On behalf of the Claimant:

Counsel:

Mr Doak Bishop King & Spalding

Mr James Castello King & Spalding

Mr Ed Kehoe King & Spalding

Ms Isabel Fernandez de la Cuesta King & Spalding

Ms Nilufar Hossain King & Spalding

Mr Rami Chahine King & Spalding

Ms Sara Burns King & Spalding

Ms Sara McBrearty King & Spalding

Mr David Weiss King & Spalding

Ms Virginia Castelan King & Spalding

Mr Timothy McKenzie King & Spalding

Ms Zhennia Silverman King & Spalding

Ms Carol Tamez King & Spalding

The Claimant

Mr Javier Gerboles De Galdiz Unión Fenosa Gas, S.A.

Ms Wendy Valentina Quintero Unión Fenosa Gas, S.A.

Ms Elena Feliu Vera Unión Fenosa Gas, S.A.

Mr. Ignacio de la Pena Unión Fenosa Gas, S.A.

On behalf of the Respondent

Counsel:

Ms Claudia Annacker Cleary Gottlieb Steen & Hamilton LLP

Mr Robert T. Greig Cleary Gottlieb Steen & Hamilton LLP

Mr J. Cameron Murphy Cleary Gottlieb Steen & Hamilton LLP

Ms Laurie Achtouk-Spivak Cleary Gottlieb Steen & Hamilton LLP

Mr Larry Work-Dembowski Cleary Gottlieb Steen & Hamilton LLP

Ms Ariella Rosenberg Cleary Gottlieb Steen & Hamilton LLP

Ms S. Ellie Norton Cleary Gottlieb Steen & Hamilton LLP

Mr Pablo Mateos Rodríguez Cleary Gottlieb Steen & Hamilton LLP

Ms Sarah Moy Cleary Gottlieb Steen & Hamilton LLP

Ms Emilie Mills Cleary Gottlieb Steen & Hamilton LLP

The Respondent:

Counsellor/ Mahmoud El Khrashy Egyptian State Lawsuits Authority (ESLA)

Counsellor/ Amr Arafa Egyptian State Lawsuits Authority (ESLA)

Counsellor/ Yousria El Gamal Egyptian State Lawsuits Authority (ESLA)

Counsellor/ Yasmine Shamekh Egyptian State Lawsuits Authority (ESLA)

Counsellor/ Nada Elzahar Egyptian State Lawsuits Authority (ESLA)

On behalf of the Claimant:

Mr José Javier Fernández Martínez

Mr José María Egea Krauel

Mr Javier Sáez Ramírez

Mr Paolo Conti

Mr José Luis de Lara Alonso-Burón

Mr Christopher John Goncalves

Mr Kenneth B. Medlock III

Mr Kiran P. Sequiera

Mr Gardner William Walkup Jr.

On behalf of the Respondent:

Mr Hassan El Mahdy

Mr Mahmoud Abdel Hameed

Mr Ahmed Shaaban

Dr Antón García

Mr Ian Davison

Dr Mohsin Khan

Mr Gervase MacGregor

On behalf of the Claimant:

Mr Javier Sáez Ramírez Unión Fenosa Gas, S.A.

Mr José María Egea Krauel Unión Fenosa Gas, S.A.

Mr José Javier Fernández Martínez Unión Fenosa Gas, S.A.

Mr José de Lara Alonso-Burón Unión Fenosa Gas, S.A.

