Government and LNG terminal contractor lock swords

The government on Monday signaled it may have to take “painful decisions” regarding the liquefied natural gas (LNG) terminal project in Vasiliko, as the contractor itself blamed the Cypriot side for disruptions and delays in the construction schedule.

Speaking on the Omega channel, Energy Minister George Papanastasiou asserted that a prior invoice has in fact been paid to the contractor.

Last week, the minister had said the alleged non-payment of that invoice was the reason why the Chinese-led consortium had downed tools on the LNG terminal.

“Having paid the invoice, we now await the contractor’s reaction, because if they come up with new demands they will not continue construction works,” Papanastasiou told Omega.

He reiterated that the contractor halting work constitutes a breach of contract.

“The situation created has come as something of a surprise to me,” the minister said, taking a swipe at the previous government over its handling of the terminal agreement.

“A surprise not because I did not anticipate any problems, but with the fact that the timetable was left to the discretion of the contractor…who are not cooperating as they should, and essentially we are failing in the implementation of the project.”

According to the minister, when the present government took charge in 2023 there were no construction works underway. The contractor had promised to deliver the project by September 2022, then July 2023, then October 2023, and now July 2024.

Papanastasiou said he does not expect the contractor to deliver by July of this year either, adding: “They have the nerve to claim €200 million in arbitration.”

He was alluding to arbitration proceedings between the contractor and the Republic in a London court.

“To date, the contractor has received €240 million, and another €25 million has been approved out of the total that must be paid out. Now our lawyers in London inform us that they claim another €200 million.”

The minister demurred when asked if the Cypriot side has a Plan B. But he commented that “if we have to, we shall take painful decisions, because the interruption [in construction] may be due to the contractor’s inability to fulfill the project, something that Defa as well as the energy ministry are looking into.”

But in a statement of its own also on Monday, the contractor – CPP-Metron Consortium Ltd or CMC – painted an entirely different picture.

The contractor spoke of facing “great challenges, including the pandemic and delay and disruption caused by Etyfa, which – as the auditor-general’s special report records – failed to issue a Notice to Proceed until May 2020 and delayed the appointment of its supervising engineer [the owner’s engineer] until August 2020”.

“In the meantime, it has withheld tens of millions in payments, changed the nature and scope of the project and has consistently interfered with essential design and procurement activities. Nevertheless, CMC has taken on the burden of financing the project and accommodating Etyfa’s changes while overcoming the practical and technical challenges put in their way.”

CMC said they “recognise and regret that the project has been delayed, albeit for reasons that are beyond its control and its contractual responsibility”.

“Indeed, for almost four years, CMC and its team of world-leading experts have continued to perform both the works in China to convert the vessel into an Fsru and the onshore/jetty works in Cyprus. They have done so throughout the pandemic and continued to work despite Etyfa’s repeated failures to honour its contractual obligations to make proper or timely payments.”

Their press release ended: “CMC remains, as it has always been, dedicated to the project. CMC believe it is important that it is completed as quickly and efficiently as possible, and has already made substantial progress towards that goal. With the cooperation of Etyfa and renewed support from the ministry of energy, it will continue to do so.”