Government has a ‘plan B’ over Vasiliko LNG terminal (Updated)

The government does have a ‘Plan B’ for the stalled Vasiliko liquefied natural gas (LNG) terminal, though it has not yet worked out the timetable for that alternative, Energy Minister George Papanastasiou said on Thursday.

Papanastasiou was speaking at a behind-closed-doors meeting of the House Audit Committee, with arbitration proceedings going on between the Republic of Cyprus and the Chinese-led consortium which is due to build the LNG plant.

He explained that he “would not give the same project today as the Republic of Cyprus to this consortium”, but that completing the project with the current contractor is “the fastest solution”.

“The Republic of Cyprus’ first port of call will be to complete the project with this contractor, unless it shows serious weaknesses or its demands are terribly excessive,” he said.

He noted his ministry’s priority is “the future of the terminal, which must be operational as soon as possible”.

The minister added that the contractor “will not receive a single euro while the process is ongoing”, and that the government “requires the project to be delivered in July 2024 as promised by the contractor”.

This deadline has been set after two previous extensions were given. The terminal was initially supposed to be ready in September 2022, before its deadline was extended to July 2023 and then to October of the same year.

However Papanastasiou remained optimistic, saying “we are concentrating on making this terminal work.”

He also highlighted the need to import natural gas to be used in conventional power generation at present, saying that if the LNG terminal existed today, the price of electricity would drop to around 20 cents per kilowatt hour.

He said he’s discussing the matter with Chinese Ambassador Liu Yantao “on a political level”, given that the contracting company is state-owned.

The ongoing discussions with Liu, he said, are “very constructive”, with a meeting scheduled for Friday with a high-ranking executive from the company who has travelled to Cyprus for consultation on the matter.

Asked if he believes it is possible to complete the terminal by July, he said “we are very close to completion, so long as the contractor wishes it so.

“If the contractor for whatever reason is unwilling or unable to complete the work, they should say so, so Cyprus is not held captive by the contractor’s weaknesses.”

Committee chairman and Diko MP Zacharias Koulias said he has “absolute confidence” that the project will “have a happy ending”.

“Parliament also expects that China will be asked to honour its signature,” he said, adding that “Cyprus is a small state which has friendly relations with China, and Cyprus is a member of the European Union. In honouring its signature here, China will be able to continue to carry out projects in the EU.”

Asked if the matter would be referred to the Anti-Corruption Authority, Koulias said that such a decision will be taken at a full session of the committee after all its meetings on the matter have been completed.

“Certainly, there are considerations where it will go beyond this, but there are so many serious violations that it has to go somewhere,” he said.

Akel MP Irene Charalambidou pointed out that former minister Lakkotrypis had, according to Auditor-General Odysseas Michaelides, “failed to mention his relationship” with the parent company of one of the companies involved in the terminal and was subsequently employed by the same company.

In a press release later in the day, CPP-Metron Consortium Ltd or CMC sought to deflect blame away from itself and onto the Cypriot side.

The contractor asserted the ‘Etyfa Prometheas’ Fsru (floating, storage and regasification unit) is “ready to sail to Cyprus since [the] middle of January 2024”.

It added: “CMC remains surprised by relentless media articles stating that the vessel is unseaworthy. This is of course patently false as the vessel undertook over 2,000 nautical miles of sea and gas trials in one of the world’s busiest shipping lanes…”

According to the contractor, a handover ceremony for the vessel took place at a shipyard in China in January “to which Etyfa was timely and officially invited but did not attend. According to Lloyds Register there is nothing technical pending for ‘Etyfa Prometheas’ to sail to Cyprus, but there are certain steps that only Etyfa has the authority and obligation as the rightful owner of doing so.”

The Chinese contractor said it remains “very concerned by the lack of infrastructure and equipment to handle the vessel on arrival in Cyprus.” It said the Cypriot side does not possess the required tug boats, and hinted at security issues relating to a live ammo firing range encroaching on the jetty being built at Vasiliko.

“Without dealing with these problems, it is impossible for ‘Etyfa Prometheas’ to even approach the jetty.”

But industry sources apprised of the matter told the Cyprus Mail these allegations were inaccurate. For one thing, they said, there is currently no firing range in the vicinity.

For another, Cyprus does in fact possess tugboats that are more than capable of handling the ‘Etyfa Prometheas’ vessel.

The same sources also noted the Chinese-led consortium is misrepresenting the situation. They stressed that the Frsu vessel is not yet properly certified to set sail.

Under the Epcoma (Engineering, Procurement, Construction, Management) contract signed by the two parties, the vessel must pass two types of certification: as an LNG carrier, and as a floating regasification unit.

The vessel still has about a dozen “critical issues” that need resolving before it can get certified, the sources told us.