Chinese-led consortium pulls out of contract to build Cyprus’ first natural gas import terminal

NICOSIA, Cyprus (AP) — A Chinese-led consortium on Thursday pulled out of its contract with Cyprus to build the island nation’s first natural gas import terminal over what it says was the Cypriot government’s failure to pay what it owed for work completed this year.

The CPP-Metron Consortium said in a statement that the Cypriot government failed to live up to its commitments to pay up, despite promises made during a March meeting chaired by President Nikos Christodoulides.

“No contractor can be expected to work indefinitely on credit,” the consortium said. “That was not the deal CMC signed up to.”

The Cyprus government has not yet commented on the development. But an official with deep knowledge of the issue said CPP-Metron was not able to complete the project because of its own cash flow problem and that both sides had mutually agreed to break the contract.

The official, who spoke on condition of anonymity because he’s not permitted to speak publicly about the contract’s details, said the consortium underbid competitors to win the contract for the terminal, but couldn’t stay on budget because of a series of grave miscalculations on the project’s cost that burgeoned following the COVID-19 pandemic and Russia’s 2022 invasion of Ukraine.

According to the official, the cash-starved consortium’s parent company wouldn’t provide additional money and two key subcontractors were let go while work essentially came to a standstill.

Work on the 289 million euro ($319 million) terminal on the island’s southern coast began in July 2020 and was scheduled to be completed two years later.

The European Union had pitched in a 101 million euro ($110 million) grant.

Billed as Cyprus’ costliest energy project, it was the crude-dependent island’s first important step to transitioning to cleaner, cheaper natural gas for energy generation. The government had said the terminal would cut power generation costs by 15%-25% and reduce Cyprus’ carbon footprint by 30%.

Cypriot officials also said it would allow for future use of natural gas from fields discovered in waters off Cyprus. ExxonMobil, Chevron, Italy’s Eni and French Total are all licensed to drill for oil and gas off Cyprus’ southern coastline.

The terminal features a tanker ship built in Singapore and refitted to convert liquefied natural gas back into gaseous form to use in Cyprus’ main power plant. It also includes a jetty and pipelines to convey the gas to the nearby Vasilikos power plant.

But a string of delays that CPP-Metron blamed on Cyprus’ Natural Gas Infrastructure Company (ETYFA) held up completion of the work until the consortium decided to pull the plug.

The consortium consists of China Petroleum Pipeline Engineering, Metron Energy Applications, Hudong-Zhongua Shipbuilding and Wilhelmsen Ship Management.

CPP-Metron accused ETYFA of “weaponizing payments” to complete additional work outside of what was stipulated in the contract, such as a natural gas export facility which it called “unnecessary and premature” and a “product of future ambitions and speculation.”

It also accused ETYFA of throwing up obstacles to Cyprus taking delivery of the tanker ship christened ETYFA Prometheas so that it could begin earning money for the Cypriot government either as a liquefied natural gas carrier or putting it to use in another project elsewhere.

But the official said the ship was far from ready to be delivered and that any construction delays were strictly owed to CPP-Metron’s own money problems.

He said the end of the contract would now enable the Cypriot government to bring on subcontractors to complete work on the onshore terminal and jetty in as quickly as 10 months.

Menelaos Hadjicostis, The Associated Press