Thanks to its strategic geographical location and modern infrastructure, Cyprus has developed into a convenient transhipment centre for Europe-Far East trade and has strengthened its position as a key EU outpost in the Eastern Mediterranean region.
As an island nation, Cyprus relies heavily on its transport links via extensive air connections and its sophisticated multipurpose ports crucial to export and import activities. Conveniently located at the intersection between Asia, Europe and Africa, and along the trade routes to the Levant, North Adriatic and Black Sea, Cyprus is easily accessed with minimum diversion from main arterial routes. This coupled with the country’s good infrastructure and pro-business stance has boosted its status as a prominent regional base for cost-effective cargo transport and processing. Cyprus’ potential as a transhipment hub is also becoming evident, as manufacturers and distributors realise that while the island economy itself may be small it is only an hour’s flying time from 200 million potential customers, and four hours’ flight time from over 2 billion people.
In addition to cargo transport, Cyprus is a top-tier destination port for some of the biggest cruise ships in the world and has two international airports with around 80 airlines connecting the island with hundreds of destinations around the globe. Following natural gas discoveries in its waters, the island has attracted some major global players like ExxonMobil, ENI, Shell and Total who have chosen the island as the natural service centre for their regional operations, taking advantage of Cyprus’ specialised logistics and port services for this growing industry.
Although the coronavirus pandemic has had a severe impact on many economies and sectors such as aviation, global supply lines and cargo traffic have kept moving despite the challenges, distributing crucial supplies around the world. Cyprus took early action in response to the outbreak implementing strict safety protocols and ramping up support to its transport sector allowing companies and industry players to keep operations going, underlining its credentials as an efficient and sophisticated regional transport hub.
The key ports of Cyprus are Limassol and Larnaca, with the addition of bulk ports and oil terminals at Vassiliko, Dekelia and Moni. Limassol is the main port handling 90% of export and import volumes with an annual handling capacity of 500,000 TEUs. Cyprus has an outstanding reputation as a maritime centre and 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 Limassol has been pouring investment into 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 inaugurated in 2018, which enabled the largest cruise ships in the world to visit the country for the first time. Furthermore, in line with its ongoing commitment to upgrade and modernise the infrastructure of Limassol port, DP World Limassol has recently acquired new equipment in an effort to increase its handling capacity and improve operational efficiency. Despite the challenges brought on by the Covid-19 pandemic, the company is following through with its investment strategy, delivering on its pledge to support the maritime sector and help build resilience in Cyprus’ supply chain.
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 almost €20 million in a state-of-the-art IT system, which processes information flow at high speed between customs, clearance and customer. It also 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. 2020 will be all about Eurogate’s second phase of investments which include two more super-post-Panamax cranes and expansion of the storage area to maximum capacity, enabling it to handle 1.1 million containers per year.
The operators of Limassol’s redeveloped port have capitalised on the increased importance of the region in world shipping. This increase was due to enhanced trade, regional port expansions, the discovery of natural gas deposits in East Med waters and the expansion of the Suez Canal, which currently handles over 10% 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.
Cyprus’ second-largest port is in Larnaca, just 2km from the town centre and 6km from the island’s largest airport, handling a variety of loads – unpacked, conventional and oil products. Its 326-metre 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. In 2020, Cyprus finally reached an agreement with Israeli investors for the long-awaited €1.2 billion redevelopment of Larnaca port and marina, the island’s largest infrastructure project of its kind. The tender-winning Cypriot-Israeli consortium Kition Ocean Holdings has eco-viable plans to restructure Larnaca marina, the port and surrounding land. As part of the marina development, there will be a yacht club with a retail park, a passenger terminal at the port as well as hotels, a private island and residential properties. As for the port, the ambition is to have the best state-of-the- art port in the Eastern Mediterranean which will also offer services for gas exploration and facilitate military ships. Plans include deepening and expanding the port so that large cruise ships can dock and to attract more transport and energy companies to base operations at the port.
The build-operate-transfer (BOT) project involves UK-based Prosperity Group, a Cypriot-owned company with extensive experience in international large-scale mixed-use developments and Israel’s REM International which is part of the group that owns and manages the port and marina of Eilat in Israel. Under the proposed venture, it is estimated that the state will receive more than €19.6 billion during the lifetime of the project. The BOT project will see the government receiving a fixed rent and a percentage of the revenue generated through a concession agreement with the port/marina operated on a 40-year lease and the real estate acquired on a 125-year lease.
Re-Exports 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 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, it now 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 company is G.A.P. Vassilopoulos Group, which handles the multipurpose terminal at Limassol port with DP World Limassol, 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 throughout Cyprus and worldwide.
July 2020 also saw Emirates SkyCargo expanding to Larnaca, adding it to its scheduled cargo flights to 100 destinations across six continents. The network expansion is in response to the growing economic activity and demand for air cargo capacity from markets across the world along with Emirates’ increased passenger flight operations. By offering multiple daily or weekly cargo flight frequencies to major production and consumer markets, the carrier is helping facilitate supplies of goods required for combatting the current pandemic as well as machinery and equipment required for manufacturing and several key economic sectors across global trade lanes.
