Twists and turns of LNG debacle and who will be blamed

Speculation spun into overdrive on Monday over which officials in Cyprus might land in hot water over the liquefied natural gas project fiasco amid an ongoing probe into the matter by the European public prosecutor’s office.

Depending on the news outlet, ex-president Nicos Anastasiades as well as former energy ministers Giorgos Lakkotrypis and Natasa Pilides could face some tough questions, while former finance minister Harris Georgiades also got a mention.

News outlets quoted excerpts from the auditor-general’s special report, released in January. In particular, they drew attention to a meeting held at the presidential palace in November 2019, during the Anastasiades administration.

The contract with the Chinese-led consortium was signed on December 13, 2019.

A second meeting at the presidential palace, again to discuss the troubled LNG project, was held in February 2022. Here, the matter of the extra €25 million demanded by the contractor came up. A decision was made to grant the contractor’s request. At the time, Pilides served as energy minister, having succeeded Lakkotrypis in July of 2020.

It’s understood that the auditor-general’s findings are at least partly responsible for triggering the investigation by the European public prosecutor’s office (EPPO).

Going by the Audit Office report, the session at the presidential palace in November 2019 is particularly revealing. The passage reads:

“At the meeting under the then president of the Republic on November 22, 2019, the then energy minister [Lakkotrypis] admitted that, given the possibility of the EU making findings about violations of laws governing public procurement in relation to the process evaluating the bids, the financing of up to €101 million from the EU (European Climate, Infrastructure and Environment Executive Agency (CINEA) should not be taken for granted.”

In other words, even back then officials knew that serious questions hung over the evaluation of the bids for the contract. They also knew that, down the line, there was a risk of the EU pulling the €101 million in pledged grants.

But the contract still went through less than a month later.

Later, the report states: “The then finance minister [Harris Georgiades] expressed his ministry’s opinion that the project must absolutely go ahead with the consortium as the contractor, even if this meant the loss of the €101 million grant from the EU.”

Elsewhere the dossier notes: “We [the Audit Office] reported that the project presented major delays as, whereas the Epcoma [Engineering, Procurement, Construction, Management] contract was signed with the contractor on December 13, 2019, construction works only began on September 28, 2020.

“Further, whereas construction works should have been completed by September 27, 2022, the contractor submitted a revised timetable with a date of completion of July 31, 2023.”

The auditor-general’s report was extensively discussed in parliament in mid-February. There, former energy minister Lakkotrypis insisted that the awarding of the contract was legal and “without any legal impediments”.

Lakkotrypis went on to lament that no minutes were kept during the November 2019 meeting at the presidential palace.

He also said two opposing views were heard at that meeting – one from the auditor-general, the other from the natural gas infrastructure company which held that the competition was lawful and the contract should be awarded.

As Lakkotrypis put it, “the balance tipped in favour of awarding the contract.”

The ex-energy minister mentioned also that this was the fourth attempt to award an LNG contract, and that the sentiment at the time was that scrapping the tender might jeopardise financing for the mooted project.

Questions are also being asked about the cost of the project. It’s been suggested that an extortionate price was charged for the purchase of an LNG carrier and its conversion into an Fsru (floating, storage and regasification unit).