Damietta train 1 nears completion

09 July 2004
Spanish Egyptian Gas Company (SEGAS)is understood to be considering plans for a second 5.5 million-tonne-a-year (t/y) train at its liquefied natural gas (LNG) complex at Damietta, after securing a joint offtake and feedstock agreement for train 1, which is due to come on stream in December. With the first phase of the project approaching completion, the company has also decided against proceeding with a project financing and has instead mandated four banks to arrange a $600 million, five-year corporate loan, which will be fully guaranteed by the sponsor (MEED 19:3:04).

BP Egypthas signed an agreement with Egyptian General Petroleum Corporation (EGPC) and Egyptian Natural Gas Holding Company (EGAS) to supply up to 310 million cubic feet a day (cf/d) of natural gas to the plant from 2008. BP subsidiary BP Gas Marketing (BPGM)will lift its share of LNG - equivalent to about 2.3 million t/y - from the beginning of commercial production in early 2005. Under the terms of a tolling agreement signed last year, EGAS had guaranteed to sell the remaining 2.3 million t/y of spare capacity not accounted for by the principal offtaker, Union Fenosa.

The Spanish company, which is the main investor in SEGAS, has already guaranteed the long-term sale of 3.2 million t/y. About 60 per cent of this share will be taken up by Union Fenosa itself, and sales agreements for the remaining 40 per cent are understood to be under negotiation.

'There is very good potential for a second train now and I expect that something will be announced soon, although there is no formal movement yet,' says SEGAS technical director Omar el-Komi. 'All the implications are that a decision on train 2 could be made in October or November. We expect to have the financing arrangements confirmed by early August' .

The banks mandated for the corporate lending for train 1 are Royal Bank of Scotland (RBS), Royal Bank of Canada (RBC), Sao Paolo IMIof Italy and Santander Central Hispano (SCH)of Spain. The loan will take out a bridge arranged by RBS and RBC with Calyonlast year.

The European Investment Bank (EIB) is also understood to be considering extending a concessionary loan to SEGAS of a similar size and on similar terms to its $372 million lending to the Idku LNG project being developed along the coast from Damietta. The Idku lending, which comprises two equally-sized long-term concessionary loans, provides political and commercial risk coverage for the project over a 23-year period (MEED 11:6:04, Cover Story).

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