Filenews 18 May 2024 - by Chrysanthos Manoli
It is difficult to understand the choice of the Chinese state-owned company CPP to unilaterally terminate its cooperation two months ago with the consortium of subcontractors, consisting of the Cypriot company Multimarine Services and the Greek company Spanopoulos Group (through IM Marine Cyprus), which had helped it, at no cost, to get out of the impasse in which it had found itself for a long time. for the construction of the pier in Vasilikos, for the needs of the LNG terminal (in the photo, snapshot from the signing of CPP's agreement with the consortium).
Since the end of this collaboration, "not a single screw has been inserted" into the pier, a professional who monitors the project told us.
And it won't come any time soon unless CPP enters into a new agreement with the two companies. Without them, especially without Multimarine which has invested in multi-million dollar equipment to execute the (mainly building, but specialized) projects commissioned by the Chinese contractor, CPP cannot follow up the project. And it can hardly replace it within a reasonable time, as the construction of the pier -about 1500 meters in the sea of Vasilikos- requires special equipment, available spaces for the construction of large quantities of concrete required by the jetty, as provided by the terms of the contract, and know-how.
However, after last night's announcement by CPP (the Greek METRON also appears as a member of the consortium, although it does not give signs of life to Vasilikos), it is rather clear that CPP has no intention of continuing through subcontractors or otherwise the works on the pier.
CPP reportedly searched Cyprus and neighbouring countries to find other subcontractors to continue the project. Did not find. That's why it recently reapproached the joint venture of Multimarine Services and Spanopoulos for a new agreement.
The negotiations did not come to a conclusion, but it was not clear until yesterday whether they had foundered definitively. The information we have reported that decisions were awaited from CPP headquarters.
But since all those who follow the developments around the LNG terminal consider that the decision of the Chinese company to terminate cooperation with the consortium was a very painful own goal for it, the question arises: Was it simply a misguided choice of the contractor or something else? Did CPP not know that it alone could not carry out these projects without much delay?
Cyprus' plan b
Recently, there have been increasing estimates that the termination of cooperation with subcontractors was aimed at depriving the Cypriot Government of the much-discussed plan b. That is, the option of needing to terminate the contract with CPP-Metron and entrust the completion of works on the pier and ashore to CPP's subcontractors. Which, as is widely said, the contract allows it to do without launching new tenders, which would cause a long delay.
By terminating the cooperation with Multimarine and Spanopoulos, the Chinese deprived the Republic of Cyprus of the opportunity to use the two companies to complete the works in Vasilikos, but deprived themselves of the ability to proceed with the implementation of the contract and were pushed even further into a corner.
In the courts for millions
At the same time, the Chinese risk paying many millions of euros in compensation to their two subcontractors, as they are quite likely to go to court and claim very large sums as accruals, but also large sums in compensation (tens of millions, reportedly) for the unilateral termination of the contract and the expensive investments they made to undertake the projects and for the lost revenues. And without a new deal with them, CPP seems inevitable to go to court.
Obviously, damages of tens or hundreds of millions are now likely to be called upon, through courts, to pay also to the Republic of Cyprus, which has so far paid more than €300 million without owning and using the FSRU ship Prometheus and the infrastructure in Vasilikos and without anticipating, under CPP's responsibility -for a few more years- the very large economic and environmental benefit from the use of natural gas in electricity production.
in-cyprus 18 May 2024
In a new statement last night, the CMC consortium, which is largely made up of China’s CPP, accused ETYFA (Natural Gas Infrastructure Company) of making huge changes to what it has asked the consortium to build at the new Vasilikos liquefied natural gas (LNG) pier and that it has worked hard to meet ETYFA’s demands while calling it an unsustainable situation for itself.
It can be inferred from the announcement that the Chinese state-owned company does not intend to continue under the current circumstances with the construction of the Vasilikos pier project.
In its announcement, CMC said that ETYFA awarded CMC the construction of the Vasilikos LNG facility in December 2019 and that this award includes the jetty connecting the FSRU to onshore facilities.
The company claims that it has been working hard for years and that despite the COVID-19 pandemic, and non-payment by ETYFA, it has achieved a lot and adds that “apart from ETYFA’s inexplicable refusal to take delivery of the completed FSRU vessel which is ready in Shanghai, another major dispute between the parties concerns the pier itself”.
According to the developer, although the parties’ disagreement over the pier has been going on for several years, CMC has not made any public statements on this issue and has focused as much as possible on finding practical solutions for the good of the project. “However, the continued disengagement of ETYFA from efforts to resolve this issue makes CMC’s silence impossible,” the announcement adds.
CMC argues that ETYFA has largely changed what it asked CMC to build. “Simply put, CMC signed a contract to design, build, and operate one type of project (importing LNG and converting it to natural gas), but ETYFA later insisted that CMC build something fundamentally different (a facility capable of exporting LNG),” the developer says, noting that “this is a radical departure from the parties’ original agreement for CMC to build an LNG reception and regasification facility.”
It adds that an LNG export facility relies heavily on state-of-the-art “cryogenic” technology that involves cooling natural gas to extremely low temperatures, turning it into liquid known as LNG and that this process is essential for efficient and safe export of natural gas over vast distances.
“But this technology to export LNG brings with it a huge variety of new technical and cost issues and this request by ETYFA has had a colossal impact on CMC’s projects at the pier,” it adds.
CMC further argues that ETYFA demanded not only the “possibility” of adding cryogenic capacity in the future but cryogenic capacity from day one in terms of the design and construction of the pier, which had a huge impact on CMC’s costs for which CMC is entitled to be compensated.
The announcement goes on to say that although the company has worked hard to meet this very different capability from day one “imposed” by ETYFA, many other elements will need to be built which will take many years to enable the export of LNG from the Vasilikos facility. The developer claims that LNG export is a long way off in the future for Cyprus (if it ever happens) and that despite this ETYFA insists that the design and construction of the Vasilikos jetty must be ready for it.
“For Cyprus to embark on such a monumental LNG export project would be a major economic undertaking and would have a cost that could reach several billion euros. The timeframe for such a project would likely extend far beyond just six years, underlining the enormity of the undertaking,” CMC adds.
It is further reported that despite the difficulties imposed on CMC by changes that ETYFA imagined as easy, CMC did what ETYFA asked for and that the issue now is that ETYFA has to pay CMC for the huge amount of extra labour and materials used to implement ETYFA’s new ‘vision’ for the project, i.e. from a gas import project to a much more complex cryogenic extraction project.
CMC finally argues that it is ETYFA that has created this situation with a “dream” of LNG export that (if ever achieved) may take many more years and many more billions of euros to achieve which is not CMC’s concern. “CMC has done its best for ETYFA and the Republic of Cyprus, but the situation for CMC has become serious and unsustainable on CMC’s part,” the statement concludes.
