Transport & Logistics - Cyprus Profile

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Transport & Logistics

In the Right Place, at the Right Time

Cyprus was born lucky as far as its strategic location is concerned. But it has capitalised on that luck to turn itself into a key regional transport hub, with modernised port facilities and airports linking the island with all corners of the globe.

A further stroke of luck for Cyprus has come in the form of natural gas discoveries in its Exclusive Economic Zone (EEZ) and elsewhere in the Eastern Mediterranean. Major global players like ExxonMobil, ENI, Shell and Total have chosen the island as the natural service centre for their regional operations. At the same time, investment at Limassol port by Dubai’s DP World and Germany’s Eurogate International has pushed Cyprus into the top league of destination ports for the biggest cargo and cruise ships. Meanwhile, the number of arrivals by air continues to rise, with the island’s two airports continuing to attract more airlines, offering greater and more convenient connections to the rest of the world. Cyprus’ potential as a transhipment hub is also becoming evident, as manufacturers and distributors realise that while the island itself may be small it is only an hour’s flying time from 200 million potential customers.

Multipurpose Ports

Cyprus has a long and solid reputation as a maritime centre. It has built on that experience to develop Limassol port into a state-of-the art facility, equipped to compete with regional rivals such as Piraeus and Haifa. DP World Limassol, in partnership with G.A.P. Vassilopoulos Ltd, operates three core areas of the port: oil and gas, the cruise sector and domestic cargo. DP World is heavily investing in all aspects of the port, including offshore oil and gas, multipurpose general cargo, roll-on and roll-off, and further development of the new cruise terminal. Operating the container port is Germany’s Eurogate International GmBH, in partnership with Interorient Navigation Company Ltd and East Med Holdings SA, who have invested millions in a high-spec information technology system to process information flow at high speed between customs, clearance and the customer.

The operators of Limassol’s redeveloped multipurpose port have capitalised on the increased importance of the east Mediterranean in world shipping. This increase has resulted from enhanced trade, regional port expansions, the discovery of natural gas deposits in its waters and the expansion of the Suez Canal, which currently handles 7% of global maritime trade. The investment in expanding and modernising Limassol port has boosted competitiveness and will help generate around €2 billion for state coffers over the next 25 years.

The Hydrocarbons Dividend

Cyprus’ transport and logistics sector has already seen big benefits from the discovery of natural gas in Cypriot, Israeli and Egyptian waters – even before all these resources have been extracted and monetised. Cyprus-based logistics companies have been able to capitalise on the island’s geographical advantages to offer specialised support to oil and gas companies such as ExxonMobil and ENI as they operate both in Cyprus’ own offshore gas fields and those of its regional neighbours. The operations of ENI in Egypt’s giant Zohr gas field for instance, have been underpinned by facilities provided by the newly privatised Limassol port. Gas pipelines destined for Zohr were stored at Limassol before being shipped to Egypt and the field’s pipelaying vessel was also mobilised from the port.

As the search for offshore natural gas accelerates, Limassol port enjoys a strong competitive advantage as the logistics base for the increasing number of multinational oil and gas giants and service companies drawn to the island. International port operator DP World, which was awarded a 25-year operating concession in 2016, has already provided Cyprus with significant added muscle as the island strives to become the region’s pre-eminent energy services and trading hub.

DP World Limassol has established a 100,000 square metre, environmentally compliant oil and gas logistics centre at the port with capacity to support as many as three offshore explorations at any one time in the Eastern Mediterranean. Its Limassol operations encompass both oil and gas exploration and production. It has a bulk-handling plant, a pipe storage plant and three covered bonded areas where goods can be stored in transit, and provides maintenance and service of supply vessels .

In January 2019, the company acquired a range of state-of the-art vessel-loading equipment for the handling of general cargo and for use in its dedicated 430-metre oil and gas berth. Its new mobile harbour crane with heavy-lifting capabilities will speed up the process of loading and unloading, resulting in a significant reduction in vessel turnaround time. The new crane will help maximise the multipurpose port’s potential and will lead to a higher turnover at all its berths.

New Energy Port

Occupancy at the DP World Limassol oil and gas area and dedicated berth is expected to increase sharply as exploration of the region’s offshore fields gains momentum, with energy giants ENI, Total and ExxonMobil all expanding operations in the area. In a bold move, intended to significantly expand the capacity of the island’s hydrocarbon service infrastructure, the Cypriot government has announced plans for the development of a new dedicated energy port at Vassilikos, midway between Larnaca and Limassol, at a cost of €250 million. Tenders will soon be invited on a design, build, finance, operate, transfer (DBFOT) basis.

