Cyprus Energy Minister Natasa Pilides is confident the €300 mln Vasiliko LNG import terminal will be completed in the summer of 2023, despite contractors threatening to pull out over extra costs.
In comments to state radio CyBC on Tuesday, Pilides said the implementation of the project is proceeding within the reset timeframe, agreed following delays attributed to the coronavirus pandemic.
“The government has introduced safeguard clauses so that if any unjustified delays occur in the completion of the project, it will entail consequences for the construction company”.
Pilides comments come after the Auditor General’s office claimed the consortium’s demand for an additional €25 mln to cover the increased cost of raw materials was “extortion”.
The Chinese consortium, led by China Petroleum Pipeline Engineering (CPP), is ready to walk away from the construction project if the additional €25 mln is not given.
The audit service perceives the demand as extortion, noting the contract foresees that if a difference should arise, the matter is subject to arbitration, and the consortium has no right to back out.
“Abandonment of the project, in addition to the financial claims of the Republic, automatically entails that the consortium would be blocked at a European level.
“In our opinion, no state can be blackmailed, nor can it appear to be acting under threat,” said the Audit Office in a statement.
“Sixteen months since the start of the project was launched, which has a total duration of 24 months, it is still in the study stage, and not the slightest bit of work has been carried out on sight.”
Auditor General, Odysseas Michaelides, said if the contractor does not meet its contractual obligations to the letter, the government could request tens of millions in compensation for the delay.
Pilides noted: “There is no question of not utilising the capabilities given to us in the contract…there will be some further improvements to the contract.”
Asked about the consortium’s demand for an additional €25 mln, Pilides said the government finds the request to be reasonable, considering the spike in the cost of raw materials.
“The additional amount will be decided and determined by the Central Committee on Changes and Claims.
“Certainly, the amount will not exceed 10% of the total cost.”
The Central Committee on Changes and Claims is the principal state organ that reviews public procurement contracts.
CPP pledged in November to bring natural gas to Cyprus in June 2023 after some delays in the schedule attributed to the COVID-19 pandemic.
The original timeframe was the end of 2022.
Cyprus intends to import approximately 0.5 bcm of LNG through Gas Sale Purchase Agreements (GSPAs) for three to four years, maintaining the option to purchase LNG from SPOT markets.
The project is considered Cyprus’ largest energy venture. It features an LNG floating storage and regasification unit (FSRU), a jetty, mooring facilities, a pipeline, and other onshore and offshore related infrastructure.
The project will generate benefits worth €1.5 bln a year for the Republic of Cyprus.