Damietta LNG plant could reopen early next year after Eni, Naturgy seal agreement: Italian energy giant Eni has reached an agreement with the Egyptian government and its Union Fenosa Gas (UFG) partner Naturgy to finally re-open the Damietta LNG plant by the end of 1Q2021 after an eight-year hiatus, Eni said in a statement yesterday. The pact will see Naturgy leave UFG and its stake in the plant redistributed among Eni and its Egyptian state-owned partners the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Company (EGPC).

Who gets what? Under the new agreement, Eni will own 50% of the plant, and state-owned EGAS will hold 40% and EGPC the remaining 10%. Eni will also take over the contract for the purchase of natural gas for the plant and will receive corresponding liquefaction rights, the statement said.

You’re not wrong to think this all sounds familiar: An earlier attempt to reach an agreement fell through in April, despite a preliminary agreement having been reached a month earlier. Naturgy said at the time that a series of unspecified conditions were not met and, crucially, the reopening of the plant was stalled because of covid-19 restrictions on business operations, a source familiar with the matter told Reuters.

Why does the Damietta LNG plant matter? The Damietta plant is a key part of Egypt’s strategy to increase its natural gas exports and emerge as the Eastern Mediterranean’s premier energy hub. Closed since 2012, the plant’s reopening would boost Egypt’s ability to export natural gas to European markets.

Naturgy will receive cash payments adding up to around USD 600 mn, as well as most of UFG’s assets outside of Egypt, excluding its commercial activities in Spain, Naturgy said in a statement on Tuesday. Once the plant restarts operations in 1Q2021, Naturgy will depart Egypt and end its JV with Eni.

What to watch for next: Quiet confirmation that the Spanish firm has dropped its USD 2 bn international arbitration case against Egypt dating back to the 2012 shut-off of gas to the plant amid the challenges of the early post-revolution period.

Advisors: Ernst & Young and Matouk Bassiouny & Hennawy represented UFG, Riad & Riad and CMS represented Eni, and Zaki Hashem and Shearman & Sterling represented EGAS.