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Tuesday, 4 September 2018

Arbitrator orders Egypt to pay USD 2 bn to Union Fenosa Gas over natural gas supply cut to Damietta plant

Arbitrator orders Egypt to pay USD 2 bn in settlements to UGS over cut of natural gas supply to Damietta plant: The World Bank’s International Centre for Settlement of Investment Disputes ordered Egypt to pay USD 2 bn in settlements yesterday to Spanish-Italian JV Union Fenosa Gas (UGS) over a natural gas dispute, the Financial Times reports. The amount is likely to be settled “in the form of renewed gas supplies to [the liquefaction plant in] Damietta, rather than in cash,” sources close to the matter said. UGS — a joint venture between Spain’s Naturgy and Italy’s Eni — had filed the case against Egypt some years ago, complaining that the government had cut off flows to its Damietta liquefaction plant, of which it owns 80%. UGS had filed previous complaints about the interruptions with the International Court of Arbitration and International Chamber of Commerce, demanding USD 270 mn plus interest for the state’s failure to comply with supply contracts. The EGPC and EGAS together own 20% of the Damietta LNG plant.

The move could “accelerate the resumption of the country’s LNG exports,” the salmon-colored paper notes. Egypt is trying to clear obstacles preventing it from establishing itself as a regional hub for energy exports in the East Mediterranean, which includes the resolution of pending legal disputes. The government is in the process of finalizing an agreement to connect Cyprus’ Aphrodite with Egyptian liquefaction facilities, where gas would be processed and re-exported back to Europe. Expectations are for gas to be flowing from Cyprus to Egypt by 2022. Egypt’s Dolphinus Holdings had also signed in February a USD 15 bn agreement to import gas from Israel’s Tamara and Leviathan fields as early as next year.

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