A deal regarding the delivery of the floating storage and re-gasification unit (Fsru) that is part of the liquefied natural gas (LNG) project at Vasiliko has been reached by the Cyprus government and the Chinese CPP-Metron Consortium (CMC), Energy Minister George Papanastasiou said on Tuesday.

He also spoke of “the more realistic scenario” now for completion of the construction works for the LNG project – end of 2025. He specified this did not mean that natural gas would start being imported for electricity generation by that date, only that all the construction works would be completed by then.

Speaking at the House energy committee, Papanastasiou said the Fsru, Prometheas, would now be delivered to Cypriot authorities within the next 60 days.

He said the agreement regarding its delivery was “financial”, and that as a result of the vessel being delivered, the amount payable by CMC by way of the bonds had been reduced.

To this end, he clarified that the government had “not given any additional money” to CMC.

He added that “certain actions will have to be taken on both sides” for the Fsru to be delivered within the next 60 days, with these largely entailing the production of certifications to allow it to sail from Shanghai, where it is currently located.

The minister clarified that the vessel would be certified as a single-voyage LNG carrier so that it can be crewed and set sail from China.

But it additionally needs to be certified as a storage and re-gasification unit. To do that, it must dock at an operational terminal to be tested. Since the terminal at Vasiliko is incomplete, the ship will have to dock elsewhere – not in Cyprus.

The Cyprus Mail understands that possible destinations for the Fsru – once it leaves Shanghai – include Greece, Italy or Egypt.

Regarding the bonds mentioned by the minister, there are three main types of bonds/guarantees that a construction contractor provides – retention bonds, performance bonds and bid bonds.

In this case, it’s understood that the amount in bonds payable by the Chinese-led contractor has been reduced proportionally to the weighting of the Fsru. The Fsru has a weighting of 75 per cent in the whole LNG project; the jetty at Vasiliko has a 15 per cent weighting, and the onshore facilities a 10 per cent weighting.

Regarding the jetty and the other onshore infrastructures, Papanastasiou said the project owner, Etyfa – the state-run Natural Gas Infrastructure Company – will select its project manager over the next couple of weeks. The project manager would then assist Etyfa in drafting tender documents for the contracts for the remaining works at Vasiliko.

The minister confirmed that, based on legal advice, Etyfa may not use any of the subcontractors of the CMC consortium – it has to find new ones.

Sources told the Cyprus Mail that both the jetty and the onshore infrastructures at Vasiliko are currently “at 50 per cent”.

Concerning the loans for the LNG project received so far from the European Investment Bank and the European Bank for Reconstruction and Development, Papanastasiou told MPs the lenders have been persuaded not to demand their money back. This was because the Cypriot government has promised to soon hand over an implementation plan.

The development breathes life into a project which had previously appeared to be stalling after CMC had in July terminated its contract with Etyfa to build the terminal.

They had accused Etyfa of “bullying” and of leaving CMC to work “without proper or timely payments” for years.

They added 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, engineering, procurement and construction works and conversion of an LNG carrier to a floating storage regasification unit.”

“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,” they said.

The Fsru had been one of the key points of contention between Etyfa and CMC, with CMC insisting that the vessel was ready in Shanghai and that Etyfa had “inexplicably refused to take delivery” of it while also frequently not meeting payment deadlines.

The situation worsened after the contract was terminated when the European Commission demanded that Cyprus repay almost €69 million which had been paid in grants for the terminal.

The energy ministry had announced it had received a letter from the European Commission which listed “possible irregularities which occurred during the evaluation period of the tender” for the construction project.

The commission’s letter, according to the ministry, “alleges two substantive violations”, the first being the criteria for awarding the tender [to CMC] in December 2019 and the second being the signing of the bilateral agreement upon approval of an additional €25m in funding in June 2022.

The European public prosecutor’s office (EPPO) had earlier in the same month publicly announced the opening of an investigation into possible procurement fraud, misappropriation of EU funds and corruption related to the Vasiliko LNG terminal.

Cyprus signed the contract for the LNG project in December 2019. The entire project should have taken 22 months to complete, but in July this year the Chinese-led contractor terminated the contract.