Termination of Vasilikos contract "not bad news," sources say

The termination of the contract for the construction of the Vasilikos natural gas terminal by the CPP-METRON Consortium Ltd (CMC) is "not bad news," as it frees the Republic of Cyprus from a stalled agreement, according to sources familiar with the matter.

The sources suggested that ending the contract could mark the beginning of a solution to a long-standing problem for the country. The project had significantly exceeded its original two-year timeline, now extending beyond four years.

While the Republic of Cyprus had been negotiating with the company to explore all possible solutions, the company announced the termination of the contract today, citing various reasons.

However, the termination was not unexpected. Sources indicated that negotiations between the two parties were leading to a mutual agreement for termination, conditional on the delivery of the ETYFA "Prometheus" FSRU. Despite this, recent reports indicated that CMC was discussing only the delivery of the vessel, not the termination. Nevertheless, the consortium unilaterally ended the contract on Thursday.

For months, the government had been in discussions with CMC to resume the stalled works at Vasilikos, which had restarted last March only to be halted again two months later. The company was also demanding payments for uncompleted works, sources noted.

The government focused on bringing the ship to Cyprus, considering it 75% of the project. However, certifications from the classification society were pending.

Additionally, the Republic is in arbitration over further claims by the company in a London court. Specifically, CMC is seeking an additional €200 million, beyond the compensation under the contract. The company has already received €25 million over the initial agreement, approved by the previous administration.

Next steps

According to knowledgeable sources, the next likely step is for Cyprus’ Natural Gas Infrastructure Company (ETYFA) to complete the project, taking over the construction of the three components of the terminal: the ship, the jetty, and the onshore terminal. The goal is to finish these using the subcontractors previously employed by the consortium, such as Cosco Shipping for the FSRU, Spanopoulos, and Wilhelmsen.

The project is expected to be completed under the surviving clauses of the terminated contract. It is estimated that, if all goes well, the onshore terminal and jetty could be completed within ten months.

As for the ship currently in Shanghai, efforts will be made to sail it under certain conditions, aiming for an initial certification to allow departure, followed by the remaining necessary certifications in Cyprus.

(Source: CNA)

Also read: Nicosia 'blindsided' by CMC’s decision to terminate Vasiliko terminal contract

Also read: CMC terminates Vasilikos LNG terminal contract