EU demands Cyprus repay €69m in LNG grants
The European Commission has demanded that Cyprus repay almost €69 million which had been paid in grants for the crisis-ridden liquefied natural gas (LNG) terminal project at Vasiliko, the energy ministry said on Saturday.
The ministry 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.
“These issues concern the evaluation criteria of the China Petroleum Pipeline Engineering Co consortium, Metron Energy Applications SA, Hudong-Zhongua Shipbuilding Group and Wilhelmsen Ship Management Limited,” they added.
The China Petroleum Pipeline Engineering Co consortium and Metron Energy Applications SA together formed the CPP-Metron Consortium (CMC) and were responsible for the terminal’s construction until tearing up their contract with the government on July 18.
The ministry on Saturday said the letter “alleges two substantive violations”, the first being the criteria for awarding the tender to the above-listed companies in December 2019 and the second being the signing of the bilateral agreement upon approval of an additional €25m in funding in June 2022.
As a result, they said, the commission has demanded that the Cypriot government repay exactly €68,608,438.46, which was the exact amount which had been paid by the commission to Cyprus’ Natural Gas Infrastructure Company (Etyfa).
This money had been provided as part of the European Union’s “Cyprus Gas 2 EU” project, which was listed as an EU “project of common interest” and had been funded by the EU to the tune of €101m.
The ministry said they would respond to the commission’s letter within 30 days and added that “the government’s priority remains the defence of the Republic of Cyprus’ interests and it is assisting the ongoing investigation in every way to this end.”
They added that they are working “in full cooperation with the European authorities” and have done so “since the first moment, in accordance with the strict instructions of [President Nikos Christodoulides],” with the aim of having a “full investigation of the facts”.
They said they will “demonstrate zero tolerance for possible illegal actions”.
The European public prosecutor’s office (EPPO) had on Thursday publicly announced the opening of an investigation into possible procurement fraud, misappropriation of EU funds and corruption related the Vasiliko LNG terminal on Thursday.
The project currently finds itself at a dead end, CMC having terminated its contract with the government for the terminal’s construction on July 18.
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 an 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.
Energy Minister George Papanastasiou at the time told the Cyprus Mail the “one-sided termination of the agreement … will be studied”.
The European Commission’s letter and the EPPO’s related investigation into the matter come after Cyprus’ audit office released a report in March describing the project’s management as “tragic”.
The audit office said the project has cost the Cypriot taxpayer a total of €542m so far – a number which may rise if the government does repay the money the European Commission is now demanding.