Sophisticated Distillation Terminal

The island’s reputation as a leading logistics and support provider for the oil and gas industry in the East Med is complemented by its emerging role as a centre for the processing, storage and re-export of fuel. This is largely due to the development of a sophisticated €300-million fuel distillation terminal at Vassilikos. It is operated by VTTV, the Cyprus subsidiary of Dutch multinational VTTI, and processes so-called ‘white’ or ‘clean’ products that have already been refined, such as diesel or middle distillates. These are shipped to Vassilikos from producers in the Gulf and the former Soviet Union and are then blended or modified to meet the specifications of the European market.

VTTV is the first energy terminal of its kind in the Eastern Mediterranean which connects Europe and the Black Sea with markets in the Middle East and Asia. Product fuel oil from the Black Sea area heading to markets in Asia must first be transported in small ships because of shallow waters in the Bosporus. At Vassilikos, VTTV helps to ‘build bulk’ and processes the cargo to the correct specifications for it to be exported economically via much larger vessels to the more distant markets of Asia.

The existing VTTV terminal consists of 28 tanks and has a capacity of 544,000 cubic metres, a 1.5km long deep-water marine jetty and four berths, capable of accommodating vessels from 5,000 to 160,000 DWT. These facilities mean that it is ideally placed to benefit from the growth in ship-to-ship cargo transfer operations in the region. Most transfers take place offshore, saving on port fees but this can be difficult and dangerous in bad weather and can lead to environmentally damaging oil spills. VTTV’s purpose-built jetty provides a safer, less environmentally hazardous alternative. The company anticipates that in 2019 up to 240 vessels will call at its Vassilikos jetty – an increase of 46%  on the previous year – and the company is engaged in talks with the government about implementing flexible marine tariffs and port charges to make jetty transfers more commercially competitive. Further opportunities for growth are expected to arise from the implementation of the International Maritime Organisation’s sulphur cap on fuel content in January 2020, when an upper limit of 0.5% sulphur content will lead to demand for new blends for ship’s fuel.

Streamlined Container Traffic

The rapid expansion of the transport and logistics sector is not exclusively connected to the hydrocarbons industry. Limassol port’s role as a multipurpose hub for regional maritime commerce was assured when the contract for its container handling operations was awarded to Eurogate International in 2016. Subsequent investments of €17.8 million in the latest operating systems are already yielding results. A new, state-of-the-art IT system, which processes information flow at high speed between customs, clearance and customer, enables the latter to locate a container at any time during the clearance process and take possession of it just 20 minutes after the ship carrying it has berthed.

The acquisition of two bigger, super-post-Panamax cranes, capable of servicing vessels 23 or more containers wide, has further enhanced the terminal’s efficiency, enabling it to attract the larger transhipment vessels now in use. In 2018, the terminal experienced 14% growth, handling almost 394,000 TEUs or standard containers per year, most of them from the ports of Thessaloniki and Piraeus and other parts of Europe. Growth forecasts for 2019 are around 7% and in anticipation of this, two more super-post-Panamax cranes will soon be installed, while the storage area will be expanded to maximum capacity, enabling it to handle 1.1 million containers per year.

Cruise Destination

Another element in the development of this fast-growing multipurpose port has been an upgrade of cruise facilities. Cyprus’ status as a destination for cruise liners soared in May 2018 when President Nicos Anastasiades and Dubai’s DP World Group Chairman Sultan Ahmed bin Sulayem inaugurated the new Limassol cruise terminal. The facility is set to promote Cyprus tourism to a new level, as it will allow the biggest cruise ships, in excess of 400 metres length overall, to visit the island for the first time. The dedicated terminal provides safety, stability and reliability for cruise itineraries focused on the Eastern Mediterranean and further afield.

A glance at the figures indicates the way forward. A total of 58 arrivals were recorded at Limassol port in 2018. Of these, 26 were ships using the port for transit calls and 32 for home port calls. An increase of 40% is estimated for 2019. Of the 90 ships arriving, 50 are expected to be in transit and 40 for boarding/disembarking.

Even before the establishment of the new terminal, Cyprus was in a favourable position to act as a stop for cruise ships in the Eastern Mediterranean, being a single day’s sailing from such destinations as Rhodes, Crete, Alexandria and Port Said. DP World places high priority on the cruise industry and with the opening of the terminal aspires to put Limassol on the map as a new home port destination of choice for cruise lines. During 2019, DP World Limassol’s strategy is to make the terminal more productive and more sustainable, encouraging job creation and better services for the wider Cypriot business community. The opportunities for investing in the various and diverse spin-offs resulting from the opening of the cruise terminal are many. DP World Limassol is hoping that in order to capitalise on these opportunities, all stakeholders and partners, including government departments, will invest in improving the quality and reliability of their services. It also hopes the Cyprus government will introduce incentives for the cruise industry, as seen in other neighbouring destinations.

