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13 July, 2024
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Crisis looms over vital energy project in Cyprus

Chinese consortium's shocking moves threaten energy security and spark legal showdown


In a dramatic turn of events, the consortium behind Cyprus's largest energy project, the Vasilikos F.A. terminal, is sending ominous signals of a possible rupture with the Republic of Cyprus.

According to a report by Apostolos Tomaras, the China Petroleum Pipeline Engineering Co. Ltd, METRON S.A., Hudong-Zhonghua Shipbuilding Co. Ltd, and Wilhelmsen Ship Management Limited, involved in the project, have not only cut off communication but are hinting at a complete breakdown. The consequences could be dire for the energy security of Cyprus, with potential legal battles looming and the project's completion hanging in the balance.

The consortium's abrupt disappearance raises concerns in Nicosia, leading to fears of a head-on collision that may impact the Republic's energy security and result in prolonged legal disputes. A potential rupture with the Chinese contractors carries significant financial risks, potentially causing the loss or difficult recovery of already paid assets. As the March 31 deadline approaches, the situation is becoming increasingly critical, with the possibility of the project being officially halted, marking a new low in the Republic's history.

Amid these uncertainties, discussions at the political level are reportedly underway to investigate the project's tendering process, evolution, and the circumstances leading to the sole bidder scenario, which some argue amounts to a direct award. If the worst-case scenario unfolds, and the terminal project faces a crisis, criminal investigations may be initiated to determine responsibilities, both political and otherwise.

The government faces a delicate balancing act, considering the possibility of criminal investigations while navigating arbitration proceedings initiated by the consortium, seeking an additional €200 million. With tensions escalating, the government has granted an extension until the end of March, hoping for a resolution. If the current deadlock persists, bold decisions, including the termination of the contract, may become inevitable.

Efforts behind the scenes to break the impasse include overtures to Beijing, with officials in contact with the Chinese ambassador in Nicosia. The Republic of Cyprus has already paid €245 million to the project consortium out of the total cost of €289 million, with the fate of the stranded FSRU ship in Singapore adding to the urgency of the situation.

The Vasilikos F.A. terminal project has a complex history dating back almost 20 years, with recent developments bringing it to the brink of a potential collapse. As political and legal maneuvering intensifies, the Republic of Cyprus finds itself at a crossroads, grappling with the fallout from a project that promised energy security but now risks becoming one of the most significant scandals in its history.

[Read the full story by Apostolos Tomaras in Kathimerini's Sunday edition]

Cyprus  |  energy  |  China

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