Mr Christopher John Goncalves BRG

Mr Gardner William Walkup Jr. BRG

Mr Kenneth B. Medlock III Center for Energy Studies, Baker Institute for Public Policy, Houston, TX

Mr Kiran Sequeira Navigant

On behalf of the Respondent:

Mr Ahmed Shaaban Egyptian Natural Gas Company (GASCO)

Mr Hassan El Mahdy Egyptian Natural Gas Holding Company (EGAS)

Mr Mahmoud Abdel Hameed Egyptian Natural Gas Holding Company (EGAS)

Mr Gervase MacGregor BDO LLP

Mr Ian Davison RPS Energy Consultants Limited

Dr Antón García Compass Lexecon

Earlier this week, on December 5, 2017, EGAS sought leave from the Tribunal in CRCICA Case 896 to disclose to Egypt the pleadings filed by UFG and EGAS on EGAS' corruption defense in that case. EGAS explained to the Tribunal that it sought such leave because Egypt intends to submit these Case 896 pleadings in this arbitration. Specifically, EGAS stated: 'We understand that the Arab Republic of Egypt would seek to place these submissions before the tribunal in Unión Fenosa Gas, S.A. v. Arab Republic of Egypt (ICSID Case No. ARB/14/4).' Egypt's determination to use these materials must be quite strong since EGAS made its request notwithstanding that the Case 896 Tribunal had already closed that proceeding and admonished the parties not to submit further requests […] As we have previously noted, EGAS has entered into a joint defense agreement with Egypt and is therefore doubtless well informed of Egypt's intentions in this arbitration [... ].

1. The Tribunal refers to the Respondent's application to the Tribunal for an order admitting new documents into this arbitration's evidential file and to the Claimant's opposition to the Respondent's application. The Respondent's application addressed originally only six documents. The Claimant thereafter produced a seventh document. The Tribunal considers that all seven documents should be read together for the purpose of this Procedural Order.

2. The Tribunal refers to its Procedural Orders Nos 13, 14 and 15 and the Parties' respective letters (or email messages) dated 22 January 2018 (two), 3 January 2018, 21 December 2017, 8 December 2017, 30 November 2017, 23 November 2017, 20 September 2017 (email), 19 September 2017 (email), 8 August 2017, 30 June 2017 and 21 June 2017.

3. Notwithstanding the Respondent's application made at a late stage of this arbitration, the Tribunal considers that these six new documents are relevant to issues raised by the Parties' dispute, as also the seventh document. Accordingly, the Tribunal has decided to admit these seven new documents into the evidential file, together with the Parties' several submissions regarding these documents made in their respective correspondence listed above.

4. This Procedural Order is strictly limited to the admission of the seven new documents into the evidential file. The arbitration's evidential file is closed to the Parties. Nonetheless, the Tribunal reserves its right to request any further written explanations from the Parties.

(i) the Project takes place in a country known for corrupt payments, namely Egypt at the time of the events in question;

(ii) [REDACTED]

(iii) There is no substantial time lag between [REDACTED] and the date when the main contract is awarded to the principal ([REDACTED] to 1 August 2000);

(iv) The subject matter of the [REDACTED] is not tangible (for example, [REDACTED]

(v) The agent has a close personal or family relationship, or business relationship, with a public official or relative of an official (such as that between Mr El Komy and the Respondent's Minister Mr Fahmy), which is the only qualification the agent brings to the venture;

(vi) The agent is a shell company or has some other non-transparent corporate structure (EATCO is a shell entity owned by members of Mr El Komy's family);

(vii) [REDACTED]

(viii) [REDACTED]

(b) Dismiss Claimant's claims for lack of jurisdiction;

(c) In eventu, decline to exercise jurisdiction over Claimant's claims;

[...]

(e) Order Claimant to pay to Respondent the full costs of this arbitration, including, without limitation, arbitrators' fees and expenses, administrative costs, counsel fees, expenses and any other costs associated with this arbitration;

(f) Order Claimant to pay to Respondent interest on the amounts awarded under (e) aboveuntil the date of full payment;

(g) Grant any further relief to Respondent as it may deem appropriate.

(a) Reject Egypt's jurisdictional objections in their entirety and confirm its jurisdiction over the dispute;

(b) Order Egypt to pay all costs and expenses of the jurisdictional phase of this arbitration, including the fees and expenses of UFG's legal representatives in respect of this phase and any other costs; and

[(c)] Order any further relief that the tribunal deems just and appropriate.

