The floating storage and regasification unit is 92% complete – In two months the issuance of a permit for supply is expected
December 2023 or early 2024 is set to complete the remaining 30% of the project, which mainly concerns land and sea infrastructure in Vassiliko.
By Maria Herakleous
Around 70% is estimated to be the implementation rate of the LNG Terminal in Vassiliko for the floating liquefied natural gas regasification storage unit (FSRU), for the land and sea infrastructures. According to information from “K”, the floating unit that constitutes the largest part of the project's cost is 92% complete and is expected to be delivered in July. Later, in December 2023 or the beginning of 2024, the completion of the remaining 30% of the project, which mainly concerns land and sea infrastructure in Vasiliko, is set. It has already been reported by the responsible minister (Energy), that considerations are being made for the temporary use of the floating unit by other European countries until the completion of all infrastructure so that it can be used normally by the Republic of Cyprus. At the same time, DEFA submitted a request to CERA for the issuance of a natural gas supply license, which is expected to be granted within the next two months, barring any unforeseen circumstances. With the granting of the license, DEFA will be able to proceed with the planning for the supply of liquefied natural gas, from potential suppliers.
Problems were presented from the beginning of the undertaking of the project, while in November 2021 the progress of the works was below 20%.
Of course, the completion of the project faces serious delays, which are attributed to various causes (within and outside DEFA and CERA) and issues that should be handled by the competent minister. It is recalled that the bid for the conversion of a floating LNG import, storage and regasification unit, construction of a wharf on which the floating unit will be permanently moored, as well as the mooring facilities, a pipeline on the wharf and land-based WHA facilities, was awarded on 2019. According to information from “K”, the problems started from the start of the project. Based on figures released in November 2021 there was already an 11-month delay in the contractor's registered work schedule, with work progress at very low levels of less than 20%.
At the same time, the contractor's claims amounted to 100 million euros. After 6 months of negotiations, the deadlock was ended and with the decision of the Central Committee of Changes and Claims an additional €25 million was agreed to the contracting consortium, while the agreement gained important compensatory measures for the Republic of Cyprus, such as the transfer of the regasification/storage ship of the FA in the ownership of KD, imposition of a second cushion of clauses amounting to €22.5 million in case of further delay and an increase in the amount of the faithful performance guarantee.
The consortium and Aktor
In 2019, the tender for the conversion of a floating LNG import, storage and regasification unit, the construction of a jetty on which the floating unit will be permanently moored as well as the mooring facilities, a pipeline on the jetty and land-based PV facilities was awarded to the consortium of five of “CMC” companies. China Petroleum Pipeline Engineering Co Ltd ('CPP'), Aktor S.A., Metron S.A., Hudong Zhonghua Shipbuilding Co. Ltd and Wilhelmsen Ship Management Limited. (Work was supposed to start in 2020 and 2021, after 6 months, negotiation). Sources report to “K” that, even in this case, there were rough handlings, and particularly strict terms of the contract prepared by ETYFA (the company that owns the facilities, a subsidiary of DEFA), resulting in the exclusion of large companies in the sector, such as consortiums Samsung, Posco, Mitsui, Osaka Gas and the consortium Damco, Enagas, GasLog LNG Services, SNAM Spa, Terna S.A. Both of these consortia were disqualified due to non-compliance with the specifications of the tender documents. According to the same information, the two consortia had submitted an offer, with proposed changes to the contract, since in the event of acceptance of the terms of the offer documents, they would be exposed to many uncertainties and disproportionate risks to their companies. In the end, the bid was awarded to the CMC consortium with the leading role being assumed by the CPP company, with the main shareholder being the Government of China. Along the way, Aktor S.A. was removed from the list of joint venture companies, citing the company's connection with “Elektor” Cyprus, which since 2018 was on a blacklist barring it from claiming new public contracts in Cyprus.
It is recalled that there was also a relevant intervention by the auditor general, who requested the exclusion of the consortium (and not only Aktor) from the tender, since the evaluation of the CMC consortium was also based on Aktor's experience in the construction of the pier. Information from “K” states that the most important reason for the delay in the construction of the pier in Vassiliko is also based on the delay in finding a replacement for Aktor by the joint venture contractor of the project. At the same time, ETYFA seems to blame the delay on the contractor. It is noted that in the last 13 years several tenders have been announced by DEFA for the construction of the regasification and storage unit of the FA.
All attempts seem to have failed either due to incorrect specifications/designs, or due to a change in strategy, with resulting in tenders being canceled before tenders are awarded. In the event of a new cancellation, it is considered that the opportunity to draw European funding of €101 million would be lost, since this was the last time that European funding would be given for projects related to PV as well as the opportunity to lift the energy isolation of Cyprus and of reducing dependence on oil.