The contract between the state Natural Gas Infrastructure Company (Etyfa) and CPP-Metron Consortium Ltd (CMC Ltd) for the construction of the natural gas liquification plant at Vasiliko is heading towards termination, Energy Minister George Papanastasiou said on Tuesday.

Papanastasiou, who described negotiations as “tough”, made the announcement at the House energy committee, saying that Etyfa was now looking into other ways to complete the project “outside the contract”.

Papanastasiou said the extensions given to the consortium indicated that there was no end date for completion.

The energy minister added that negotiations with the construction company to send the floating unit were at their final stage, with Etyfa aiming for the ship to sail out the soonest possible.

“There appears to be a conclusion, which the parties accept, according to which the current contract is terminated,” Papanastasiou said.

Papanastasiou said there were daily deliberations between Etyfa and CPP and that “the floating unit is being delivered in the state it is today.”

Elaborating on the floating unit, he said the ship is ready as an LNG carrier and the classifier has agreed to send it to Cyprus under certain conditions.

Furthermore, the second certification for the regasification of the natural gas cannot be made at this time, as the ship is in Shanghai and must dock at an input terminal like the one being built at Vasiliko, to check whether it is operating within the specifications.

Etyfa’s aim is for the ship to set sail the soonest possible. There may be a conclusion within the next few days and at the same time the contract will be terminated. This is the effort on both sides and it seems to be accepted by both sides,” he added.

The minister said Etyfa was going ahead with plans and that the Chinese consortium was trying to be relieved of any responsibility.

“Of course, it cannot be relieved of all responsibilities because this terminal should have been delivered in September. There are some obligations emanating from this contract, so we are waiting for the conclusion,” the minister added.

“We are not far away,” Papanastasiou pointed out.

Replying to questions, the minister said many extensions had been given and that “we are now moving into other plans.”

“Plan B has become plan A,” he said.

Tough negotiations are ongoing, he added, “connecting the sailing of the floating unit to the remaining solutions, which will be given for the other two parts of the terminal.”

He explained that there are three parts to the terminal, with the most important being the floating unit. The other two are the jetty and the part of the terminal on land.

“We believe the two last ones are easy to complete. Their construction is already at 60 per cent and the remaining 40 per cent we believe we can complete with our own means,” Papanastasiou said.

Regarding the floating unit, the minister explained it was the core issue of current negotiations, as it constituted 75 per cent of the project.

At the moment, Etyfa and CPP are tied in negotiations to build and operate the Vasiliko terminal.

“There is nothing to announce regarding the conclusion. What is happening at the moment is an intense negotiation between the two parties to reach a solution,” the minister said.

This solution was outlined in two plans agreed on by Etyfa and the energy ministry.

Plan A was always to complete the terminal with the means at the disposal of the consortium and plan B was outside the contract.

Negotiations have not led to a solution yet and “both sides understand the difficulty of continuing the contract,” he said.

“Our side sees that there is a terminal that is not being completed, there have been many extensions to complete it and it appears that there is an inability from the other side to complete it.”

Regarding the other side, “it may see its incapacities, which are possibly technical or even financial, so it seems that both are directed towards a solution that will be outside the specific contract.”

Deputy managing director of China Petroleum Pipeline Engineering Duan Bingquan had pledged his determination to bring natural gas to Cyprus at the end of June 2023.

Cyprus and a consortium led by China Petroleum Pipeline Engineering Co Ltd signed a contract for the construction of the nearly €300 million infrastructure for the import of liquefied natural gas (LNG) at Vassiliko for electricity generation, a project described as the biggest ever in the field of energy in Cyprus.

The LNG terminal was to include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU, a jetty-borne gas pipeline and related infrastructure.

The project with an estimated worth of €290 million secured a €101-million grant from the EU under the Connecting Europe Facility (CEF) financial instrument. The rest of the financing will come from Cyprus Electricity Authority’s participation in the share capital of Etyfa, with €43 million, and through financing by the European Investment Bank and the European Bank for Reconstruction and Development, with €150m and €80m respectively.