Larnaca Port

Cyprus’ second-largest port is at Larnaca. Plans have been under discussion for some years to develop the port as part of a wider goal of boosting the town’s attraction as a tourist destination. Once the scheme moves from the drawing board into reality it will present excellent investment opportunities, combining commercial port and passenger activities with leisure and real estate development. A strong card in Larnaca’s hand is that the port lies just 2km from the town centre and 6km from the island’s largest airport. Today it is a multipurpose port covering an area of 445,000 square metres, handling a variety of loads – unpacked, conventional and oil products. Its 326-metres North Quay is equipped with a crane on rails, while the 340-metre South Quay has a similar crane and a ramp suitable for ro-ro ships.

Air Links Around the Globe

For Cyprus’ two international airports, the story is one of steady growth. More records were broken in 2018, with Larnaka (LCA) and Pafos (PFO) together handling close to 11 million passengers, up almost 1 million on the previous year. The increase in Larnaka was 4.3% (a total of 8.07 million passengers) while Pafos recorded a 14.1% rise (2.8 million). The two airports are host to 70 airlines from around the globe, connecting to 120 destinations in 40 countries – with further expansion of global connectivity expected in 2019.

The smooth operation of these airports is a vital ingredient in the island’s economic prosperity, built on a thriving tourism industry and an expanding centre for international trade and global business. Through their operations Larnaka and Pafos contribute approximately 4% to the country’s GDP whilst it is estimated that over 18,000 jobs are sustained at the two airports and in the wider tourism industry of Cyprus.

Hermes Airports offers an extensive package of incentives designed to support airlines that develop their business in Cyprus. The idea is to promote growth in the number of passengers travelling to and from the island – either from new or existing routes – and to encourage arrivals throughout the year and not just in the summer tourism season. The incentives have been very successful and, combined with other marketing initiatives, have brought in 80 new routes and 4 million passengers during the past five years. The key areas of growth are linked with efforts to establish Cyprus as a year-round attraction for visitors, and connect the island with destinations beyond Europe and the Middle East, in particular those in North America and Asia.

Hermes’ focus is also on making the airport experience as pleasant and relaxed as possible. A number of major projects are being undertaken in 2019, including the re-design and reconstruction of the shops and restaurants in the two airports’ commercial areas, expanding the range and accessibility of the services on offer. At the same time, as part of efforts to safeguard the environment, a solar park will be established to generate 20-30% of the energy needs of the airports.

Processing, Re-Exporting and Transhipment

The rapid modernisation and expansion witnessed at Cyprus’ main port at Limassol and its two airports, at Larnaca and Paphos, have coincided with growth of logistics services companies. They are investing heavily in technology, equipment and warehousing, in response to growing demand for transhipment, processing and re-export services.

A leading company in this field is Eurofreight Logistics. Around 40% of its focus is on consumer products logistics, providing warehousing and distribution services, with additional expertise in temperature-controlled and frozen food logistics. Pharma logistics account for around 20% of Eurofreight’s business. As well as facilitating trade between East and West, the company has clients in countries such as Germany, Switzerland and the United Kingdom that send pharmaceuticals and cosmetics to Cyprus for processing and then have them sent back home. Even with transportation costs, it is still cheaper for such companies to process their products in Cyprus, thanks to tax savings.

Among other projects, Eurofreight helps a client in China to export its products to the Middle East in a fraction of the time it previously took. It used to take the Chinese firm 30 days to send its goods by ship. Now it flies these to Larnaca, where Eurofreight Logistics handles the order, paperwork and labelling before forwarding them to another aircraft. Delivery time has been slashed to less than a week.

Another major transport and logistics concern is G.A.P. Vassilopoulos Group, which handles the multipurpose terminal at Limassol port with DP World, and marine services there with P&O Maritime. The group provides sea freight, air freight and land forwarding services through its representation of DB Schenker, as well as specialising in freight forwarding by air and land, warehousing and distribution.

East Med Transport Hub

As a focus for the East Med region’s burgeoning energy sector, a centre of global business and commerce and a magnet for tourists, Cyprus has leveraged its strategic location and built the infrastructure to become a major transport and logistics hub for sea and air traffic. The potential to expand this role is enormous. Cyprus has developed a business infrastructure which is modern and efficient, and can draw on a deep pool of highly qualified human talent. With a pro-business government committed to safeguarding the island’s attractive, EU-approved tax regime, Cyprus is opening doors to those committed to the expansion of the transport and logistics sector.

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July 2019

Cooperation Partners