After endless wrangling, the Vasiliko liquified natural gas (LNG) project was pronounced dead on Thursday by the Chinese-led construction firm CPP-Metron Consortium Ltd (CMC).
In a statement, the firm slammed Natural Gas Infrastructure Company (Etyfa) accusing it of bullying and for leaving CMC to work “without proper or timely payments” for years.
“CMC has found itself with no alternative but to terminate its contract with Etyfa for the LNG Receiving and Regasification Terminal project at Vasilikos and has done so today, July 18th.”
Energy Minister George Papanastasiou told the Cyprus Mail that at this stage the “one-sided termination of the agreement from the Chinese consortium will be studied.”
Etyfa will revert with its own announcement, he specified.
In the termination letter, CMC said Etyfa and its advisers on the project “had little to no relevant experience in any of the essential components for delivering a project of this nature: oil and gas, EPC (engineering, procurement and construction) works and conversion of a LNG carrier to an FSRU (floating storage regasification unit).”
The project has been a bone of contention for months, with an audit office report earlier this year describing its management as nothing short of “tragic”.
It identified the project has cost taxpayers €542 million due to the increased cost of delays in a process riddled with inaccuracies and serious violations of public contractingthat could even involve criminal responsibility.
Since the signing of the contract in December 2019, the CPP has submitted four delivery timetables – September 2022, July 2023, October 2023 and July 2024.
The contract was awarded in 2019 with a 24-month deadline for completion.
CMC said “the position has become untenable. Contrary to the promises that were made by the [energy] minister in March, CMC has still not received any payment whatsoever for its work in 2024.
“That is but the latest failure in a four-year history characterised by wrongful withholdings and delayed payments. No contractor can be expected to work indefinitely on credit. That was not the deal that CMC signed up to. It was not the deal that the EU agreed to fund.”
CMC added that Etyfa “weaponised payments and bullied CMC with unwarranted threats” to force the construction firm to deliver a project that is “materially different and considerably more complicated and expensive” than what CMC signed up to deliver and the EU agreed to fund.
Earlier this month, Energy Minister George Papanastasiou warned the contract was heading towards termination, describing the negotiations between Etyfa and CMC as tough.
He said the extensions given to the consortium indicated that there was no end date for completion.
In January this year, CMC submitted a statement of claim before a London arbitration court seeking to claim increased costs from the Republic of Cyprus due to technical problems and delays surrounding the project.
Efforts to resolve the issue involved President Nikos Christodoulides meeting with the Chinese ambassador to Cyprus in May, with the meeting lasting two hours.
The contract for the LNG project provides only for unilateral termination, by one or the other party.
Later in the day, industry sources told the Cyprus Mail that a termination had been “expected any day now”, given that the differences between the two sides were deemed irreconcilable.
However, from the talks it had also been expected that the Chinese-led contractor would have made arrangements to hand over the Fsru ship – still in Shanghai – to the Cypriot side before making any announcement.
Instead, the contractor took the Cypriot side by surprise when it abruptly announced the termination of the contract without making arrangements for delivery of the ship.
Under the contract, the owner of the project (Etyfa, the Cypriot state) immediately takes control of all assets once either side terminates the agreement. Theoretically, Etyfa could move into the site at Vasiliko and take control as of Friday.
It’s understood that the government is determined to finish the project one way or another.
The Cyprus News Agency (CNA) meanwhile reported that all the construction materials have already been purchased and are located at the worksite at Vasiliko. One source told the news agency that, if all goes well, the land-based terminal and the jetty could be completed within 10 months.
As for the Fsru, CNA said efforts would be made to allow the vessel to set sail for Cyprus, despite it lacking full certification.
Late in the evening, Etyfa itself put out a statement expressing “grief” at the latest development but also vowing to see the LNG project through to completion without the Chinese.
“Our suspicions have been fully confirmed that the consortium not only does not want to, but also cannot, complete the project it undertook and for which it was paid to carry out,” the statement read.
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