Companies involved in the Egyptian and Omani projects have been seeking assurances about Union Fenosa's plans in light of the partnership question and the recently announced decision to reduce its investment in new power generating capacity in Spain. The company had planned to bring 3,000 MW of capacity on stream by 2006. This has since been cut to 2,000 MW.

Several international companies have expressed interest in forging ties with Union Fenosa's gas business, including BP of the UK, the Royal Dutch/Shell Group and France's TotalFinaElf. Union Fenosa is thought to have been disappointed by the level of the initial offers. 'Union Fenosa's downstream business is a concept with some major liabilities attached,' says one observer familiar with the company. 'The strategic partners cannot be expected to put up a lot of cash.'

Union Fenosa has said it aims to save some Eur 800 million ($800 million) through securing a partner for its gas business, mainly through reducing its own investment commitments. This will play an important part in the company's plans to cut total debt by $2,600 million from it present level, estimated at about $8,500 million.

The Egyptian plant is now more than 25 per cent complete, and is scheduled to come on stream in late 2004 with capacity to produce 5 million tonnes a year (t/y) of LNG. Union Fenosa says talks are now under way to find offtakers outside Spain for 1,400 million cubic metres a year (equivalent to 1 million t/y) of the plant's output. Most of the remainder will be allocated to the Spanish market. The company has also agreed to buy 50 per cent of the 3.2 million t/y of LNG to be produced by the third train in Oman. Union Fenosa says the Omani gas will also be marketed in Spain.