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Thursday, 6 September 2018

Egypt taking steps to resolve UGS dispute over Damietta supply interruptions

Egypt is taking steps to settle the USD 2 bn it has been ordered to pay Spanish-Italian JV Union Fenosa Gas (UGS) over gas supply interruptions at the Damietta liquefaction plant, the Oil Ministry said in a statement picked up by Reuters. (The Oil Ministry’s website was down at dispatch time.) Details on what the steps entail were not disclosed, but the statement is the first official line on the issue since the World Bank’s International Centre for Settlement of Investment Disputes issued the ruling earlier this week. Sources said the payments would be made in the form of new gas shipments. 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%. Sources said on Tuesday that the government was willing to resolve the dispute, as the move could expedite the resumption of LNG exports and help put Egypt on the map as a regional energy export hub.

Speaking of which, the Oil Ministry is reportedly planning to end its five-year contract for the Höegh Gallant FSRU in mid-September after a number of wells, including from Zohr, are connected to the grid, an EGAS source said. The decision comes as Egypt’s gas production is expected to reach 6.75 mcf/d by then, bringing us closer to a cessation of gas import tenders. The source noted that Egypt does plan to hold on to one FSRU should the need arise to import gas. It could also be converted to a floating liquefaction and storage unit (FLSU).

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