LNG tender branded a ‘massive scandal’
Chicanery or sheer stupidity – the question some MPs posed this week as to how Cyprus got tangled in the whole LNG farrago in awarding the contract to the Chinese-led consortium. But the parliamentarians were likely hinting at corruption rather than incompetence. And they barely stopped short of naming names when they alluded to government officials in charge at the time.
Frustration with the LNG import terminal at Vasiliko grew exponentially after the energy minister revealed to MPs that the European Commission has asked for €67.2 million of its money back. Brussels also gave Cyprus a November 6 deadline to return the funds – non-negotiable.
The €67.2 million is the amount disbursed to Cyprus out of the total €101 million grant from Cinea (European Climate, Infrastructure and Environment Executive Agency). The full €101 million for the LNG import project had been pledged either in late 2017 or January 2018. The act making it official happened in May 2018. It preceded by several months the contract agreement signed between Etyfa and the Chinese-led consortium in December 2019.
Demanding the money back was the latest slap in the face for the troubled LNG project, coming after the European Public Prosecutor’s Office (Eppo) launched a criminal probe into the affair.
The Eppo is investigating suspected procurement fraud, misappropriation of EU funds and corruption.
Although the probe began in March 2024, this month it became known that the Eppo is scrutinising bank accounts here in Cyprus – evidently seeking suspicious money transfers. The bank accounts are said to belong to politicians, current and former state officials and civil servants.
Speaking to the Cyprus Mail, Akel MP Andreas Pashiourtidis confidently opined that the Eppo is investigating the circumstances in which the €101 million grant was made, and who may have benefited personally.
“I don’t know it for a fact, it’s deductive reasoning,” said Pashiourtidis, an attorney by profession.
“I think the European prosecutor will look into everything, all facets – including how and why the tender was awarded to the Chinese consortium. Or if someone here took bribes.”
Once the Eppo wraps up its probe, it will forward its findings to the attorney-general. The Eppo itself cannot file indictments – only the attorney-general can. Any subsequent criminal trials would take place in Cyprus.
Following the energy minister’s appearance in parliament this week, MPs flooded the airwaves expressing dismay at the train wreck that is the LNG project.
Despite reassurances from the minister that “the project must be completed, and will be completed,” parliamentarians were not sold.
Diko’s Chrysis Pantelides had the best soundbite. He told CyBC radio: “In 2019, specific individuals in the Disy administration decided to award the project to the consortium in question.
“So either we were idiots for taking these decisions, or it’s corruption. Let’s speak plainly. It is corruption. Some people ‘ate up’ money and gave the project to the Chinese, meaning that today the Cypriot state is paying the price for that. It’s that simple.”
Prodded by the journalist if these people have names, Pantelides replied:
“Yes they do. They are those who took the decisions: energy ministers, members of the Etyfa board, Defa and so on. It’s all there, on the record.”
Though shying away from naming individuals, it’s clear that the MP was alluding to former energy minister Giorgos Lakkotrypis. He served in the position from July 2013 to July 2020.
Chiming in, Akel MP Costas Costa told the state broadcaster that the Vasiliko LNG is “a massive scandal”.
The initial contract was around €500 million, he recalled. Later, the contractor demanded €25 million extra to cover the increased price of steel.
Then, Cyprus paid the Chinese some €40 million just to have the Fsru vessel released from Shanghai.
“During the first half of 2025 we paid €2.5 million for the costs of ‘Prometheas’ in Malaysia. Plus, we purchased two parts for the ship – including a nitrogen unit – costing around €8 million.
“The Chinese consortium says these parts did not need to be bought by the Cypriots after the ship’s release. Who knows who’s right and who’s wrong?”
In addition, to date the legal fees paid to lawyers representing the Cypriot side at the arbitration court in London rack up to €10.5 million.
Costa noted also how the contract was awarded in December 2019, but actual work did not start until a year later. The LNG 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 Etyfa.
But Costa was worried that the future may hold even worse news. He referred to the ‘gap analysis’ currently being done by Technip, the government’s new advisor on the LNG project.
A gap analysis involves the comparison of actual performance with potential or desired performance.
“In the worst-case scenario, should Technip find substandard or faulty construction, we’d have to basically start from scratch,” Costa warned.
It would then take Technip about eight months just to prepare new tender documents to procure materials. Meaning it could be 2029 or 2030 until Cyprus finally gets natural gas for electricity generation.
“We know that some people did things not stipulated in the contract, so tomorrow we might have to undo them and start from square one,” Costa said.
“Well, all this was not done by ghosts or extra-terrestrials. Certain individuals did these things. And in this country, we can’t always talk of responsibility but never have responsible parties.”
At this point, it’s worth remembering what the auditor-general found wrong with the LNG project. The report, issued in January 2024, makes for some harrowing reading.
It noted that the tender for the Engineering, Procurement, Construction, Operation and Maintenance Agreement (Epcoma) for the LNG import project went live in October 2018, for a total estimated contract value of €500 million.
The deadline for submitting the tenders was initially set for January 18, 2019. With subsequent amendments, that date got pushed back by six months to July 7, 2019.
Three bidders (consortiums) took part. On August 22 of the same year, the natural gas infrastructure company (Etyfa) awarded the project to the Chinese-led CPP consortium. Its bid was €499,999,997.
Of this, the €289 million concerned the two-year design and construction of the project (including the Fsru), and €210 million concerned the 20 years of operation of maintenance.
Although Etyfa dubbed the tender a ‘success’, in retrospect it transpired that it was anything but.
The Audit Office lists the brazen procedural shenanigans. For starters, two of the three bidders had been summarily disqualified in the pre-selection stage, leaving just one interested party in contention.
Etyfa pressed on regardless.
It subsequently emerged that one of the companies in the winning consortium had earlier been fined €38.5 million by Greek authorities for violations of competition laws. Additionally, an affiliate of the same Greek company had previously been barred from bidding for public contracts in Cyprus, its officers having been found guilty and sentenced by a court here of bribing public officials and circulating forged documents – in relation to the scandal regarding the Paphos landfill contract.
This tainted track record, said the auditor-general, was grounds to disqualify the consortium as a whole from the LNG terminal project. But Etyfa, in breach of procurement regulations, said it would simply bar the one dubious member of the consortium and award the contract to the rest of the members.
There’s more: the successful bidder had scored below the threshold in the technical evaluation. But Etyfa ‘rounded up’ the numbers, giving the consortium a final pass grade.
Then the consortium amended the wording of the tender guarantee in a manner that “violated essential terms of the competition”. This in itself should’ve been grounds for disqualification.
A tender guarantee, also known as a bid bond, is a financial instrument provided by a bank or insurer on behalf of a bidder to assure a project owner that the bidder will honor their bid. It serves as security against the risks that the bidder might withdraw their bid, fail to sign the contract if awarded, or not provide a performance guarantee when required.
Next, it turned out that the outfit which the consortium indicated as their technical expert in matters of operations and maintenance of the LNG terminal, had claimed prior experience in various similar projects. Except, it provided no documentation for this.
The auditor-general’s office began warning that all these irregularities put at risk the €101 million grant from the European Commission. It also sounded the alarm about insufficient financing, and proposed that the tender be scrapped and another one begun from scratch.
But during a meeting chaired by then-president Nicos Anastasiades in November 2019, and despite warnings that the project might lose the €101 million from the EU in the future, Etyfa overrode the objections by arguing that the project was urgent and should not be delayed. Any problems would be dealt with down the road.
And so on December 13, 2019 Etyfa and the consortium signed on the dotted line.