cyprus, approximately 25 km east of the town of Limassol, 30 km southwest of the town of Larnaca and 40 km south of the island’s capital city, Nicosia.

The Study Area is delimited to the west by the western boundary of the ‘Evangelos Florakis’ Naval Base, to the north by the A1 Nicosia-Limassol motorway, to the south by the southern coastline of Cyprus including the relevant offshore area in the entire Vasilikos Bay as well as EAC’s fuel importation buoy. After consultation with stakeholders and the Ministry of Energy, Commerce, Industry & Tourism (MECIT), the Study Area was extended to the east of the Vasilikos river, as shown in Figure ES-1.

Figure ES-1 Extended study area for the Vasilikos Master Plan

The Project Team consulted widely with relevant government departments and ministries such as the Ministry of Energy, Commerce, Industry & Tourism (MECIT), Ministry of Defence, Department of Town Planning and Housing, Public Works Department, Department of Labour Inspection, Cyprus Ports Authority, etc. and with management teams of the major existing businesses operating in the area (Electricity Authority of Cyprus, Vassiliko Cement Works, VTT Vasiliko, Petrolina Holdings, Archirodon Construction). A full list of organisations consulted may be found in Appendix B.

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1.3 MASTER PLAN SUMMARY The main components of the Master Plan are zones dedicated as follows (see Figure ES-2 below and Plan 16, Volume 2) 2:

The facilities of EAC Vasilikos power station, Vassiliko Cement Works (VCW), Vasilikos Port, VTTV and Petrolina will remain as they are.

LNG zone comprising:

- Phase 1 LNG – space for up to three 5 Mtpa LNG trains plus storage and utilities and access – required immediately

- Phase 2 LNG – space for up to two 5 Mtpa LNG trains plus storage and utilities – not required until additional gas discoveries (greater than a further 10 Tcf) are confirmed; until then, the area can continue to be used by Vassiliko Cement Works for quarrying and stockpiling of material

- Phase 3 LNG – space for additional LNG plants and/or gas-based industries – not required until gas discoveries total more than 30 Tcf or if substantial rich gas discoveries are made.

Oil storage and gas-based industries zone, comprising:

- Phase 1 oil storage – capacity at least 2.2 million m3 of oil products (depends on location of LPG storage) including VTTV and Petrolina storage

- Phase 2 oil storage – capacity at least 1.0 million m3 of oil products (depends on location of LPG storage)

- LPG storage – three options; government to decide based on feasibility relating to timing, land ownership and cost

- Gas-based industries, e.g. methanol and gas compressor station

A Restricted Development Zone 500m in width around the LNG and oil products storage & gas-based industries zones.

Future quarrying area for Vassiliko Cement Works – the old Mari quarry in the triangle at the apex of the land expropriated for the Vasilikos Energy Centre.

Zones for offices and workshops NW of the Vasilikos power station and in the northern part of the Restricted Development Zone.

The Master Plan also includes provisions for installation of new import and export berths:

LNG jetty and berths

Dedicated LPG berth – five options, of which three are considered practical; final location to be decided and will depend on government’s decision on location of LPG storage facilities.

Bitumen berth – possibly combined with the LPG import berth, dependent on final LPG berth location.

2 Section 7 (Baseline Master Plan) discusses all the planned and potential projects, and Section 8 (Master Plan Summary and Conclusions) discusses alternative planning scenarios, the overall Master Plan, proposed planning zones and conclusions and recommendations.

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Spur off the VTTV jetty to provide additional oil import capacity

Buoy offshore the BEMRS site (e.g. either for future Methanol exports or for LPG import – there is not sufficient room for offshore buoy berths for both activities).

Implementation of the Master Plan will require additional infrastructure, specifically new/upgraded road network (the proposed future road network is shown in Plan 17, Volume 2)

Figure ES-2 Master Plan for the Vasilikos Area

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1.4 RECOMMENDATIONS The Master Plan report includes the following key recommendations:

The Vasilikos area should be dedicated for hydrocarbon-based heavy industries and the existing industries.

- All other uses that do not have to be in the area should not be permitted (section 7.7)

The government should adopt the planning zones described in section 8.3.3, the main elements of which are to (see Plans 16 and 20 in Volume 2):

- Create a “White Zone” area in the Mari Residential and Animal Husbandry Zones where development would be frozen until the Government Plans concerning the LNG Phase 3 implementation are finalized.

- Extend the existing B2 planning zoning boundaries to the east to cover the needs for the location of gas based and other relevant industries. When the LNG Phase 3 is in place then this heavy industry zone should also be extended to the north in the recommended “White Zone”

- Establish a 500 m Restricted Development Zone around the boundaries of the proposed Heavy Industry Zone where only agricultural uses should be permitted; some light industry and small offices may be permitted in the northern area.

- Further elaborate and refine planning zones and PSC policies after the general concepts have been approved.

The government to select location for LPG storage based on its evaluation of the feasibility and possible timing (section 7.4 and Appendix D)

LPG should be offloaded at a dedicated LPG berth (section 7.4 and Appendix D)

The capacity of the road network should be expanded (7.9.2.3 and Plan 17, Volume 2):

- Roads and junctions should be upgraded to improve safety

- Land should be reserved to enable the rerouting of the Mari-Vasilikos road eastwards, initially if necessitated by construction of camps, eventually to bypass LNG Phase 2 and gas-based industry projects

- A detailed topographical survey for the whole Study Area should be carried out

The planned Vasilopotomos substation and HVDC converter station should be moved from the currently planned site to a location outside the Restricted Development Zone; the incoming 132 kV overhead transmission line should also be rerouted (section 7.8)

The 2 km exclusion zone round the VTTV jetty head should be rescinded to ensure this does not limit marine development or operations within Vasilikos Bay (section 6.2.4.5)

There should be no fish farms located between Cape Dolos and Zygi (section 5.13.6.2)

The entire Vasilikos marine area should be treated as a single port entity with one pilot station to avoid conflicting operations and manoeuvres between different terminals (sections 6.2.4, 7.10.4)

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Consideration will need to be given to the construction of a Port Control Office with port radar and VHF coverage (section 7.10.4)

The government should consider using the methodology used by the government of the Netherlands to implement appropriate risk assessment and risk management policies (section 6.2.2)

- A key element is to move to a risk-based land use planning system; all new hydrocarbon facilities would be required to undertake a Quantitative Risk Assessment as part of the permitting process

A Vasilikos Safety & Security Committee, possibly chaired by Civil Defence, should be formed to coordinate safety and security actions and emergency response and evacuation plans for the Vasilikos area (section 6.2.5)

For the purposes of the International Ship and Port Facility Security Code (ISPS Code) the whole Vasilikos marine area should be designated as a single port facility in future with strictly controlled access to all jetties and marine facilities (section 6.1.2)

Unless a Quantitative Risk Assessment shows otherwise, oil storage areas, beyond those already built, should be separated from the existing VTTV and Petrolina facilities and from each other by safety buffer zones that could remain used for agriculture or for non-hazardous materials stockpiling by Vassiliko Cement Works

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MASTER PLAN OF THE VASILIKOS AREA (UPDATE) EXECUTIVE …