The natural gas re-gasification terminal project in Vasilikos has faced cost overruns over the years.
Initially estimated at €289 million, the project’s cost rose to €314.5 million after the Anastasiades government agreed to an additional €25 million payment to the CMC consortium, citing increased raw material costs due to the COVID-19 pandemic. This decision was made despite strong opposition from the Audit Office.
To date, the Republic of Cyprus has paid approximately €239 million through DEFA-ETYFA, leaving a theoretical balance of €75.5 million. However, this figure is now in doubt due to ongoing disputes and arbitration proceedings.
The Chinese state-owned company CPP, the primary contractor, is currently holding the FSRU Prometheus in Shanghai and has a pending arbitration request in London for approximately €136 million. Additionally, CPP is contesting Cyprus’s right to withhold €70 million in guarantees.
Unofficial sources suggest that Cyprus may recover only half of the €70 million in guarantees, with the delivery of the FSRU Prometheus to ETYFA remaining uncertain pending arbitration outcomes.
Even if arbitration concludes favourably for Cyprus, the completion of the Vasilikos terminal may exceed the remaining €75.5 million budget. The project faces potential delays and increased costs, particularly if new contractors are sought instead of utilising existing subcontractors.
According to the project’s consulting engineer, Hill International, the FSRU Prometheus requires an additional €10 million in works to be operational. The pier construction, initially budgeted at €79.3 million with €35 million paid, may require around €50 million to complete within a year.
ETYFA’s decision to hire a new Project Manager to oversee contractor selection for the pier completion could lead to further delays and cost increases, as warned by Hill International.
The onshore infrastructure initially allocated €31.7 million with €12 million paid, and other works budgeted at €6.2 million with €5 million paid, also face potential cost escalations.
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