The Italian and Spanish gas groups Eni and Naturgy have failed to complete their March 2020 agreement with the Egyptian government over the 5 Mt/year (6.75 bcm/year) Damietta gas liquefaction plant in northern Egypt.
The LNG plant is owned by a joint venture between Eni and Naturgy named Union Fenosa Gas (UFG, 80%), the Egyptian Natural Gas Holding Company (EGAS, 10%) and Egyptian General Petroleum Corporation (EGPC, 10%). As part the of the agreement, Naturgy was set to sell assets in Egypt and dissolve its joint venture with Eni, while Eni and state-owned Egyptians firms would have taken over the plant. As a compensation, Naturgy would have received US$300m in cash, and UFG’s assets outside Egypt worth US$600m (except in Spain). After the completion of the transaction, Damietta was supposed to be owned by Eni (50%), EGAS (40%) and EGPC (10%). Eni would have ensured the supply in natural gas to the plant, having obtained liquefaction rights of 3.78 bcm/year.
The LNG plant, which has been close since the end of 2012, was expected to restart by June 2020 but the coronavirus pandemic prevented it from reopening. Naturgy intends to pursue a US$2bn legal claim compensation awarded by the World Bank’s International Centre for Settlement of Investment Disputes in 2018.
Egypt is seeking to become an energy hub in the eastern Mediterranean. The discovery of the giant Zohr gas field by Eni in August 2015 (estimated gas reserves of 850 bcm) and its start in December contributed to relaunch domestic gas production that had been declining since 2009 and revived the interest in Egypt's energy resources. In January 2020, ExxonMobil signed two agreements to launch oil and gas exploration in the Egyptian part of the Mediterranean Sea.