(d) In eventu , suspend the proceedings pending the resolution of the Contractual Arbitrations [described as the ICC arbitration between SEGAS and EGAS under the Tolling Agreement; the CRCICA arbitration between UFG and EGAS under the SPA; and the CRCICA arbitration between UFG and EGAS under the SPA).

(c) Deny Egypt's request that these proceedings be suspended pending resolution of the CRCICA and ICC arbitrations […]

a. Declare that Egypt has violated the BIT in connection with its treatment of UFG and UFG's investment;

b. Award Claimant compensation for the full amount of damages it suffered due to Egypt's breaches of its BIT obligations, in the amounts set forth in this Memorial;

c. Award Claimant pre-award and post-award interest on any compensatory amounts until the date of full satisfaction of the award, at a rate to be determined by the Tribunal in accordance with the BIT;

d. Order Egypt to pay all costs and expenses of this arbitration, including ICSID's administrative fees, the fees and expenses of the Arbitral Tribunal, the fees and expenses of UFG's legal representatives in respect of this arbitration and any other costs of this arbitration; and

e. Grant any other and further relief that it deems just and proper.

(a) Dismiss the Claimant's claims in their entirety for lack of jurisdiction and/or as inadmissible;

(b) In eventu, stay the proceeding pending the resolution of the contractual arbitrations;

(c) Alternatively, dismiss Claimant's claims on the merits in their entirety;

(d) In the further alternative, declare that Claimant is not entitled to the damages it seeks, or to any damages;

(e) In any event, order Claimant to pay all the costs of this arbitration as well as the Respondent's legal costs and expenses in connection with this arbitration, including but not limited to its attorney's fees and expenses and the fees and expenses of its experts; and

(f) grant such further relief against Claimant as the Tribunal deems fit and proper.

For the purposes of the present Agreement,

1. The term 'Investor' means:

a) any individual who, in the case of Spanish investors, is resident in Spain under Spanish law and, in the case of investors of the other Party, possesses its nationality pursuant to the law of that Party;

b) any legal entity, including companies, associations of companies, trading corporate entities and other organizations which is incorporated or, in any event, is properly organized under the law of that Party and is actually managed from the territory of that Party.

2. The term 'Investment' means any kind of assets, such as goods and rights of all sorts, acquired under the law of the host country of the investment and in particular, although not exclusively, the following:

- [1] shares and other forms of participation in companies;

- [2] rights arising from all types of contributions made for the purpose of creating economic value, including every loan granted for this purpose, whether capitalized or not;

- [3] movable and immovable property and any other property rights such as mortgages, loans or pledges;

- [4] any rights in the field of intellectual property, including patents and trademarks, as well as manufacturing licences and know-how;

- [5] rights to engage in economic and commercial activities authorized by law or by virtue of a contract, particularly those rights to search for, cultivate, extract or exploit natural resources, in accordance with existing laws and regulations.

3. The term 'returns' refers to income deriving from an investment in accordance with the definition contained above, and includes, in particular, profits, dividends and interests.

4. The term 'territory' designates the land territory and territorial waters of each of the Parties, as well as the exclusive economic zone and the continental shelf that extends outside the limits of the territorial waters of each of the Parties, over which they have or may have jurisdiction and sovereign rights for the purposes of prospectioning [sic], exploration and conservation of natural resources, pursuant to international law.

1. Each Party shall protect in its territory the investments made in accordance with its laws and regulations, by investors of the other Party and shall not hamper, by means of unjustified or discriminatory measures, the management, maintenance use, enjoyment, expansion, sale and if it is the case, the liquidation of such investments.

1. Each Party shall guarantee in its territory fair and equitable treatment for the investments made by investors of the other Party.

2. This treatment shall not be less favorable than that which is extended by each Party to the investments made in its territory by investors of a third country.

