Taxpayers charged €350 million a year over stalled LNG project

MPs on Tuesday again grilled state officials over the status of the LNG import terminal at Vasiliko, as it was heard that the non-completion of the project costs taxpayers some €350 million a year in greenhouse gas emissions allowances due to the ongoing use of diesel for electricity generation.

Once again, the head of the natural gas public company Defa was summoned to parliament to provide an update on the LNG project, stalled since July 2024 when the Chinese-led consortium walked out.

This time, Giorgos Ashikalis had some positive news: earlier this week Defa took the decision to invite bids for subcontractors for the works pending at the LNG terminal.

This would allow them to launch the tender soon, he said.

Regarding the floating, storage and regasification unit – the Prometheas vessel – Ashikalis said it is “ready” from a technical side.

Certain missing valves, as well as the nitrogen unit, have been installed – for a total cost of just under €1 million.

The nitrogen unit is a critical component on an Fsru, used to ensure the natural gas produced meets the specific caloric value and composition standards of the receiving pipeline grid.

The vessel remains moored in Malaysia.

Now, said Ashikalis, the government is examining options for the ship – including letting it sail to another country for certification and/or leasing.

The ship cannot come to Cyprus because the jetty at Vasiliko is half-complete.

As to the leasing option – allowing a company to use the Fsru to regasify LNG – there is a complication: it requires the nod from the European Commission which co-financed the project.

“Various companies have expressed an interest in using it [the Fsru], but the EU won’t let us,” Ashikalis said.

Former Defa general manager Marios Menelaou said the non-use of LNG for energy production is costing Cyprus an estimated €350 million a year.

In addition to lower emissions, LNG also provides more flexibility and stability to a grid.

His remarks related to worries that the grid currently operates at threshold, making the risk of blackouts likely.

Akel MP Costas Costa complained that “no one knows if the LNG project will get finished, when it will get finished, or how much it will cost.”

He said the project’s consultants and advisers alone have invoiced Defa to the tune of €70 million so far. This compared to the initial budgeted expenditure of €15 million.

The contract for the LNG project had been awarded in December 2019, but actual work did not start until a year later. The terminal should have been finished by July 2022.

There followed four delivery timetables, all missed – September 2022, July 2023, October 2023 and lastly July 2024. In that same month, the Chinese contractor pulled out, citing irreconcilable differences with Cypriot authorities.

The government is now in the process of returning €67 million in funding for the LNG terminal to the European Commission.

That amount represents part of the roughly €101 million grant approved for the LNG project in 2017 under the EU’s Connecting Europe Facility. Only €67 million was disbursed.

Brussels’ demand for repayment followed allegations of irregularities in the tender award process to the Chinese-led consortium and the mismanagement of the project.

The European Public Prosecutor’s Office is also investigating for potential corruption.