Cyprus Mail
Cyprus Energy

New setback for plans to import gas

The island’s effort to import natural gas to power its electricity grid looked set to delay further on Friday after complications emerged in the tender process for the construction of an LNG import terminal at Vassilikos

The latest obstacle to the effort spanning some 14 years concerns an appeal lodged by a company against a decision to exclude it from the project because of links to an entity implicated in a waste treatment scandal.

Aktor SA is part of a consortium comprising China Petroleum Pipeline Engineering Co Ltd (CPPE), Aktor SA and Metron SA, Hudong-Zhonghua Shipbuilding Co. Ltd and Wilhelmsen Ship Management Ltd that won the tender for the construction of a floating storage regasification unit (FSRU), a jetty for the mooring of the FSRU, pipelines, port and other facilities.

Aktor is the sister company of Helector, facing corruption charges related to waste management plants in Paphos and Larnaca. Aktor is also accused of fraud relating to projects in the Balkans. Both companies are fully owned by Greece’s Ellaktor Group.

Because of this, the natural gas company (Defa) decided to exclude Aktor from the €500m project, prompting it to seek recourse before the tender review board.

Defa was poised to push ahead with the procedure but Aktor has asked the tender review board to halt all actions pending adjudication of its appeal. The board is set to issue its decision interim decision in the next days.

The contracts were scheduled to be signed on November 6 and 7.

Auditor-general Odysseas Michaelides has written to Defa suggesting that the entire consortium should have been excluded from the start because of Aktor’s participation. An additional reason for not signing the contracts was the fact that Defa had not yet secured funding for the project, worth €300m plus €200m for maintenance over 20 years, according to Michaelides.

“You cannot legally proceed with signing any contract without having secured the necessary funding,” the auditor said.

The cost will be covered with €101m from EU, €43m from the electricity company, a €150m loan from the European Investment Bank, and a €115m loan from the European Bank for Reconstruction and Development.

The loans must be guaranteed by the state provided they are approved by parliament, which has not done so yet.

Michaelides argued that the consortium should have been excluded from the preselection phase of the competition because of Aktor’s participation. Aktor, the auditor said, had been fined €40m by Greece’s competition watchdog for unfair practices and it was also linked to a company that has been banned for five years from taking part in Cypriot projects.

“We consider this decision unprecedented,” the auditor said of Defa’s failure to exclude the consortium from the onset.

The setback could mean further long delays, which could ultimately render the endeavour an exercise in futility.

The process to import gas for power generation started in 2005 when London-based Golar applied for a licence to build and operate a floating electricity power plant on a barge off the coast of Cyprus.

It was the first of nine failed attempts. The current endeavour is the tenth in a row.

A chief reason why the previous attempt in 2016 to tender building such a facility failed, was because the infrastructure costs were too high in relation to the low quantities of gas Cyprus needs to import.

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