It started with a very suspicious tenders\u2019 procedure<\/strong> in which two of the three consortiums bidding for the project had been excluded for compliance reasons, before any technical and financial assessment of their offers had even been carried out.<\/p>\n There was only one offer on the table for a project, described by then president, Nicos Anastasiades, as one of the biggest infrastructure projects in the history of the Republic<\/strong>, that was estimated to cost half a billion euros. An amount of \u20ac289 million would go on the construction of the LNG terminal in Vasiliko and the FSRU (Floating, Storage, Regasification Unit) \u2013 the ship part of the project \u2013 while \u20ac210m would be paid for their operation and maintenance over a 20-year period.<\/p>\n The total cost has already climbed far higher, the latest estimate by the audit office putting it at \u20ac542m. CPP was paid an extra \u20ac25m for increased cost of materials while the engineers also received additional payments. It could climb much, much higher if a statement of claim \u2013submitted to the court of arbitration in London at the end of 2022 by CPP \u2013 demanding an additional \u20ac200m in costs is successful.<\/p>\n It could take two years before the court issues a decision, but the company stopped work at the Vasiliko terminal 10 days ago. Speaking to the Cyprus Mail earlier this week, Energy Minister Giorgos Papanastasiou warned \u201cwe will give them another week and then issue a written warning.\u201d<\/p>\n According to the minister, the FSRU is 95 per cent ready, although it still needs to secure certification to sail to Cyprus. The terminal in Vasiliko, which has been beset by problems and includes disputes between CPP and its sub-contractors, is only 45 to 50 per cent ready,<\/strong> said Papanastasiou.<\/p>\n When the contract was signed the completion date was September 2022, but three new dates have been given since then, the latest being July 2024. If it has taken almost three years for half the work at the terminal to be completed, it is unlikely the remaining 50 per cent will be finished in six months, especially now the company has stopped work.<\/p>\n In an article in the Sunday Mail two years ago in January 2022, energy analyst Dr Charles Ellinas wrote: \u201cBased on informal, unofficial information, the project is unlikely to be completed before the end of 2024. CPP\u2019s lack of experience in such projects appears to be a contributing factor.\u201d<\/p>\n It appears that not only did the government manage to end up with only one offer for the LNG terminal in 2019, but it was also submitted by a consortium that had no experience in such projects<\/strong>.<\/p>\n In a document prepared by the European Investment Bank\u2019s (EIB) internal services \u2013 excerpts of which were published by French newspaper Liberation \u2013 before the bank\u2019s board was to validate the granting of a \u20ac150m loan in June 2020, the obvious question was asked. As there was only one offer on the table, didn\u2019t common sense dictate the cancellation of the call for tenders and the relaunch of another one for such a big project?<\/p>\n Before the signing of the contract, auditor-general Odysseas Michaelides had sent a 10-page letter to the Public Company for Natural Gas (Defa) saying there had been blatant irregularities in the evaluation of the tenders which necessitated the cancellation of the procedure.<\/p>\n After an exchange of letters, between Defa and Michaelides, with the latter insisting on the cancellation, Anastasiades stepped in and called a meeting at the presidential palace in late November 2019, attended by Michaelides, the attorney general, the accountant general and the ministers of energy and finance.<\/p>\n It was reported that after listening to everyone, Anastasiades took the \u201cpolitical decision\u201d to go ahead regardless of the irregular tenders\u2019 procedure.<\/strong><\/p>\n He decided that \u201cthe construction of infrastructure for the importation of natural gas is a project of great national importance and should proceed regardless of the mistakes, omissions and irregularities, identified by the auditor-general in the process of the evaluation of the tenders by Defa,\u201d Politis reported on November 23, 2019. He urged Defa to sign the contract with CPP.<\/p>\n Since 2005, there had been 10 attempts by the state to import natural gas, including compressed natural gas (CNG), and none of them materialised for a variety of reasons. Anastasiades was determined to go ahead and give the project to CPP, ignoring all the warning signs.<\/p>\n Speaking to the Cyprus Mail on Wednesday, Papanastasiou did not pull his punches.<\/p>\n \u201cI had concerns since day one,\u201d he said. \u201cWe are paying for sins of the past.\u201d<\/strong><\/p>\n The report prepared by the EIB internal service, six months after the signing of the contract and reported in Liberation in June 2020, raised questions about the financials and the legitimacy of the deal, which excluded two other consortiums \u2013 one led by South Korean conglomerate Samsung and the other by Greek company Damco Energy \u2013 for compliance reasons and chose the consortium with no expertise or know-how in LNG terminals.<\/p>\n This biggest concern was the cost of the Vasiliko LNG terminal. \u201cThe price of the project puts it in the high end for such a scheme,\u201d said the EIB report. The strange thing, the report said, was that it was not high end technically because it was a conversion project. The cost of this operation \u2013 the LNG tanker and its conversion to FSRU \u2013 was estimated to cost \u20ac200m, two thirds of the total amount of the project. A 2002 boat \u2013 the Etyfa Prometheas \u2013 <\/em>belonging to Shell was bought and taken to a Shanghai shipyard, where it still sits, currently awaiting certification.