CMC terminates Vasilikos LNG terminal contract

The CPP-METRON Consortium Ltd (CMC) has announced that it has terminated its contract with the Natural Gas Infrastructure Company (ETYFA) for the construction of the Vasilikos LNG Receiving and Regasification Terminal.

A press release from the consortium, which includes Chinese business interests, says, "CMC has found itself with no alternative but to terminate its contract with ETYFA for the LNG Receiving and Regasification Terminal project at Vasilikos and has done so today, July 18th."

The company said the decision had come, "After years of working without proper or timely payments from ETYFA and having made extraordinary efforts to meet ETYFA half way, including repeated efforts by its senior management and through diplomatic channels to find a mutually acceptable compromise."

The company's full statement can be seen below while official responses from ETYFA and the state are pending.

Also read: Energy Minister sees "some light on the horizon" regarding Vasiliko LNG terminal

CMC press release regarding the Vasilikos LNG Receiving and Regasification Terminal – Termination of Agreement:

After years of working without proper or timely payments from ETYFA and having made extraordinary efforts to meet ETYFA half way, including repeated efforts by its senior management and through diplomatic channels to find a mutually acceptable compromise, CMC has found itself with no alternative but to terminate its contract with ETYFA for the LNG Receiving and Regasification Terminal project at Vasilikos and has done so today, July 18th. ETYFA and the team of advisers it engaged for this project, had little to no relevant experience in any of the essential components for delivering a project of this nature: oil and gas, EPC works and conversion of a LNG carrier to an FSRU. ETYFA elected through an international tender, to appoint a consortium that followed to the letter the tender process. We hear and read a lot of accusations about how this award took place. We do not like to comment because we believe that these accusations do not have to do anything with us since we have followed strictly and to the letter the tender process and the Contract. ETYFA was responsible for any evaluation of the tender and for any awards. ETYFA by appointing its consortium members, engaged a contractor that was able to mobilise an experienced team of industry experts to deliver this critical project for the people of Cyprus. To the contrary of the Owner’s Engineer, by looking at their sites one can clearly see the vast experience that the Contractor has in similar projects. ETYFA from the beginning of the Project has demanded CMC perform additional and extra-contractual scope that is unnecessary and/or inappropriate for an import facility. Rather, ETYFA has forced CMC also to design and construct an export facility as well. That is plainly work outside the contract and beyond the scope of the project the EU agreed to fund. It is also entirely unnecessary and premature; a product of future ambitions and speculation. It is notable that nobody from the government, even within ETYFA, can provide any justification as to why an LNG export facility is needed since there are no LNG production units and LNG storage on the island nor are there any plans to build them. By weaponising payments and bullying CMC with unwarranted threats – many of which it and its agents have repeated in the press – ETYFA has forced CMC into financing and delivering a project that is materially different, and considerably more complicated and expensive, than the import facility that the EU sanctioned and CMC signed up to deliver. ETYFA has gone to the lengths between February 2021 to July 2022, of withholding all payments by demanding CMC to accept their unreasonable and out of contract requests. As recorded in the Special Report by the Auditor’s Office, ETYFA has known since 2021 that its actions and demands for extra-contractual work has caused delays and disruption to the project, and substantially increased costs. Rather than accept responsibility and engage with CMC to find a resolution to this problem, ETYFA delayed informing the Cypriot Government for more than a year and it was only with CMC’s efforts and making a presentation to the then Minister of Energy Mrs. Natassa Pilides, that the real situation surfaced. ETYFA still remains in denial even today. It is an extraordinary feature of this project that ETYFA has failed to work with CMC to take delivery of the vessel, the ETYFA Prometheas. ETYFA insisted on taking early ownership of the ETYFA Prometheas in June 2022 and the vessel was certified by Lloyd’s Register as ready to sail as long ago as January 2024. Yet, since then, ETYFA has created obstacles to delay its departure from China and failed to make the necessary arrangements for it to begin earning substantial sums for the people of Cyprus by putting it into commercial operation in the global energy market whether as an LNG Carrier or FSRU for another project. A more productive approach would have been for ETYFA to engage an experienced shipping agent to assist with taking the proper steps and preparing the necessary documentation. Had ETYFA done so, the FSRU could have sailed in January 2024. Instead, the documentation remains pending, even after the Energy Minister’s direct involvement. After the meeting that took place in March of 2024 with the President and the Minister of MECI, CMC had hopes that the current stalemate could be resolved. Relying on promises of a change in ETYFA’s behaviour, re-evaluation of the jetty works by an independent third party and expedited visas for Chinese labour, CMC lifted its suspension for non-payment and resumed onshore works at Vasilikos. Unfortunately, ETYFA refused to honour the commitments of its own government. The position has become untenable: contrary to the promises that were made by the Minister in March, CMC has still not received any payment whatsoever for its work in 2024. That is but the latest failure in a 4-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.

CPP-METRON CONSORTIUM LT