[...]

5. In addition to the provisions of paragraph 2 of this article, each Party shall apply, under its own law, no less favourable treatment to the investments of investors of the other Party than which is that granted to its own investors.

The nationalization, expropriation or any other measure of similar characteristics or effects that may be applied by the authorities of one Party against the investments in its own territory of investors of the other Party must be applied exclusively for reasons of public interest pursuant to the law, and shall in no case be discriminatory. The Party adopting such measures shall pay to the investor or his legal beneficiary an adequate indemnity in convertible currency without unjustified delay.

1. Disputes between one of the Parties and one investor of the other Party shall be notified in writing, including a detailed information, by the investor to the host Party of the investment. As far as possible the Parties shall endeavour to settle these differences by means of a friendly agreement.

2. If these disputes cannot be settled in this way within six months from the date of the written notification mentioned in paragraph 1, the conflict shall be submitted, at the choice of the investor, to:

- [1] a court of arbitration in accordance with the Rules of Procedure of the Arbitration Institute of the Stockholm Chamber of Commerce.

- [2] the court of arbitration of the Paris International Chamber of Commerce.

- [3] the ad hoc court of arbitration established under the Arbitration Rules of Procedure of the United Nations Commission for International Trade Law.

- [4] the International Center for Settlement of Investment Disputes (ICSID) set up by the 'Convention on Settlement of Investment Disputes between States and Nationals of other States', in case both Parties become signatories of this Convention.

- [5] Regional Center for International Commercial Arbitration in Cairo.

3. The arbitration shall be based on:

- [1] the provisions of this agreement;

- [2] the national law of the Party in whose territory the investment was made, including the rules relative to conflicts of law;

- [3] the rules and the universally accepted principles of international law.

4. The arbitration decisions shall be final and binding for the parties in conflict. Each Party undertakes to execute the decisions in accordance with its national law.

[1] Given that the capacity of the Complex shall be known once the EPC Contract is executed, Buyer shall notify Seller the nominal capacity of the Complex as prompt [sic] as possible after signature of the EPC Contract, and Seller commits to sell and deliver to the Buyer at the Delivery Point up to the maximum of the amount of NG needed for the nominal capacity of the Complex, according to the terms of this Agreement and the nomination procedure to be included in the Coordination, Operating and Measurement Agreement.

[2] In the event that new natural gas liquefaction trains are constructed by Buyer, then Buyer shall notify Seller of the nominal capacity of the new train/s as prompt [sic] as possible and Seller undertakes to sell and deliver to Buyer at the Delivery Point up to the maximum of the amount of NG and daily quantities of NG needed for such capacity.

[3] Seller shall also sell and deliver to the Buyer at the Delivery Point the NG that Buyer requests for the execution of the commissioning, start-up and testing, and any other action needed for the commercial operation of the Complex, at the price set forth in Article 13, and with the specific delivery conditions set forth under the Coordination, Operating and Measurement Agreement.

[4] Seller shall be the exclusive responsible [sic] for the transportation, supply and delivery of NG to the Delivery Point specified in Article 12.

[5] Seller shall at all times keep a back up supply to meet an on stream (load) factor of 95% of the LNG Complex.

During each Contract Year, Buyer will be obligated to purchase, take and pay for, or pay for if not taken a minimum of ninety per cent (90%) of the ACQ applicable for such Contract Year, less any amount of NG to be deducted from the ACQ (or from the quantity applicable for each Contract Year of the Build-up period, as the case may be) due to the occurrence of

(i) Force Majeure events, (ii) Seller's failure to supply the NG, and/or (iii) scheduled maintenance of the Complex ('Adjusted ACQ, ').

If for any reason whatsoever, the capacity of the Complex is increased (due to the increase in capacity of the first train up to a maximum of 10% of the then existing ACQ or due to the construction of new train/s), Seller shall be obligated to sell and deliver to Buyer the NG necessary for that increase in capacity. The take or pay obligations of the Buyer for the first train shall not be altered and therefore they shall be 90% of the ACQ as defined in 4.1, less the amounts and concepts mentioned in (i), (ii) and (iii) of this Section 6.1.

