Gov­ern­ment ne­go­ti­a­tions to bring down Egypt’s $2bn fine for Union Fenosa

Com­pen­sa­tion of part­ners to stop pump­ing of gas to Dami­etta LNG Plant with part of rev­enue: Source

The Daily News Egypt - - Front Page - By Mo­hamed Adel

The Egyp­tian gov­ern­ment is near­ing an agree­ment with Ital­ian-Span­ish Union Fenosa Gas (UGS) on drop­ping of the ar­bi­tra­tion pro­ceed­ings at World Bank’s the In­ter­na­tional Cen­tre for the Set­tle­ment of In­vest­ment Dis­putes (ICSID) against the Egyp­tian Nat­u­ral Gas Hold­ing Com­pany (EGAS), as the Dami­etta liq­ue­fac­tion plant grad­u­ally op­er­ates this year af­ter a six-year hia­tus.

A source in the oil sec­tor in­formed Daily News Egypt that the min­istry of pe­tro­leum is ne­go­ti­at­ing with UFG to set­tle the case with amounts de­ducted from EGAS’s share in the rev­enues of the fac­tory’s re-op­er­a­tion, in re­turn for waiv­ing the in­ter­na­tional ar­bi­tra­tion case filed against Egypt.

He added that the min­istry is con­sid­er­ing al­low­ing the Dami­etta plant to ex­port quan­ti­ties of nat­u­ral gas pro­duced from Cyprus and Is­rael fields in the Mediter­ranean Sea, thus achiev­ing eco­nomic re­turns in Egypt and ending ar­bi­tra­tion dis­putes.

Fur­ther­more, he pointed to the start of ne­go­ti­a­tions with for­eign part­ners in the Dami­etta plant for the price of gas and fees for the use of the na­tional net­work of gases, in re­turn for the grad­ual re-op­er­a­tion of the plant and the ex­port of quan­ti­ties of nat­u­ral gas pro­duced lo­cally.

A de­ci­sion by an ar­bi­tra­tion panel of the ICSID re­cently is­sued a ma­jor­ity opin­ion re­quir­ing the EGAS to com­pen­sate the UGS with an amount of $2bn.

The source pointed out that the for­eign part­ners in the Dami­etta plant ac­cused the state-owned EGAS that it had stopped sup­ply­ing quan­ti­ties of gas agreed upon in the gas sale and pur­chase con­tract be­tween the Egyp­tian Gen­eral Pe­tro­leum Cor­po­ra­tion, EGAS and Unión Fenosa in 2000, which obliges EGAS to sup­ply 750m mil­lion cu­bic feet of gas per day to the Dami­etta plant start­ing from Jan­uary 2005.

Fol­low­ing the Jan­uary 2011 revo­lu­tion and sub­se­quent crises, the gas sup­ply to the plan re­duced un­til stop­ping in De­cem­ber 2012 un­til now.

The source noted that the Ital­ian Eni was ap­proved to ex­port part of the gas pro­duced from the Zohr gas well through the Dami­etta plant if the lo­cal mar­ket does not need it.

The Dami­etta plant own­er­ship is 26% owned by Italy’s Eni, 26% by Unión Fenosa and SEAGas, and 48% by the Egyp­tian gov­ern­ment.

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