Italy’s Eni and Spain’s Naturgy have reached an agreement with Egypt to resolve a series of disputes over the Damietta gas liquefaction plant in northern Egypt, paving the way for the facility to restart by June, the Egyptian Ministry of Petroleum and Mineral ressoruces and the companies said on Thursday.
The agreement will end Naturgy’s business interests in Egypt and dissolve a joint venture between Naturgy and Eni, while Eni and state-owned Egyptian firms will increase their holdings in the Damietta plant.
The facility, which has a capacity of 7.56 billion cubic meters per year, has been idle since the end of 2012 when a popular uprising hit gas supplies in Egypt and the government was forced to import gas to meet domestic demand.
But recent discoveries mean Cairo now has a surplus of gas that it can export through liquefied natural gas (LNG) plants. Last year, Egypt exported more than 3 million tonnes of LNG, up from 1.5 million tonnes in 2018 and 850,000 tonnes in 2017.
The Damietta plant was 80% owned by Union Fenosa Gas (UFG), the joint venture between Eni and Naturgy, with the rest split evenly between the Egyptian Natural Gas Holding Company (EGAS) and Egyptian General Petroleum Corporation (EGPC).
Under Thursday’s agreement, the plant will now be 50% owned by Eni, 40% by EGAS and 10% by EGPC.
In a statement issued on Thursday, the Ministry of Petroleum and Mineral Resources said that as the agreement comes into effect, all arbitration awards against Egypt will be settled and all disputes between Egypt and the two companies concerning the Damietta plant will be terminated.
Eni, the biggest foreign oil and gas producer Libya, discovered Egypt’s biggest-ever gas field Zohr in 2015 and has a series of other assets in the Mediterranean.
It will take over the contract for the purchase of natural gas for the Damietta plant and secure corresponding liquefaction rights, increasing its LNG portfolio by 3.78 billion cubic metres per year.
Eni, like other majors, is looking to decarbonise its business activities and sees LNG and gas as important resources in that transition.
Naturgy, meanwhile, hailed the agreement as a positive step in its plan to reduce its exposure to gas procurement contracts. LNG prices are trading at multi-year lows.
The Spanish firm will also pocket $600 million in cash and most of UFG’s $300 million-worth of assets outside Egypt, not including its Spanish business.
Since a management reshuffle in 2018, Naturgy has focused on cutting costs and moving out of countries including Colombia, Italy, Moldova and South Africa.
Eni said it would take over UFG’s marketing of natural gas in Spain, bolstering its presence in the European gas market.