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More delays for LNG terminal

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Construction of a liquefied natural gas (LNG) terminal at Vassiliko is stuck after a dispute between the government and the consortium implementing Cyprus’ largest energy project.

With long delays already under its belt, the project is back another nine months, confirmed by Energy Minister Natasa Pilides.

Nicosia signed a landmark deal to build a €290 mln terminal to import LNG for electricity generation in December 2019 with the multinational consortium led by China Petroleum Pipeline Engineering.

The government had hoped to see the LNG terminal completed by early 2022.

A setback was announced last year, as the consortium evoked delays imposed by the COVID pandemic and chemicals found buried at the site, which needed to be cleaned up.

As announced in February last year, the project was pushed back to July 2023.

However, answering a question sent in by ruling DISY MP and chair of the House’s Energy Committee, Kyriacos Hadjiyiannis, Pilides conceded the project had been derailed from that timeframe.

Pilides updated the House on the project by the Public Natural Gas Company (DEFA) for importing LNG and whether the announced timetables will be respected.

Pilides told MPs the consortium submitted a revised schedule that presents a nine-month delay as demands for compensation due to the ongoing impact of COVID-19 throughout the supply chain.

She said that the consortium’s demands were not approved by DEFA, with the matter to be settled through a contractual dispute resolution process.

A request for €25 mln compensation for increased raw materials and equipment costs was met.

Regarding work on the storage and regasification unit (FSRU), Pilides explained that the vessel bought for the purpose is currently being converted at a Shanghai shipyard.

Concerning the land and sea construction, Pilides notes that the contractor completed the preliminary work after establishing the construction site.

“To date, the offices have been installed and are fully functional (they have electricity, internet, etc.), the earthworks are being completed, and the pilings and mechanical constructions of the pier are expected to start in the next period”, Pilides was quoted by Phileleftheros.

The project’s cost was originally set to €290 mln, of which €101 mln is a grant from the European Commission Connecting Europe Facility (CEF) financing program.

The rest of the financing was secured from EAC’s participation in the share capital of the Natural Gas Infrastructure Company (ETYFA), a subsidiary of DEFA, with €43 mln and from financing from the European Investment Bank.

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.

It features an LNG FSRU unit, 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.

The contract between ETYFA and the consortium of Chinese, Greek and Norwegian interests, led by China Petroleum Pipeline Engineering CO Ltd, was signed on 13 December 2019.

According to the terms of the tender, the consortium had to complete all the infrastructure 24 months from the date of commencement of the project work.