The Audit Office of the Republic of Cyprus has announced its intention to inform the European Public Prosecutor's Office (EPPO) regarding the liquefied natural gas (LNG) project in Cyprus, which includes grants from the European Union.

In its audit of the LNG terminal in Vasilikos, the Audit Office highlighted serious breaches of public contracts, repeated delays, and a "fragile image" at DEFA and its subsidiary ETYFA regarding the project and cost increases. The audit points to findings that may involve disciplinary or criminal liabilities.

"Our Office's audit uncovered other serious findings, potentially involving disciplinary/criminal liabilities, including irregularities by the ETYFA Board in approving work reports and corresponding invoices/payments, as well as irregularities by ETYFA's Director-General in subcontractor approval processes," the Audit Office stated.

The report indicates that all findings, unfortunately, confirm the Office's initial concerns and reservations about a project of such magnitude and national importance, with direct and indirect expenses exceeding €542 million plus VAT. Specifically, this amount includes the EPCOMA contract value of around €500 million, an approved €25 million increase due to steel price rises, approximately €11.6 million for the renewed contract of the Supervising Engineer, and about €6.1 million for DEFA's legal, commercial, and financial consulting contracts for the project.

"The Office's intention is to crystallize the situation regarding both the delivery timeline of the ship and the completion of the works at Vasilikos, then to inform the EPPO, as the project received funding from EU entities," the Audit Office remarks.

Regarding timelines and repeated delays, the Office notes that the project contractor submitted a revised schedule in January 2023, further postponing completion from 31.7.2023 to 20.10.2023, a timeline "utterly detached from reality" as pointed out by ETYFA itself, due to the lack of expected progress and work pace.

When indicated to the contractor, they submitted a revised schedule with a completion date of 23.7.2024. "Thus, a project initially meant to be completed within 24 months is now theoretically set to be delivered 22 months past the original deadline, effectively doubling the time frame, though we express serious doubts about its practical realization," the Office adds.

Regarding the ETYFA Prometheas ship, acting as a floating terminal, the Office notes DEFA/ETYFA and the Ministry of Energy repeatedly presented the project's implementation as urgent, leading to decisions contrary to the public interest.

"Resulting from these repeated missteps, it remains uncertain when the ship will arrive in Cyprus and whether it will face operational and safety issues, as well as if the entire project will be delivered even by the revised deadline," the Service elaborates.

The report also recalls that a company in the successful consortium was fined approximately €38.5 million by the Hellenic Competition Commission for illegal market allocation and tender rigging in public projects. A related company was barred from public contract procedures by the competent Cypriot Commission, with senior executives admitting guilt and being convicted for bribery, forgery, false accounting, and conspiracy.

"These decisions should have barred the consortium member from public contract processes, a fact ETYFA overlooked. However, when pointed out by our Office, ETYFA decided it could proceed with awarding the contract to the remaining consortium members, despite legislation indicating that the member's exclusion should have led to disqualifying the entire consortium," the report concludes.