Union Fenosa Gas (UFG), which is co-owned by Spain’s Gas Natural Fenosa and Italy’s Eni, has contradicted reports that Egypt’s state gas company EGAS has “won” its case at the International Court of Arbitration in Paris.
Reuters, Egypt’s state news publication Al-Ahram, and the Ministry of Petroleum all falsely reported that the arbitration ended in Cairo’s favour.
The arbitration was worth $270 mn, in addition to interest. The Egyptian government diverted oil from export to the domestic market in violation of the contracted capacity of the plant. The Segas plant, located in Damietta, is 80% owned by UFG, while the remaining 20% belongs to state-owned EGAS and Ministry of Petroleum.
UFG has maintained that the arbitration has not ended, stating that ”this is just a partial award; what’s relevant is that the tribunal has clearly stated that it has jurisdiction to decide on the merits of the case and that means that the arbitrators will continue with the process,” a UFG source told Natural Gas Europe by email on 15 June.
Production stalled at two LNG facilities in 2013, when the regime under Abdel Fattah Al-Sisi decided to divert gas to the domestic market in order to mitigate power cuts and black outs, which were the primary cause of frustration with the public, as well as private companies.
Egypt’s designation as a net natural gas importer is a recent one and corresponds to Israel and Cyprus’ interests in capturing the Egyptian market’s increasing demand for natural gas. Egypt must import $1.1 bn worth of gas to satisfy the country’s $5 bn need for natural gas.
Oil has seen a massive depreciation in value since UFG, Noble, and Delek signed their deal. Companies have been forced to cut costs and push for tax concessions, as well as demand payment of past debts in order to compensate for the 65% decrease in natural gas production since Sisi took power.
Egypt potentially owes not just $5.9 bn to foreign oil companies, in which more than a third of government expenditure has been allocated, but another $1.7 bn to Israel for halting natural gas exports to the Segas plant.
Egypt has already lost more than $ 700m with an agreed upon price of $8 per million BTU, though current international prices stand at $4.97. This deal was made despite the Egyptian oil ministry stating in 2013 that it would only proceed with the deal if it “realizes high added value for the Egyptian economy”.
On 5 May 2013, the United States’ Nobel Energy and Israel’s Delek signed a letter of intent to export 2.5 tr cubic feet of gas over a period of 15 years. The gas would be sent from Israel’s Tamar field to the Segas LNG processing plant in Damietta, which is operated and owned by UFG. The parties signed a binding agreement on the matter six months later.
Former Egyptian President Hosni Mubarak and Israel had several bilateral trade agreements in 1994, through which Mubarak and Hussein Salem, co-owner of the East Mediterranean Gas Company, provided gas at discounted prices to Israel.