Cyprus Mail 21 May 2024 - by Iole Damaskinos
It is unclear who is right in the Vasiliko liquified natural gas (LNG) terminal dispute, and the state is locked into a situation from which it will be difficult to extricate itself, energy expert Charles Ellinas said on Tuesday.
Speaking to state broadcaster CyBC, Ellinas noted it was imperative for a compromise to be reached, since the terminal would save close to €300 million every year in fuel costs.
“With every year of the project remaining half-finished, we lose this amount,” Ellinas said.
Terminating the contract and finding someone else other than the Chinese consortium CPP Metron (CMC) to complete the project, an idea which has been floated by the state as a “Plan B”, would be very difficult to carry out and would cause additional years of delays, the expert added.
President Nikos Christodoulides met with Chinese ambassador Liu Yantao over the project on Monday at the presidential palace for two hours, but no statements were made afterwards. Energy Minister George Papanastasiou also attended the meeting.
The government is currently in arbitration in London with (CMC), which has undertaken construction of the onshore project, seen as a key infrastructure for Cyprus’ energy needs.
CPP had filed a claim with the court of arbitration for additional compensation from the Cyprus government amounting to €200 million. CMC alleges that Cyprus has altered the terms of the original contract.
Only two months ago CMC and the Cyprus government appeared to have put aside disputes and construction was resumed after the Chinese-led company halted work earlier in the year.
Those statements had come on the heels of the Chinese consortium expecting the natural gas infrastructure company (Etyfa) to pay up, which wasn’t done, Ellinas said.
In late March, China’s ambassador had said the work would be finished by the end of this year and that the floating storage and regasification unit (FSRU) Prometheas, was “more than 99 per cent complete” with the vessel expected to be formally delivered to Cyprus by April or May. The ship is still in Shanghai.
Over the weekend, CMC said that their suspension of work in January had been an “absolute last resort” which they lifted in March, “on assurances that Etyfa would clear debts [owed] and that going forward would comply with the contractual procedures and timetable for approving payments”.
“Regardless of whether or not we continue with the company [CMC] the arbitration process will be ongoing and its decision may not be in [Cyprus’] favour,” Ellinas warned. This does not mean it would be completely against Cyprus, however, a cost would have to be borne.
It is imperative for the project to be actualised because the high cost of oil, which is set to remain high, combined with the low cost of natural gas, which is set to remain low due to the high quantities of LNG flooding the market, would reduce Cyprus’ electricity costs by a third, Ellinas said.
“This is a huge amount. The costs for the EAC would be reduced by at least $300 million per year recouping losses [of the past].”
The only course of action is to employ independent experts to advise on the matter, Ellinas added, saying that neither Etyfa nor the natural gas public company (Defa) had experts up to the task.
The LNG terminal project has been funded with €101 million from the European Commission and €240 million from EU banks.
