Eni Ousts Naturgy from Egyptian LNG
Italian producer Eni has signed a series of agreements with Cairo, Egyptian state energy entities Egas and EGPC and Spanish utility Naturgy. The documents end a lengthy $2bn legal dispute and strengthen Eni's position in the east Mediterranean in an "important reorganisation," it said February 27.
The "amicable" agreements dissolve Union Fenosa Gas (UFG), the 50-50 joint venture it owns with Naturgy, and also pave the way to restarting the mothballed 7.6bn m³/yr Damietta LNG export plant this summer, subject to conditions precedent. The agreement values UFG at $1.5bn of which $1.2bn relate to its Egyptian assets including the outstanding legal proceedings, and the remaining $0.3bn for the assets outside of Egypt.
Damietta was turned off in 2012 as the gas was needed at home but only a year ago, UFG said it was still waiting for compensation from Cairo for the damages caused, for the restoration of gas supply to the Damietta LNG plant and for the guarantees of the government's future compliance with the contracts.
Damietta is owned by Segas, which is 40% owned by Eni through UFG. Its assets will be split between Eni which will own 50% and the state of Egypt: Egas having 40% and EGPC 10%. Eni will pay Naturgas $600mn for assets in Egypt and outside Spain – Eni retains the gas trading business there, "strengthening its presence in the European gas market" – and acquire the Damietta liquefaction and sales rights, thus increasing the volumes of LNG in its portfolio by 3.78bn m³/yr. The LNG will be sold free on board and have no restrictions on resale, Eni said.
With the Idku plant already operational, Egypt has now regained full capacity to meet domestic gas demand and can allocate surplus production for export through its LNG plants.
On its part, Naturgy said that freedom from Egyptian LNG contractual obligations was "an important step to gradually reduce the company’s exposure to gas procurement contracts, and solves a complex situation which had lingered since 2012, consuming significant time and resources."
CEO Francisco Reynes said he valued “very positively this agreement, since it represents a clear advance in the main objectives of our strategic plan 2018-2022. We are simplifying Naturgy's geographical presence to focus on those areas that maximise the creation of long-term value of our main businesses with the company's stakeholders in mind.”
LNG was a weak spot in Naturgy's results last year, as it was buying at a higher price than it could sell at. It did not comment to NGW on its US commitments to buy 5mn mt/yr. Reportedly it has said it will not exercise its full offtake rights but even so it must pay Cheniere for the capacity on two long-term contracts.