[1] If Seller, for reasons other than Force Majeure or Buyer's failure to take, fails to deliver at the Delivery Point a quantity of NG nominated by Buyer according to this Agreement, Seller shall be liable to Buyer for any damages, costs and/or expenses (to the extent permissible under Egyptian laws, but excluding consequential damages and loss of profits) arising from Seller's failure to supply, including (i) third party's claims and penalties against Buyer, (ii) costs, extra-costs, damages and expenses caused to the Complex arising from Seller's failure to supply, including operation and maintenance costs (expressed in USD per MMBTU), and capital investment costs (expressed in USD per MMBTU)."

[2] Seller's liability vis-a-vis Buyer as a result of this Section 8.1 shall not exceed an amount equivalent to ninety per cent (90%) of the Price applicable to the NG not delivered by Seller.

The quality specification of the NG to be supplied to Buyer, shall be in accordance with the Specifications contained in Annex 2 (' NG Specifications ') of this Agreement, which shall include the typical values for such NG and the limits of such values which are acceptable for Buyer. The procedures for measurement of quality and tests shall be developed in the Coordination, Operating and Measurement Agreement referred to in Article 19.

The provisions regarding the nominations, procedures, deviations from nominations, commissioning and tests, and maintenance, among others, shall be developed by the Parties in the Coordination, Operating and Measurement Agreement referred to in Article 19.

For the purposes of this agreement 'Force Majeure' means an event or circumstance which is beyond the reasonable control of a Party or Parties (acting and having acted with reasonable level of due diligence) resulting in or causing failure by the Party concerned to perform any of its obligations hereunder.

The Parties shall be relieved from liability under this Agreement for so long as and to the extent that due to Force Majeure, and without limiting the generality of the foregoing Section 15.1, any of the following events or circumstances, (each of which shall constitute a Force Majeure event only to the extent that it satisfies the requirements of Section 15.1) occurs:

Any act of war, invasion, armed forces conflict or act of foreign enemy, blockade, embargo or revolution.

Any riot, insurrection, civil commotion, act or campaign of terrorism or sabotage that is part of religious or ethnic unrest or commotion that is widespread or nationwide, such as, by way of example and not limitation, actions associated with or directed against the Buyer (or its contractors) as a part of a broader pattern of actions against companies or facilities with foreign ownership or management.

[…]

(iv) Strikes, works to rule, labor unrest or go-slows that are widespread or nationwide or that are of a political nature, (but not where the same is related to the Seller or any of their assignees, affiliates, joints ventures [sic], contractors and subcontractors or successors in title) such as, by way of example and not limitation, labor actions directed against the Buyer (or of its contractors and subcontractors) as a part of a broader pattern or labor actions against companies or facilities with foreign ownership or management.

[…]

The parties shall further be relieved from liability under this Agreement as follows:

(A) In the case of Seller:

(1) For so long and to the extent that due to Force Majeure and/or

(2) For so long as and to the extent that owing to the failure due to Force Majeure by a third party, acting with a reasonable level of due diligence of its obligations to Seller to produce, transport, process, or handle NG to be made available to Buyer hereunder provided that in respect of such failure by a third party, the reasons giving rise to such failure would constitute a Force Majeure event as defined in this Agreement affecting to such third party, Seller is unable to make available the properly nominated quantity of NG in accordance with this Agreement […].

Where Force Majeure partially affects Seller's obligation to supply NG to Buyer and to any other purchaser/s, Seller shall treat Buyer no worse than any other present or future purchaser/s of NG. This right shall be binding upon the Parties at all times, including the event of shortage of NG […]

In the case of the Seller, Force Majeure shall not include changes in market conditions including, without limitation, changes that:

(i) Directly or indirectly affect the demand for or price of NG.

