Eni Says Egypt-UFG Dispute "Ongoing"
Eni has said that a five-year-long arbitration dispute between its jointly-owned Union Fenosa Gas business and the Egyptian government is "ongoing" although it says negotiations to settle it are being held.
Union Fenosa Gas (UFG) is a 50-50 joint venture between Spain's Naturgy and Italy's Eni that, among other things, has an 80% interest in the idled 5mn mt/yr capacity Damietta liquefaction complex on Egypt's Nile Delta; the remaining 20% Damietta interest is held by Egyptian state firms Egas and EGPC.
At its 2Q results call July 27, Eni was asked when the Damietta complex might restart and when talks about future tolling of non-Egyptian (East Med) gas through the facility might begin.
The arbitration dispute between UFG and the Egyptian government is "ongoing," Eni's head of gas/LNG marketing and power Massimo Mantovani replied, adding though that there had been simultaneous discussions to settle the dispute. "It's in all parties' interest to reach agreement," he said, with an implicit nod to the questioner's point about potential future earnings from tolling third-party gas at Damietta.
However Mantovani gave no indication of when or if any talks to resolve the arbitration dispute might be resolved, much less whether there might be any progress on talks on tolling non-Egyptian gas.
Naturgy hinted at its lack of confidence of any near-term breakthrough over the dispute, when this month it wrote down the book value of its 50% interest in UFG to €350mn, from €888mn. Damietta is the largest asset owned by UFG.
The dispute over Damietta was lodged in 2013 with the Paris-based arbitration tribunal, the International Chamber of Commerce. Reports of an Egyptian victory in 2016 were swiftly and robustly refuted by UFG. Damietta began exporting LNG in 2005 and has nominal capacity to produce 5mn metric tons/yr. But it relies on feed gas supplied by Egypt's state Egas, which by 2010 stopped supplying the latter - as demand for gas from the Egyptian market grew sharply. It is that market that Eni now supplies through its operated and 50%-owned Zohr gas field, on target to produce 2bn ft3/d from September 2018.
Cyprus and developers of its Aphrodite gasfield are known to have been exploring options for monetising that gas, through a possible tie-back to Damietta, where the gas could be liquefied for export. Israeli producers too might in future want to route gas via Damietta if long-standing political hurdles were reduced; however most future Israeli production volumes is committed to its fast-growing home market.