Italian state energy giant Eni has resolved the protracted legal dispute between Union Fenosa Gas – its joint venture with Naturgy of Spain – and the Egyptian government regarding compensation relating to the recently restarted Damietta liquefied natural gas project in Egypt.

Union Fenosa's Damietta LNG was shut in some eight years ago after feedstock gas was diverted to domestic customers as the nation’s production slumped, with the company demanding compensation from Egypt for the loss of operations.

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Union Fenosa in 2018 was awarded US$2 billion by the World Bank's International Center for Settlement of Investment Disputes in 2018 but the outstanding issues were only resolved in a new dispute settlement agreement last December, reported S&P Global Platts.

Under the deal, which Eni on Wednesday revealed had closed, Damietta LNG operator SEGAS will have a new shareholding – Eni on 50%, state-owned Egyptian Natural Gas Holding Company with 40% and Egyptian General Petroleum Corporation having 10%.

SEGAS’ Damietta liquefaction project, with annual capacity of 7.56 billion cubic metres of gas, had been idle since November 2012 before restarting production in recent weeks.

The first LNG cargo was exported on 22 February, followed by a second cargo on 4 March, while a third, which is currrently being loaded, will be sold directly by Eni to its customers in Europe.

“The agreement comes at an important moment, when also thanks to the fast time to market of Eni's natural gas discoveries, especially the ones in the Zohr and Nooros fields, Egypt has regained its full capacity to meet domestic gas demand and can allocate surplus production for export through its LNG plants,” Eni said in February.

The Italian operator noted the purchase of Egyptian LNG consolidates its integrated development strategy by increasing the volumes and flexibility of its portfolio, in synergy with its upstream assets.

Through this agreement, we strengthen our presence in the East Mediterranean, a key region for the supply of natural gas, which is a fundamental resource for the energy transition, of which Egypt is the main producer in the area, said Eni.

As part of the agreement, Union Fenosa’s assets have been divided between Eni and Naturgy.

For Union Fenosa Gas' activities outside Egypt, Eni will take over the natural gas marketing activities in Spain, strengthening its presence in the European gas market.