(ii) Result in the diversion of NG to other users,

(iii) Are due to the inability of the transportation system and/or pipeline (whether for reasons of maintenance, repairs or lack of capacity or otherwise) to meet consumer demand and/or Buyer demand.

This Agreement shall be governed and interpreted in accordance with the provisions hereof and, where not expressly provided, it shall be governed by Egyptian laws.

(a) Any dispute, controversy or claim arising out of or in connection with this Agreement, or breach, termination or invalidity thereof between the Parties, shall be settled by arbitration in accordance with the Arbitration Rules of the Cairo Regional Center for International Commercial Arbitration (the 'Cairo Center') in effect on the date of execution of this Agreement.

[...]

(f) The award of the arbitrators shall be final and binding upon the Parties and the arbitral award rendered shall be final and conclusive.

To the extent that any of the Parties may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgement or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed), such Party hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction.

Buyer and Seller represent and warrant to each other that neither of them nor any of their respective shareholders have any legal privileges or special rights that could render this Agreement or the arbitral awards granted pursuant to Section 16.4 totally or partially unenforceable against them.

EGPC undertakes to procure that the Egyptian authorities undertake not to interfere with the rights of Buyer under this Agreement, and not to dictate or promulgate any act or regulation which could directly or indirectly affect the rights of Buyer under this Agreement, or affect the capacity of Buyer to perform its obligations under this Agreement, even in the case of a NG shortage in Egypt, save for Force Majeure situations as defined in this Agreement.

EGPC shall also assist and actively collaborate with Buyer to obtain any authorization and/or legal, administrative or governmental benefit to Buyer for the Project and/or construction of the Complex.

Seller is the sole responsible [sic] for securing adequate supplies of NG for performance of its obligations hereunder. Seller shall, throughout the Term, provide Buyer or Lenders with such further assurances as Buyer or Lenders may reasonably request from time to time regarding the continued adequacy of NG supply sources relied upon by Seller to perform hereunder. In no case this shall represent for Seller additional obligations to those set forth in this Agreement.

Each Party represents and warrants to the other Party that (a) it possesses all power, authority, and applicable approvals (if any) necessary for it to enter into this Agreement, (b) this Agreement constitutes the valid and binding obligation of such Party enforceable against it in accordance with the terms thereof, (c) the execution, delivery, and performance hereof will not cause such Party to be in violation of any other agreement or law, regulation, order, or court process or decision to which it is a party or by which it or its properties are bound or affected, (d) it has and will maintain all regulatory authorizations, certificates, and documentation as may be necessary and legally required for it to transport, buy, sell or make sales for resale of NG sold or purchased under this Agreement; (e) it is a producer, processor, or commercial user of, or a merchant handling, of [sic] NG and has entered into this Agreement solely for purposes related to its business as such, (f) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging, and trading decisions (including decisions regarding the suitability of this Agreement) based upon its own judgement and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other Party, (g) it understands the terms, conditions, and risks of this Agreement and is capable of assuming and willing to assume (financially and otherwise) those risks, (h) it is acting as principal, and not as agent, fiduciary, or any other capacity, and (i) the other Party is not acting as a fiduciary or financial, investment, or commodity trading advisor for it.

Seller is aware that the supply of NG to Buyer under this Agreement is a key element for the successful development of the Project, and therefore Seller represents and warrants that its availability of NG will be sufficient to feed the Complex under the terms and conditions of this Agreement. Also, Seller represents and warrants that it has, and will have during the Term, all the legal, administrative and corporate rights, licenses and authorizations to deliver the NG at the Delivery Point and to comply with all its obligations under this Agreement.

This Contract shall be governed by and interpreted in accordance with the provisions hereof and by English law. English law shall govern the procedure of any arbitration under Article 11.3 (Arbitration).

