18/05/2014, 18:47
Union Fenosa will reportedly withdraw its lawsuit as part of approval of the Tamar deal.
Egypt's Ministry of Petroleum announced on Friday that the government will only approve the pending sale of natural gas by the partners in the Tamar gas field "if it creates substantial added value for the Egyptian economy." It said that the Egyptian government has added another condition: that the deal with Spain's Union Fenosa SA (BMAD: UNF), which operates the Damietta liquefied natural gas (LNG) facility, will only be approved if the company withdraws its claim against the government.
The Ministry of Petroleum's statement was reportedly preceded by
intensive negotiations with Union Fenosa and was published in
coordination with the company.
Union Fenosa's $6 billion lawsuit against the Egyptian government is in arbitration. It sued the government, after it banned gas exports, because of the domestic gas shortage, resulting in the company being in breach of contracts with customers in Europe and Asia.
Union Fenosa will reportedly withdraw its lawsuit as part of approval of the Tamar deal, so the Egyptian condition is in line with the company's interests. Union Fenosa said in response to the Ministry of Petroleum's statement, "It can be cautiously said that this is a positive step that indicates goodwill to manage serious negotiations."
The Egyptian government owns 20% of the Damietta LNG plant. When the letter of intent for the sale of gas from Tamar was signed in late April, the partners - Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Isramco Negev 2 LP (TASE: ISRA.L), and Alon Natural Gas Exploration Ltd. (TASE: ALGS) - predicted that an agreement would be signed in six months, after Egypt's presidential elections.
Union Fenosa, which has had no natural gas deliveries since 2012, sued the Egyptian government with the International Court of Arbitration. BG Group plc (NYSE; LSE: BG), which owns the LNG plant at Ideko, reported a loss of $1.5 billion in 2013 because of reduced Egyptian gas deliveries and its CEO has announced his resignation.
BG Group is also in talks with the rights holders in Leviathan - Noble Energy, Delek, and Ratio Oil Exploration (1992) LP (TASE:RATI.L) - for the purchase of double the quantity of natural gas than Union Fenosa, for a total of up to $40 billion.
Under the letter of intent between the partners in Tamar and Union Fenosa, it will buy up to 2.5 trillion cubic feet (TCF) of gas over 15 years for a total of $20 billion. This amounts to the entire unsold gas at Tamar plus the gas from the adjacent Tamar SW field. The deal is still subject to approval by the Israeli government and the obtaining of an export license - provided it meets the terms of the government's gas exports decision.
Published by Globes [online], Israel business news - www.globes-online.com - on May 18, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014
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