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Monday, 6 May 2019

Thailand’s PTT Energy Resources files USD 1 bn lawsuit against gov’t over EMG

EXCLUSIVE- Thailand’s PTT Energy Resources has filed a USD 1 bn lawsuit against Egypt over EMG: Thai state-owned energy company PTT Energy Resources is seeking USD 1 bn in damages in a suit filed in the Administrative Court against the Egyptian government. PTT alleges that Egypt failed to meet gas deliveries to Egyptian Mediterranean Gas (EMG) after 2011, according to documents seen yesterday by Enterprise. The case by PTT Energy Resources, which held a 25% stake in EMG, is the latest in a series of legal challenges brought since 2011 by disgruntled EMG shareholders against the government of Egypt, EGAS, and EGPC. The documents suggest that PTT is trying to get in on the settlements reached between other shareholders and the government — the settlements were crucial in securing the agreements that paved the way for Egypt to contract for the import of USD 15 bn-worth of gas from Israel. That agreement, closed in 2018, is key to Egypt’s drive to become the premier regional energy hub.

The case: PTT Energy Resources is alleging that the government broke an agreement to deliver 7 bcf of natural gas per annum to EMG after 2011, causing EMG to fail to meet its contractual obligations to its customers. The suit also alleges that the government failed to maintain and protect the EMG pipeline and claims the government at the time unilaterally changed the price of gas delivered while also revoking EMG’s freezone status.

Same story, new player: The claims here appear to echo those of other EMG shareholders, which led in 2012 to a USD 1.76 bn international arbitration ruling against EGAS, EGPC, and EMG. The government of former Prime Minister Sherif Ismail had made settling the case a precondition of any gas export agreement with Israel. To secure the USD 15 bn export pact (signed in February 2018) with Alaa Arafa’s Dolphinus Holdings, Israel’s Noble Energy and Delek, along with their Egyptian partner East Gas, agreed to acquire a 39% stake in EMG. Sources had told Bloomberg last year that the Egyptian government had reached an agreement to reduce the USD 1.76 bn international arbitration ruling against EGAS, EGPC, and EMG to around USD 470 mn. Bloomberg said at the time the sum would be amortized over a period of around 15 years. The documents seen by Enterprise yesterday do not make clear where PTT was during those earlier settlement negotiations.

The suit is unlikely to put a dent in Egypt’s dream of becoming the eastern Mediterranean’s premier energy hub. Executives from Delek are reportedly interested in selling even more natural gas to Egypt beyond the USD 15 bn agreement, according to reports by Bloomberg in March. The question is whether Israel’s pipeline network has the capacity to deliver the volumes already contracted. Egypt is expected to begin receiving its first shipments of Israeli gas in mid-2019.

Advisers: Shahid Law Firm is serving as legal counsel to PTT Energy Resources.

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