EU launches corruption investigation into Vasiliko LNG terminal

The European Public Prosecutor’s Office (EPPO) on Thursday said it opened an investigation into Cyprus’ contentious Vasiliko liquefied natural gas (LNG) import terminal on suspicion of procurement fraud, misappropriation of EU funds and corruption.

In a statement, EPPO said the investigation was prompted by an Audit Office report on the matter in January “regarding possible violations during the procurement procedure and the subsequent execution of the public contract for the LNG project.”

Deputy government spokesman Yiannis Antoniou said the state had been informed of EPPO’s investigation since March.

“The instructions from the President of the Republic are to have a full investigation into this matter. No one is above the law and there will be no shortcut on the principles of transparency and accountability.”

Antoniou added that since March, authorities have been fully cooperating with EPPO so as to ensure an in-depth investigation is carried out and responsibilities are attributed if and where they apply.

EPPO specified it had received reports on the matter from the European Court of Auditors and the European Climate, Infrastructure and Environment Executive Agency (CINEA).

“After receiving this information and examining it in detail, EPPO has taken the decision to open an investigation, in order to inquire into the contracts awarded by the public authorities.”

It specified no further details would be made public at this stage. “Whenever we can say something else about this investigation, we will do so proactively.”

The project aims to create an entry point for natural gas to Cyprus, enabling the country to connect with the wider European gas market, and involves a cost of €542 million – of which approximately €101m was financed by the Connecting Europe Facility (CEF) programme. 

The construction, which should have been concluded in December 2019, has not yet been completed.  

In its 136-page report on the Vasiliko LNG, the Audit Office said the management of the whole project has been “tragic”.

It identified irregularities over invoices which were approved as well as approvals for subcontractors by Cyprus’ Natural Gas Infrastructure Company (Etyfa)

Spokesperson for the Audit Office Marios Petrides said amongst a slew of concerning issues that came up during their investigation, the tender for the €500m project was awarded to a company with a €499,999,997 offer – meaning €3 off the mark, raising questions.

Last week, Chinese-led construction firm CPP-Metron Consortium Ltd (CMC) announced it was terminating the agreement over the Vasiliko LNG terminal.

In a statement, the firm slammed Etyfa accusing it of bullying and for leaving CMC to work “without proper or timely payments” for years.

“CMC has found itself with no alternative but to terminate its contract with Etyfa for the LNG Receiving and Regasification Terminal project at Vasilikos and has done so today, July 18th.”

President Nikos Christodoulides earlier this week said CMC should never have been awarded the project.

Opposition party Akel vowed to keep pressing for details of how the contract was awarded to the Chinese-led consortium by the previous administration of Nicos Anastasiades.

Since the signing of the contract in December 2019, CMC had submitted four delivery timetables – September 2022, July 2023, October 2023 and July 2024.

Though the project was tendered for €500m, an additional €42m covered €25m to the contractors for increased costs of items such as steel, according to the Audit Office.

“The contractor, presenting as a sole argument that if this amount [€25 million] was not given, the contractor would abandon the project and chaos would ensue,” the report revealed.

“And this, with admission by the contractor himself of his own non-compliance with his contractual obligations. Our office strongly disagreed with the payment of the amount in question as the contract did not provide for the payment of compensation to the contractor due to an increase in the prices of materials, since this was a risk that he assumed himself.”

The Audit Office said it had pointed out that the state should not be blackmailed or appear to be acting under a threat.