Any Dispute arising in connection with this Contract and that is not solved through Article 11.2 (Referral of Disputes to Senior Management) shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. In relation to an arbitration:

(a) the language of the arbitration shall be English;

(b) the place of arbitration shall be Paris; and

(c) there shall be three arbitrators, the first being appointed by the Owner, the second being appointed by the Toller and the third being appointed by the Owner and the Toller or, if either the Owner or the Toller has failed to appoint an arbiter or both have failed to agree upon the appointment of the third arbiter within thirty (30) days of the date the Parties determined to submit the dispute to arbitration, being appointed in accordance with the said Rules.

Each Party represents and warrants to the other Party that (a) it possesses all power, authority, and applicable approvals (if any) necessary for it to enter into this Contract and the Co-ordination Agreement, […] .

The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.

(1) The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organization of the State, and whatever its character as an organ of the central Government or of a territorial unit of the State.

(2) An organ includes any person or entity which has that status in accordance with the internal law of the State.

The conduct of a person or entity which is not an organ of the State under Article 4 but which is empowered by the law of that State to exercise elements of the governmental authority shall be considered an act of the State under international law, provided the person or entity is acting in that capacity in the particular instance.

The conduct of a person or group of persons shall be considered an act of a State under international law if the person or group of persons is in fact acting on the instructions of, or under the direction or control of, that State in carrying out the conduct.

Conduct which is not attributable to a State under the preceding articles shall nevertheless be considered an act of that State under international law if and to the extent that the State acknowledges and adopts the conduct in question as its own.

1. Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act:

(a) is the only way for the State to safeguard an essential interest against a grave and imminent peril; and

(b) does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole.

2. In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if:

(a) the international obligation in question excludes the possibility of invoking necessity; or

(b) the State has contributed to the situation of necessity.

1. The State responsible for an internationally wrongful act is under an obligation to compensate for the damage caused thereby, insofar as such damage is not made good by restitution.

2. The compensation shall cover any financially assessable damage including loss of profits insofar as it is established.

UFG: UFG is the Claimant. It is a company incorporated under the laws of Spain, and (by "assignment") a contractual party to the SPA. It also owns just under 80% of SEGAS' shares. Mr J.M. Egea Krauel was UFG's Chairman from December 2009 onwards. In March 2010, Mr J. Sáez Ramírez was appointed UFG's Executive Vice-President for Supply and Operations. Both testified as factual witnesses in this arbitration.¹

Unión Fenosa decided from the beginning to create a local corporate vehicle, SEGAS, for the sole purpose of building, owning and operating the Damietta Plant. SEGAS was incorporated in Egypt in 2000. SEGAS does not itself own, purchase, or export gas but instead provides liquefaction services in exchange for the payment of a tolling fee. The fee is to be paid by UFG and EGAS as tollers (companies who own natural gas that is liquefied at the LNG plant) under two separate Tolling Contracts and is prorated on the basis of the gas quantities they have contracted to toll through the Plant. EGPC and EGAS each obtained 10% ownership of SEGAS; and EGAS obtained 51.98% of the Plant's production capacity for an initial four-year period and thereafter only up to 41.80% for the remaining contract years.⁵

(3) Selected Factual Chronology

The Supreme Council of the Petroleum Sector shall be constituted with the presidency of the Minister of Petroleum and the membership of:

The Chairman of the Board of Directors of the Egyptian General Petroleum Corporation;

The Chairman of the Board of Directors of the Public Petroleum Company

[...];

The Chairman of the Board of Directors of the Petroleum Gases Company¹⁶

The Petroleum Sector, in the application of this Decree, shall mean the following entities:

The Ministry of Petroleum, the Egyptian General Petroleum Corporation, and the petroleum public sector and common sector companies.¹⁷

In 1999, the Egyptian government declared that domestic demand had been met and encouraged the search for export markets.

