Italy’s Eni and Spain’s Naturgy have signed agreements with the government of Egypt, resolving disputes over the Damietta gas liquefaction plant that pave the way for operations to restart by June 2020.
The agreement will see Naturgy’s exit from Egypt with the dissolution of Union Fenosa Gas (UFG)- its joint venture with Eni that owned 80 per cent of Damietta. The rest was split evenly between the Egyptian Natural Gas Holding Company (EGAS) and Egyptian General Petroleum Corporation (EGPC).
Under the new agreement, the plant will now be 50 per cent owned by Eni, 40 per cent by EGAS and 10 per cent by EGPC.
The plant, which has a capacity of 7.56 billion cubic meters per year, has been idle since November 2012, when an uprising impaired supplies in Egypt.
With new natural gas discoveries, especially 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.
Meanwhile, the JV’s assets will be divided between the two companies with Eni will take over the commercial activities of natural gas in Spain.
Eni will also take over the contract for the purchase of natural gas for the plant and will receive corresponding liquefaction rights, thus increasing the volumes of LNG in its portfolio by 3.78 billion cubic meters per year, which will be available on an FOB basis, with no destination restrictions.
While Eni strengthens its portfolio in Egypt and the Mediterranean, Naturgy said the agreement is an important step to gradually reduce the company's exposure to gas supply contracts.
Naturgy’s President, Francisco Reynés said the agreement is “very positive” and it will simplify the company’s geographic and business presence to focus on maximising the creation of long-term value for shareholders.
The agreement values UFG at US$1.5 billion, of which $1.2 billion correspond to its assets in Egypt and the remaining $300 million are assets outside the Arab country.
Naturgy will receive a cash payment of $600 million, as well as the majority of assets outside of Egypt, excluding UFG's commercial activities in Spain, the company said.