President meets Chinese ambassador over Vasiliko (update 2)

By Nikolaos Prakas and Tom Cleaver

President Nikos Christodoulides met Chinese ambassador Liu Yantao on Monday to discuss the increasingly fractious dispute over the liquefied natural gas terminal (LNG) being built in Vasiliko, which has been hit by a series of recent setbacks.

The meeting at the presidential palace lasted for two hours, but no statements were made immediately afterwards. Energy Minister George Papanastasiou also attended the meeting.

The government is currently in arbitration in London with the Chinese consortium CPP Metron (CMC), which has undertaken the construction of the onshore terminal at Vasiliko which is central to Cyprus’ energy needs for gas.

CPP has filed a claim with the court of arbitration for additional compensation from the Cyprus government amounting to €200 million. CMC alleges that Cyprus has altered the terms of the original contract.

Only two months ago the Chinese-led CPP-Metron Consortium Ltd (CMC) and the Cyprus government appeared to have put aside a myriad of disputes related to the multi-million-euro project and construction was resumed after the Chinese-led company halted work earlier in the year.

CMC said that on March 14, it had confirmed that natural gas infrastructure company Etyfa had not taken delivery of the vessel Prometheas – the floating storage and regasification unit (Fsru) and centrepiece of the Vasiliko project – despite the vessel being ready since mid-January 2024.

The ship is still in China.

The LNG terminal project has been funded with €101 million from the European Commission and €240 million from EU banks.

Meanwhile, earlier on Monday CMC called for a meeting with a “decision maker” appointed by the Cypriot government in a “neutral territory”.

“The Chinese consortium has made it clear that it is willing to meet such a decision maker in a neutral territory, such as Dubai, to negotiate the necessary reset which would allow Cyprus to realise the benefits of this project,” CMC said.

“The choice between a successful or failed project is entirely in Cyprus’ hands.”

According to the consortium, Etyfa is the one that is attempting to terminate the contract with CMC in favour of contracting with local Cypriot suppliers.

“It [Etyfa] has spent the last few months, possibly longer, orchestrating a situation to allow that to happen,” CMC said, adding that the situation has now “reached a crisis point”.

“The Chinese consortium has remained, throughout, willing to deliver this project and even now has offered the Cypriot government a way to step back from the brink and save this project so that natural gas can be brought to Cyprus and generate electricity at the earliest possible opportunity and at the most competitive budget,” it said.

It added that it had tabled a proposal which offered Cyprus a comprehensive solution to de-escalate the situation, unblock the stalemate, and resolve all outstanding issues.

“If Cyprus truly wants to avoid the increasingly real catastrophe of losing its chance of bringing natural gas to the island to generate electricity in the foreseeable future, Cyprus needs to appoint a decision maker with full authority to discuss and agree the route to implementing that proposal,” it said.

On Saturday Christodoulides had said “the state will not be blackmailed”.

“The state is faithful to its obligations, and we always respond, and we are here in this matter as well to deal with it.”

He said the Vasiliko project needed to be implemented.

“With absolute good faith and will, we will manage the problems which have come up and I hope that with good will and initiative on the other side, solutions will be found,” he said.

Asked whether the government has a ‘plan B’, he said, “of course there is a ‘plan B’. We are obliged to think about a ‘plan B’, but I do not want it to get to that point.”

His words were echoed by Papanastasiou, who on Monday said the government has a “viable and realistic ‘plan B’ if the contract is terminated”.

He added that he was “surprised” CMC had “made claims through the media rather than through an arbitration process”.

Over the weekend, CMC said that their suspension of work in January was an “absolute last resort” which they lifted in March “on assurances that Etyfa would clear debts [owed] to CMC and going forward would comply with the contractual procedures and timetable for approving payments.”

A month before the meeting in March that helped get the project restarted, Papanastasiou warned CMC should be “counting the days” before it receives a notice of termination.

In late March, China’s ambassador to Cyprus Liu Yintao said the work would be finished by the end of this year. He said the Fsru in Shanghai was “more than 99 per cent complete” and that the vessel should be formally delivered to the Cypriot side by April or May.

Regarding the infrastructures on land at Vasiliko, the ambassador said works there were 50 per cent complete.