The dispute traces back to contract awarded in 2019 to a Chinese-led consortium reportedly plagued by corruption.
Brussels has sent a stark warning to Nicosia, demanding the repayment of €67 million in EU funding linked to the unfinished liquefied natural gas (LNG) regasification terminal at Vasilikos. The debit note, delivered to the Energy Ministry, follows more than a year of audits and exchanges between Cypriot authorities and the European Commission’s financing arm.
Brussels has sent a stark warning to Nicosia, demanding the repayment of €67 million in EU funding linked to the unfinished liquefied natural gas (LNG) regasification terminal at Vasilikos. The development underscores mounting European frustration with the handling of a project once hailed as a cornerstone of Cyprus’s energy transition. It also raises doubts about whether the country can deliver on long-promised reforms while households continue to face some of the highest electricity prices in Europe.
A long trail of warnings
The dispute traces back to January 2024, when the Audit Office issued a damning report identifying irregularities in the tender launched in 2018 and the contract awarded in 2019 to a Chinese-led consortium. It flagged insufficient competition, serious procedural breaches and evidence that members of the consortium had prior convictions for bribery and bid-rigging in Cyprus and Greece – grounds that should have automatically disqualified them.
Despite this, the government pressed ahead, fearing that cancelling the tender would forfeit €101 million in EU funding under the Connecting Europe Facility and delay LNG imports by up to six years.
Those fears proved misplaced. In March 2024, the European Public Prosecutor’s Office (EPPO) opened a criminal investigation into suspected offences by ETYFA, the state-owned Natural Gas Infrastructure Company, and its contractors. By July that year, ETYFA terminated its contract with the Chinese consortium, and CINEA launched its own probe into how EU funds were being used.
Over the following year, Cyprus submitted lengthy explanatory notes, but auditors remained unconvinced. On 22 September, CINEA formally demanded the return of the €67 million disbursed so far.
Government insists project is salvageable
On 23 September Energy Minister Giorgos Papanastasiou told the parliamentary energy committee that the LNG project is “implementable, must be completed and will be completed.” He said the floating storage and regasification unit (FSRU) Prometheus could be ready as early as October, pending final checks.
Yet he also admitted that tenders to finish onshore works remain frozen on the advice of ETYFA’s consultant, who warned of operational risks. A gap analysis will be conducted over the next two months to assess divergences between design, construction and procured materials. Depending on the findings, the government may need to launch a Front-End Engineering Design (FEED) phase before resuming tenders.
Criminal probe adds pressure
The European Public Prosecutor’s Office intensified scrutiny in late August 2025, expanding its investigation into alleged fraud, misappropriation of funds and corruption tied to the Vasilikos project. According to documents reviewed by Cypriot media, the probe covers irregular approvals of invoices, obstruction of EPPO searches, and suspicions of bribery. Investigators have sought access to bank accounts of key players, while subcontractors have disowned responsibility for faulty materials, including uncertified high-pressure valves.
Former officials have warned that without safety certifications, the terminal may require a partial rebuild or even face abandonment. Christos Christodoulides, former head of the Transmission System Operator, has urged consideration of an alternative: piping natural gas from the Aphrodite offshore field to Cyprus via a short pipeline.
The LNG terminal was supposed to reduce reliance on heavy fuel oil, cut emissions, and lower electricity bills. Instead, it has become a symbol of mismanagement: construction halted, costs mounting, and EU funds at risk of clawback.
The broader context complicates matters. In parallel, Cyprus has endorsed the €2.4 billion Great Sea Interconnector to link its grid with Greece, Crete and eventually Israel. Yet this project, too, has triggered a split within the government between the finance and energy ministries over fiscal risks. At the same time, Cyprus is pursuing gas cooperation with Egypt, seeking to monetise reserves in its exclusive economic zone. But without clarity on its domestic infrastructure, its credibility as a reliable energy partner is eroding.
For now, Cypriot consumers remain the biggest losers – still paying Europe’s second-highest electricity costs in purchasing power terms, with no LNG in sight. The debit note from Brussels adds a financial penalty to the political fallout, raising the prospect that more funds could be withheld if reforms falter.