Spain’s Naturgy is planning to revive a $2 billion claim against Egypt after a crucial deal to restart its Damietta LNG joint venture fell apart.

Partner Eni said in February it had signed agreements with the other Damietta stakeholders — state-owned Egyptian General Petroleum Corporation (EGPC), the Egyptian Natural Gas Holding Company (Egas) and Naturgy — to restart the long-dormant liquefied natural gas facilities by June 2020.

The liquefaction plant's owner is SEGAS, a company which is 40% owned by Eni through Union Fenosa Gas (50% Eni and 50% Naturgy). The plant has a capacity of 7.56 billion cubic meters per annum.

Italian major Eni, the biggest gas and oil producer in Egypt, said it is still trying to find a new deal that would please the parties and avoid the need for a court settlement.

Long idle

The plant at the Mediterranean port of Damietta has been idle since 2012 when gas shortages forced the Egyptian government to halt supplies, prompting Union Fenosa to take legal action.

Rising gas production in the past year has resulted in excess local supplies, paving the way for the resumption of LNG production from the facilities.

In the meantime, Naturgy said it would go back for $2 billion in compensation that Union Fenosa was awarded in the case by the World Bank’s International Centre for Settlement of Investment Disputes in 2018.

"The agreement, as customary, was subject to the completion of certain conditions and milestones that have not been met, and it has therefore fallen through," the Spanish energy company said.

"The agreements provide for the amicable resolution of the pending disputes of Union Fenosa Gas and SEGAS with Egas ... and the subsequent corporate restructuring of Union Fenosa Gas, whose assets will be divided between the shareholders Eni and Naturgy," Eni said in February.

"In particular, the participation of Union Fenosa Gas in the Damietta plant (80%) will be transferred 50% to Eni and 30% to Egas," it said at the time.

Blow for Egypt

Eni was to take over the contract to secure gas supplies for the plant.

Union Fenosa filed a lawsuit against Egypt in 2014 seeking compensation, and commercial negotiations with the Egyptian government regained momentum in 2018 after a World Bank arbitration panel ordered Egypt to pay $2 billion in compensation.

The failure is a blow to Egypt, which is unable to operate its LNG facilities at full capacity because of the legal dispute and low gas prices in world markets.

LNG

Key Egypt LNG deal crumbles as $2 billion claim set to be revived