The Hydrocarbons Effect
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 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 Limassol has already provided Cyprus with significant added muscle as the island strives to become the region’s pre-eminent energy services and trading hub. An onsite oil and gas logistics base has also been established at Limassol port. It is a multi-user area that includes a 430-metre dedicated berth to oil and gas activities, mobilisation/demobilisation operations, open bonded and covered storages and warehouses, offices and drilling liquid production facilities to support oil and gas operations and offshore explorations in the Eastern Mediterranean. In 2019, DP World Limassol 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.
Key Fuel 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 states 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.
In 2020, the oldest Cyprus petroleum company Petrolina joined international energy trader VTTV in Vassilikos, inaugurating a new €80 million liquid fuels storage facility. The stock exchange-listed company has tripled its capacity, by installing 18 storage tanks holding 113,000 cubic metres, up from the 36,000 at the old terminal in Larnaca. The Vassilikos area is being developed as Cyprus’ new energy centre and dedicated port, with multimillion-euro plans underway to also build a liquified natural gas (LNG) import terminal.
Attractive Cruise Port
Before the pandemic, Cyprus was gaining momentum in reviving its status as an attractive port of call for cruise ships exploring the Eastern Mediterranean region. Evidence of this was British operator TUI announcing 13 new destinations leaving from Limassol Port for the winter season 2019-20, which was expected to boost tourism numbers. Although many of the cruises follow the familiar Mediterranean formula, more exotic routes were also launched such as a sail from Barbados to Limassol. To strengthen Cyprus’ maritime tourism, a new passenger terminal was inaugurated in 2018 by port operator DP World Limassol, with plans to increase passenger traffic of the port by 35%. Even before the establishment of the new passenger 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. Naturally, the coronavirus pandemic has ground cruise liner traffic to a halt and expectations are that cruise visits will not resume before 2021. Of the 72 cruise ship arrivals that were expected in 2020, some 55 of which were scheduled for October-November, have been cancelled.
Despite the current difficulties in the cruise sector, the decision of a leading international cruise company to anchor its liners in Cyprus came as a welcome boost. Six advanced passenger ships operated by cruise giant Carnival are laying up with crew on board in Moni anchorage, east of Limassol, for the duration of the Covid-19 imposed restrictions that have halted cruises worldwide. The ships include Bahamas-flagged Seabourn Encore and the brand-new Sky Princess flying the Bermuda flag. This followed an official announcement by the Cyprus shipping authorities in May offering facilities for cruise and cargo ships to dock in its ports for refuelling during the global lockdown, with operators and shipowners also allowed to bring their vessels to the island for a ‘hot lay-up’, which means the vessel is idle but can be mobilised back into service at short notice. As commercial air traffic gradually resumes, crews stuck on board ships beyond their contractual obligations, will be able to return home with relief crews coming in. The decision by Carnival presents significant financial benefits for Cyprus, and other cruise operators and companies with oil platforms have also expressed an interest to follow suit.
Cyprus’ two international airports broke records in 2019, with Larnaka (LCA) and Pafos (PFO) together handling an unprecedented 11 million passengers, constituting a 60% increase in passenger traffic from 2013. The smooth operation of these airports is vital to the island’s economic prosperity, built on a flourishing tourism industry and an expanding centre for international trade and global business. Over 70 airlines fly from Cyprus to around 40 countries and 120 destinations. 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.
With the harsh realities of the global pandemic continuing until the foreseeable future, Cyprus sprang into action to support aviation and its tourism industry. In June 2020, the country launched a new scheme to support aviation to stimulate passenger traffic by providing incentives for airlines to conduct flights even with low occupancy rates. The European Commission-approved scheme, which will run for six months with a budget of €6.3 million, will see the government subsidising airlines based on their occupancy rate index, with sums to be rolled out for flights conducted with occupancy rates between 40% and 70%. The goal is to promote direct connectivity between Cyprus and other countries and motivate airlines to operate flights to the island until the end of the year.
Cyprus has also managed to improve its connectivity to the rest of Europe even amidst the corona crisis with Hungary’s Wizz Air announcing its plans to make Larnaca its 28th base from July 2020 and to launch 11 new destinations to seven European countries from Larnaca. Stationing two Airbus A320 aircraft will provide one million seats on sale from Larnaca this year, underlining the fact that the airline sees the potential and the demand for low-cost travel in Cyprus as a rapidly developing tourist destination. Wizz’s Larnaca operation seeks to create over 100 new direct jobs with the airline plus more in associated industries.
Growing Transport and Logistics Centre
Cyprus has developed an efficient business environment 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 attracting more players and investors to support the expansion of its transport and logistics sector – with enormous potential in attracting more transhipment cargo. Despite the global challenges due to the coronavirus, Cyprus has been fast to act to solidify its status as a key East Med transport hub and vowed to double its air and sea connectivity resources to €15.7 million by the end of the year. Ports are continuing to operate normally with cargo, and flights are resuming with all the required safety measures and protocols in place. The island nation has truly leveraged its strategic location and is investing heavily to further develop its infrastructure to become a major transport and logistics centre for sea and air traffic.
For more information, contact Cyprus' investment promotion agency, Invest Cyprus.
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