Back to the complete issue
Sunday, 1 March 2020

Spanish Naturgy will be pulling out of the Damietta LNG plant

Spain’s Naturgy is pulling out of its Egypt operations, allowing liquefaction operations at Damietta LNG plant to begin again: Italy’s Eni and Spain’s Naturgy have reached an agreement with the Egyptian government that will see Naturgy exit Union Fenosa Gas (UFG), its joint venture with Eni, according to statements from Naturgy and Eni. The agreement will grant Naturgy USD 600 mn for UFG’s assets outside Egypt and its equity in the Damietta LNG plant transferred to the remaining stakeholders in the plant. It will now be 50% owned by Eni, 40% by Egyptian Natural Gas Holding Co. (EGAS) and 10% by the Egyptian General Petroleum Company (EGPC). Reuters has the story.

Arbitration disputes cleared: The agreement puts to bed a legal battle that has been waging between UFG and the Egyptian government for more than five years, putting the Damietta LNG liquefaction facility’s 5 mn tonne annual production on pause. Naturgy said the agreement will amicably end the dispute, despite the World Bank’s International Center for Settlement of Investment Disputes ordering the Egyptian government pay a USD 2 bn settlement to UFG. Last month, those demands were restated in testimony made to a DC court. The cleared dispute now puts the plant on track to begin production again by June 2020, Eni said.

Restarting operations at Damietta is particularly important now that we have surplus natural gas thanks to several new gas discoveries. Egypt officially became a net exporter of LNG last year, with imports of LNG falling to zero in 2019 and exports amounting to some USD 1.24 bn-worth of LNG, marking a nearly 150% y-o-y increase. A USD 15 bn Israeli gas import agreement that was signed in February 2018 and upgraded earlier this year, will see Israel ship more than 85 bcm of gas to Egypt over the next 15 years and the first shipment made its way into Egypt in January. Private sector companies will buy the gas shipments from Alaa Arafa’s Dolphinus before deciding whether to liquify and export it via the Damietta and Idku liquefaction plants, or sell it to the domestic market.

Some skepticism from analysts still lies over pricing: Analysts have cast doubt on Egypt’s ability to sell liquefied natural gas (LNG) for USD 5 per mn British thermal units under long-term agreements. Low domestic demand, falling demand in its only pipeline export market Jordan, and the start of gas imports from Israel earlier this month are all contributing to oversupply — all the while Egypt’s LNG selling point sits higher than global gas prices at the moment, estimated at a value of USD 4.41/mmBtu by JKM and USD 3.49/mmBtu by Platts Analytics.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.