Potential procurement violations prompt probe into Cyprus’ LNG terminal

The European Public Prosecutor’s Office (EPPO) in Nicosia, Cyprus has launched an investigation into the country’s liquefied natural gas (LNG) import terminal project due to suspected procurement fraud, misappropriation of European Union (EU) funds, and corruption.

According to the EPPO, an investigation was opened after the Audit Office of the Republic of Cyprus published a report in January indicating possible violations during the procurement procedure and the subsequent execution of the public contract for the LNG project. 

Paired with reports by the European Court of Auditors and the European Climate, Infrastructure and Environment Executive Agency (CINEA), this provided EPPO with the basis for opening an investigation to examine the contracts awarded by the public authorities. The prosecutor’s office decided not to disclose any further information at this point.

On July 27, the Cypriot Ministry of Energy, Trade, and Industry shared that it had received a letter from the European Commission listing possible irregularities during the tender’s evaluation period. These issues concern the evaluation criteria of the consortium comprising China Petroleum Pipeline Engineering, Metron Energy Applications, Hudong-Zhonghua Shipbuilding, and Wilhelmsen Ship Management.

According to the Ministry, two substantive violations were identified in the letter, one related to the criteria for awarding the tender to the consortium in December 2019, and the other to the signing of the bilateral agreement after an additional €25 million was approved in June 2022.

As a result, the European Commission has requested €68,608,438.46 to be refunded, which is the amount of European funding paid to date to the Natural Gas Infrastructure Company (ETYFA), as the party to the agreement. 

As stated, the Cypriot Government remains committed to protecting the interests of the country while completing the energy project deemed important for Cyprus, which is why it intends to assist in the ongoing investigation and fully cooperate with the European authorities, while the Ministry plans to reply to the European Commission within 30 days. Furthermore, a separate investigation into the matter is set to be launched, as instructed by the country’s president.

The project for the LNG terminal at Vassiliko Port in Cyprus project aims to create an entry point for natural gas to Cyprus, providing a connection to the European gas market. Valued at approximately €542 million, it included €101 million from the Connecting Europe Facility (CEF) program as a project of common interest (PCI). The construction, originally scheduled years ago, has not yet been completed. 

In November 2023, the China Petroleum Pipeline-led consortium in charge of converting the Prometheus from ETYFA’s LNG carrier to a floating storage and regasification unit (FSRU) shared that the FSRU completed sea trials. At the time, the terminal was expected to be opened in July 2024.

Two months later, Shanghai COSCO Shipping Heavy Industry, a subsidiary of COSCO Shipping Heavy Industry, held a delivery ceremony for the FSRU.