Cyprus is under intensifying scrutiny from both Brussels and domestic oversight institutions over the troubled Vasiliko LNG terminal. The European Commission’s agency CINEA has given the Republic of Cyprus until Thursday to return €67 million in EU funding, citing procurement irregularities in the project’s tendering process.

Energy Minister George Papanastasiou confirmed that the government will comply with the refund request but stressed that Cyprus intends to challenge the decision legally, arguing that “the €67 million is the amount the EU claims is unjustified due to the award procedure.”

Despite the financial setback, Papanastasiou insisted that the Vasiliko project will proceed as planned, noting that one of the two main components required to certify the floating storage and regasification unit (FSRU) has already been installed, with the second expected within the month.

Attorney General George Savvides, presenting the Legal Service’s 2026 budget before Parliament’s Finance Committee, confirmed that the European Public Prosecutor’s Office (EPPO) is currently handling the investigation into potential misuse of EU funds related to the terminal.

Once the EPPO took over, he said, the Cyprus Legal Service no longer had the authority to intervene, though it remains ready to step in if offences arise beyond the EPPO’s remit. 

Savvides also disclosed that the Republic’s reply to Brussels has been finalized, with authorities arguing that the Commission’s demand may violate the principle of proportionality. “Perhaps the full amount should not be reclaimed — or not at all,” he said, adding that final decisions are expected soon.

He further clarified that the Legal Service represents only the Ministry of Energy, while semi-state entities DEFA and ETYFA, which manage the LNG project, have their own lawyers and independent control over their contracts.

The Audit Office of Cyprus also entered the picture, warning that the Vasiliko project has significantly deviated from its original timetable and budget.

Auditor General Andreas Papaconstantinou revealed that the Audit Office has sent a formal letter to the Energy Minister requesting updated project timelines to enable proper monitoring. “We have completely diverged from normal schedules and costs,” he said, calling the situation deeply worrying.

Papaconstantinou criticized the government’s handling, pointing out a contradiction: “For even the simplest procurements — like pens — we demand strict compliance, yet with natural gas, no one seems to know how costs will evolve.” He added that the Audit Office has made “certain considerations which are not yet ready to be announced.”

Meanwhile, Chief Internal Auditor Anna Zavou-Christoforou told Parliament that her department had no involvement in the project’s decision-making, citing severe understaffing, ineffective risk management, and weak internal control systems within ministries.

Minister Papanastasiou reiterated that “the Vasiliko project will go ahead,” stressing that Cyprus remains committed to completing its first LNG import and regasification facility, a strategic project for the island’s energy independence.

He also confirmed ongoing efforts to secure EU involvement in the Great Sea Interconnector, aiming to overcome geopolitical challenges posed by Turkey. The issue will be raised during his November 12 meeting with the Greek Energy Minister and the European Commissioner for Energy.