<\/p>\n \u201cPrices above the market,\u201d said the EIB report. Liberation reported that a year earlier a similar conversion contract was signed by Croatia for less than \u20ac30m and that \u201cLNG carriers from the early 2000s are normally traded for \u20ac30m to \u20ac40m.\u201d The discrepancy from the normal price is \u201ctherefore more than \u20ac100m, or more or less, the subsidy from the European Union.\u201d<\/p>\n The European Commission had said it would give a \u20ac101m grant in the framework of the \u2018Connecting Europe Facility\u2019, but this was conditional on the EIB board approving a \u20ac150m loan for the project. The Anastasiades government put big pressure on the EIB to approve the loan, so that the commission would also release the \u20ac101m.<\/p>\n \u201cMany in the industry were surprised when we found out the name of the supplier selected by Cyprus,\u201d a prominent LNG player was quoted as saying by Liberation. \u201cIt is very difficult to understand how they came to this conclusion; the solution is expensive.\u201d<\/p>\n A European source quoted by the paper, said: \u201cThis contract is grotesque. It is a financial and ethical scandal.\u201d<\/strong><\/p>\n The irony was at the time of the tenders, Norwegian company Hoegh, which specialised in LNG, had offered to supply Cyprus with one of its FSRUs for a rental agreement.<\/p>\n \u201cWe can put it into service in six months and the total cost of the project does not exceed \u20ac35m per year, but would allow the Cypriot government to save \u20ac100m according to our calculations,\u201d the CEO of Hoegh, Sveinung Stohle, told Liberation.<\/p>\n It was a much more flexible, faster and cheaper solution.<\/strong> There was no need for a 20-year contract like the one signed with CPP and Hoegh did not require the construction of a new pier at Vasiliko. The only problem was that rental agreements were not eligible for EU grants.<\/p>\n But the CPP contract may end up costing the taxpayer a lot more than a rental agreement, if the auditor-general\u2019s recent report is anything to go by.<\/p>\n Dr Ellinas had warned as far back as 2019 that \u201cCyprus runs the risk of being trapped in an expensive undertaking for at least the next 10 years. This might not boost industry but may also become a long-term burden to Cyprus\u2019 economy.\u201d<\/p>\n At the end of 2019, Defa had boasted that the import of LNG would bring electricity prices down by 25 per cent. Four years later, no LNG has been imported, and it is not known when it will arrive \u2013 CPP\u2019s latest date of July 2024 seem overly optimistic under the circumstance \u2013 and electricity bills are still burdened with \u20ac300m annual emission fines.<\/p>\n Nobody knows what the final bill for the LNG Vasiliko terminal will be if it does not degenerate into a never-ending legal dispute and is eventually completed. What is known is that former president Anastasiades personally decided that a \u20ac500m infrastructure project, Cyprus\u2019 biggest ever, should be awarded without competitive tenders to a company with no experience of such a project.<\/p>\n Follow the The contract for the liquified natural gas (LNG) terminal in Vasiliko was signed with the China Petroleum Pipeline Engineering Company (CPP) in December 2019. The project has encountered significant issues, leading to potentially high costs for the taxpayer. The tender process was controversial, with two of the three bidding consortiums excluded for compliance reasons before technical and financial assessments. The estimated cost of the project was half a billion euros, with \u20ac289 million allocated for construction and \u20ac210 million for operation and maintenance over 20 years. However, the cost has risen to \u20ac542 million, with CPP demanding an additional \u20ac200 million. The terminal is only 45 to 50 percent complete, and the completion date has been pushed back multiple times, with the latest being July 2024. The consortium led by CPP lacked experience in such projects. Despite irregularities in the tender evaluation, former President Nicos Anastasiades decided to proceed with CPP. The European Investment Bank (EIB) raised concerns about the financials and legitimacy of the deal. The project’s cost was considered high compared to market rates. The European Commission had offered a \u20ac101 million grant, conditional on the EIB approving a \u20ac150 million loan. An alternative, more cost-effective solution was proposed by Norwegian company Hoegh but was not pursued due to ineligibility for EU grants. The final cost of the LNG Vasiliko terminal remains uncertain.<\/p>\n","protected":false},"author":3,"featured_media":2834,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[580,486,3,26,553,358,203,379,201,121,569,250,415,658,757,450,758,243,759,124,618,760],"class_list":["post-2833","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cyprus","tag-attorney-general","tag-china","tag-cyprus","tag-economy","tag-electricity","tag-energy","tag-environment","tag-eu","tag-europe","tag-featured","tag-finance","tag-google","tag-government","tag-history","tag-lng-plant","tag-london","tag-natural-gas","tag-odysseas-michaelides","tag-scandal","tag-ship","tag-top","tag-vassiliko-terminal"],"acf":{"keyphrase":"","keywords":"","sourceimg":"","country-category":""},"yoast_head":"\nWritten warning<\/h5>\n
![\"feature](\"http:\/\/ch.jfdi.cc\/wp-content\/uploads\/2024\/02\/taxpayers-will-pay-the-cost-of-lng-debacle.jpg\")
Political decision<\/h5>\n
\u2018Ethical scandal\u2019<\/strong><\/h5>\n
\nCyprus Mail on Google News<\/p>\n","protected":false},"excerpt":{"rendered":"