Cyprus has been given until November to repay millions of euros which had been paid by the European Commission in grants for the construction of the liquefied natural gas terminal at Vasiliko, according to reports on Wednesday.

The commission had initially demanded in July last year that Cyprus repay almost €69m in grants, with the energy ministry saying at the time that it had received a letter from the commission which listed “possible irregularities which occurred during the evaluation period of the tender” for the project.

“These issues concern the evaluation criteria of the China Petroleum Pipeline Engineering Co consortium, Metron Energy Applications SA, Hudong-Zhongua Shipbuilding Group and Wilhelmsen Ship Management Limited,” it added.

The China Petroleum Pipeline Engineering Co consortium and Metron Energy Applications SA together formed the CPP-Metron Consortium (CMC) and were responsible for the terminal’s construction until tearing up their contract with the government in July last year.

At the time, the ministry said the letter “alleges two substantive violations”, the first being the criteria for awarding the tender to the above-listed companies in December 2019 and the second being the signing of the bilateral agreement upon approval of an additional €25m in funding in June 2022.

As a result, they said, the commission has demanded that the Cypriot government repay exactly €68,608,438.46, which was the exact amount which had been paid by the commission to Cyprus’ Natural Gas Infrastructure Company, Etyfa.

This money had been provided as part of the European Union’s ‘Cyprus Gas 2 EU’ project, which was listed as an EU “project of common interest” and had been funded by the EU to the tune of €101m.

The European public prosecutor’s office (EPPO) had earlier in the same month publicly announced the opening of an investigation into possible procurement fraud, misappropriation of EU funds and corruption related to the Vasiliko LNG terminal.

Cyprus signed the contract for the LNG project in December 2019. The entire project should have taken 22 months to complete.

Nonetheless, Energy Minister George Papanastasiou had insisted to the House energy committee on Tuesday that the project “is feasible, should be completed and will be completed”.

He was quizzed by MPs regarding delays to the project and said they had come about because “there are not many options at the moment because the project is incomplete”.

“We have a ship, which will probably be ready next month after passing the final checks, and when that, the most important asset in this project, is ready, the rest of it will have to be completed in some way so that the ship can dock at the pier to begin gasification and the use of natural gas in conventional power generation,” he said.

The ship to which he was referring is the floating storage and regasification unit (FSRU) Prometheas, which is currently in Malaysia as part of the process of its certification for use. 

It had been stated earlier in the year that Prometheas would be certified in October.

A month ago, he had said the government was engaged in “damage limitation” following reports of “serious safety issues” regarding the Vasiliko terminal’s construction, with television channel Omega having reported there were “design and materials issues” with the project.

“There are very serious technical issues, which make it impossible to continue the work at this time. That is why the work on the pier has been at a standstill for months and no timetable has been given by the authorities for the completion of the work,” Omega quoted a “competent source” as having said.

He had said at the end of last year that the government’s goal was for the construction of the LNG terminal at Vasiliko to be complete by the end of this year, though the issues raised this week appear to constitute another setback for a project which has faced numerous issues in recent years.

Work had ground to a halt last year when CMC tore up its contract with the government to construct the terminal, accusing Etyfa of “bullying” and of leaving them to work “without proper or timely payments” for years.

CMC added Etyfa and its advisers on the project “had little to no relevant experience in any of the essential components for delivering a project of this nature: oil and gas, engineering, procurement and construction works and conversion of an LNG carrier to a floating storage regasification unit.”

“The position has become untenable. Contrary to the promises that were made by the [energy] minister in March, CMC has still not received any payment whatsoever for its work in 2024.

“That is but the latest failure in a four-year history characterised by wrongful withholdings and delayed payments. No contractor can be expected to work indefinitely on credit. That was not the deal that CMC signed up to. It was not the deal that the EU agreed to fund,” they said.