Egyptian Oil Minister Tarek el-Molla expects gas supplies to the idle Damietta liquefied natural gas (LNG) plant along the Mediterranean coast to resume before the end of the year, pending the resolution of a bruising legal dispute with majority shareholder Spain’s Union Fenosa (UFG).

“We expect to resume operating this plant by the year-end. It’s in an arbitration case as you know and we are in discussions to settle this arbitration case,” the minister said.

Molla said there is now enough gas in the domestic grid to supply the plant, which had to cease operations following the 2011 revolution that led to gas shortages amid rising demand and lack of foreign investment to sustain production.

Egypt’s gas production now stands at 7 billion cubic feet per day, giving it excess capacity to export LNG from Damietta.

Domestic output is expected to jump to 7.5 Bcfd next year. Combined with expected gas imports from neighbouring Israel, rising domestic supplies will allow increased LNG exports.

Egypt had hoped to export about 550 million cubic feet of gas per day from Damietta in April under a deal with state-owned Egyptian Natural Gas Holding Company (Egas).

However Union Fenosa Gas, a joint venture between Spain’s Naturgy and Italy’s Eni, has maintained that Egypt has yet to offer it enough guarantees over a $2 billion court award.

The Spanish company, which has an 80% stake in the Damietta plant, said in 2013 that Egypt was restricting supplies to the plant as it diverted export supplies to its domestic market.

A World Bank arbitration body later ordered Egypt to pay UFG $2 billion for lost revenues. The remaining 20% of Damietta is jointly owned by state-owned Egas and the Egyptian General Petroleum Corporation (EGPC). UFG signed its first gas export contract with Egypt in 2000 for the supply of up to 155 billion cubic feet per year over 25 years.

“UFG reiterates its commitment to reach an amicable agreement with the Egyptian government for the damages caused, the restoration of gas supply to the Damietta LNG plant and the guarantees of future compliance with the contracts,’’ the company said earlier this year.

“Progress has been made but the guarantees offered are not sufficient to reach the comprehensive agreement required to bring the dispute to its end,” UFG said.

Meanwhile, Molla said he also expects first gas supplies from Israeli offshore fields to flow before the end of 2019, adding both the Egyptian and Israeli government had given their blessings to a supply deal involving private companies on both sides of the border.

Egypt eventually is to import 7 billion cubic metres a year under a $15 billion agreement between Israel’s Delek Drilling, US-based partner Noble Energy and Egypt’s Dolphinus Holdings.

Israeli and Egyptian officials have described the export agreement, signed last year, as the most significant deal to emerge since the neighbours made peace in 1979.

Bilateral ties have strengthened under Egyptian President Abdel-Fattah el-Sisi, who has set himself the task of turning Egypt into a regional gas hub by making use of its well-established energy infrastructure.

Israeli supplies would come from the offshore Tamar and Leviathan fields. Testing of a gas pipeline from Israel to Egypt has been completed.

Egypt has spare liquefaction capacity through its LNG plants at the Mediterranean ports of Idku and Damietta. The Idku plant, operated by supermajor Shell, has been operating in the past year albeit not at full capacity.

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