In an unexpected setback for Cyprus’ energy ambitions, a Chinese-led consortium has terminated its contract to construct the island nation’s inaugural natural gas import terminal. The consortium, CPP-Metron, attributed its withdrawal to the Cypriot government’s alleged failure to fulfill its financial obligations for work completed in 2023.
The CPP-Metron Consortium, a coalition of China Petroleum Pipeline Engineering, Metron Energy Applications, Hudong-Zhongua Shipbuilding, and Wilhelmsen Ship Management, released a statement highlighting the Cypriot government’s breach of payment commitments. These commitments, the consortium claimed, were reaffirmed during a March meeting chaired by Cypriot President Nikos Christodoulides. Despite these assurances, the government allegedly failed to disburse the necessary funds.
“No contractor can be expected to work indefinitely on credit,” the consortium stated emphatically. “That was not the deal CMC signed up to.”
As of now, the Cypriot government has not issued a response to the consortium’s allegations or the project’s abrupt cessation.
Initiated in July 2020, the €289 million ($319 million) project, located on Cyprus’ southern coast, was envisioned as a crucial step in the island’s transition from crude oil dependency to cleaner, more economical natural gas. The European Union had supported this ambitious venture with a substantial grant of €101 million ($110 million).
Promoted as Cyprus’ most expensive energy initiative, the terminal was poised to significantly lower energy generation costs by 15%-25% and reduce the nation’s carbon footprint by 30%. Furthermore, Cypriot officials had anticipated that the terminal would facilitate the future utilization of natural gas from newly discovered offshore fields. Major industry players like ExxonMobil, Chevron, Italy’s Eni, and France’s Total hold licenses to explore and drill in these offshore areas.
The project included a repurposed tanker ship built in Singapore, designed to convert liquefied natural gas back into its gaseous state for use in Cyprus’ primary power plant. Additionally, the infrastructure encompassed a jetty and pipelines to transport the gas to the Vasilikos power plant nearby.
However, the project faced multiple delays, which CPP-Metron attributed to inefficiencies and obstructions from Cyprus’ Natural Gas Infrastructure Company (ETYFA). These delays ultimately led to the consortium’s decision to halt its involvement.
In a detailed accusation, CPP-Metron accused ETYFA of “weaponizing payments” to coerce the consortium into undertaking additional tasks beyond the original contract’s scope. These additional tasks included the development of a natural gas export facility, which the consortium described as “unnecessary and premature” and a reflection of “future ambitions and speculation.”
The consortium further claimed that ETYFA created hurdles to prevent the delivery and operation of the tanker ship, christened ETYFA Prometheas. This ship was integral to the project’s economic viability, either as a liquefied natural gas carrier generating revenue for Cyprus or through deployment in other projects.
This development casts a shadow over Cyprus’ energy strategy, raising questions about the island’s ability to manage large-scale infrastructure projects and honor financial commitments. The lack of an official response from the Cypriot government only deepens the uncertainty surrounding the future of this critical project.
The termination of the contract underscores the challenges inherent in international energy projects, particularly those involving complex logistics, substantial financial investments, and multiple stakeholders. It also highlights the importance of robust project management and transparent financial practices to ensure the successful completion of such ventures.
As the situation unfolds, stakeholders and observers will be keenly watching for the Cypriot government’s response and subsequent steps. The outcome of this dispute could have broader implications for Cyprus’ energy policy and its relationships with international investors and contractors. For now, the cessation of work on the natural gas import terminal marks a significant setback in Cyprus’ pursuit of energy transformation and sustainability.
