in-cyprus 20 January 2024
In a report published on Friday, the Audit Office unveils alleged irregularities surrounding the 2018-19 tendering and awarding process for the construction of the liquefied natural gas (LNG) terminal in Vasiliko.
The report highlights grave concerns over the Ministry of Energy, the Natural Gas Public Company (DEFA), and the Natural Gas Infrastructure Company (ETYFA) handling of the biggest-ever energy project in Cyprus, revealing significant delays and increased costs for the Republic.
The Audit Office’s investigation reveals a lack of transparency and questionable practices during the tendering process, leading to the awarding of the contract to a consortium comprising Chinese (CPP company), Greek, and Norwegian interests. The consortium, responsible for the construction of the FSRU Prometheus ship and associated infrastructure, was awarded the project at an estimated cost of almost €500 million.
The report underlines the extensive delays and rising costs incurred due to inadequate project oversight by ETYFA, DEFA, and the Ministry of Energy. It stresses serious reservations expressed by the Audit Office regarding the consortium’s ability to deliver the project within the new timelines, without encountering operational challenges.
In addition to operational shortcomings outlined in the report concerning the former management of DEFA and ETYFA, the Audit Office draws attention to political responsibilities. Despite repeated written warnings from the Auditor General regarding potential legal violations and risks to the Republic’s interests, the Anastasiades government and the Ministry of Energy management insisted on proceeding with the consortium, citing the project’s urgency.
The Auditor General’s conclusions raise concerns over the lack of competition during the tendering process, serious breaches of public procurement legislation, and the subsequent delays initiated upon signing the contract.
The report also exposes a pattern of alleged favouritism towards the contractor, who sought additional funds under the pretext of increased steel prices, a request that was controversially approved by the Treasury of the Republic.
The Audit Office’s findings also highlight issues of quality and safety, with concerns raised about the functionality of the LNG terminal and the Prometheus ship, as well as the substandard coating on key components of the infrastructure.
A consortium led by China Petroleum Pipeline Company (CPP) has been contracted with the €290 million Vassiliko LNG terminal. The original timeframe was the end of 2022.
The LNG Terminal will include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU, a jetty-borne gas pipeline and related infrastructure.