In conjunction with that search, the Integrated Gas Strategy (1999) in Egypt was penned by Mr Sameh Fahmi, Petroleum Minister. It featured the creation of a 'Master Plan' which should remain valid through 2017. The Master Plan involves price optimization to attract investors, increased gas exports, and infrastructure development, qualified by six considerations:

1. An export ceiling - 25%> of total production;

2. No foreign or domestic gas operator may export gas from Egypt prior to investing in Egypt's domestic gas market;

3. Special incentives were established to encourage foreign and Egyptian Exploration & Production (E&P) companies to establish marketing franchises, in order to promote gas-based business within Egypt;

4. Incentives were also established to encourage diversification within the gas industry;

5. Exploration & Production (E&P) incentives were aimed to maintain a higher level of attractiveness, when compared with neighboring countries;

6. All businesses within Egypt - whether state-controlled, private, or mixed -were encouraged to convert to natural gas for energy needs.²⁰

Further to our conversations, I enclose a copy of the fax received from MR YEHIA A. ELKOMI, Chairman and Managing Director of EATCO, setting out the reality and viability of our expectations.

Reference to our telephone conversation at this week and with regard to the meeting held on Jan 10, 2000 with Mr Omar El-Koumy, ADGAS-U.A.E. regarding the Spanish company interest to construct LNG and Electrical Power Plant of 500 MW using local Egyptian natural gas, we would like to inform you that we have obtained the initial approval from the Egyptian government to [construct] such Project.

The power plant of 500 MW will be able to supply the LNG plant with the required electricity and the remaining capacity will be tied to the local national grid with mutual agreement on the prices of natural gas and supply of electricity to the national grid per KW.

We also can obtain long term supply of natural gas with a contract of 25 years renewable for another 25 years and so on. The price formula will be mutually agreed between the Egyptian government and the new company to be established to construct such project.

EATCO will secure all local land for the project and all local license for the project and also EATCO will be the local partner in this project.

I'm going to meet the minister of petroleum of Egypt on 23.1.2000 for arranging the meetings required with you and the Spanish company in this regard. We understand that the Spanish company will fund the project completely and will be able to utilize all LNG produced by this plant. We understand that the capacity of LNG will be in the range of 2.5 million metric tons per year.

The official gas price will be US50,041 per m³ of natural gas supplied to the battery limit of LNG [...]

Between January 26 and 30, a UNIÓN FENOSA delegation held a series of meetings for the purpose of gathering information and obtaining a clearer perception of the potential LNG project that had been presented to the management of UNIÓN FENOSA [...] we had a meeting with the Minister of Petroleum, Sameh Fahmy, who has openly confirmed the support of the Government of Egypt for this Project. The Minister mentioned during the meeting that other international groups had expressed an interest in the Project, and encouraged UNIÓN FENOSA to submit a proposal for negotiation (in case UNIÓN FENOSA was interested in the Project) shortly. Thus, in relation to this meeting with the Minister, we have summarized our impressions of him and our/the Minister's commitments:

- A young, active and ambitious Minister.

- He is very familiar with the gas business.

- Although he has been Minister for only a short time, he is eager to do a 'well-known' project in a short period of time.

- He has a personal interest in the project and entering the Spanish market.

- We have his support for the project and his commitment to provide the gas with a long-term contract of 20 to 25 years at a competitive price […]²³

During the negotiations with UFACEX, which lasted for several months, no representatives from the Ministry of Petroleum or Government were present. EGPC was negotiating in its own name and independently, and all instructions to Committee members were made by EGPC representatives. I am not aware of any instructions given by the Ministry to the members of the Committee on the terms we negotiated with UFACEX, and as far as I know, the Ministry was not involved in these negotiations, nor was EGPC required to seek or obtain any approvals from the Ministry regarding these terms.²⁵

Mr Antonio Hernando produced the draft letter to EATCO, for signature by Mr Eloy Álvarez, in which the request for additional information and for a possible meeting date of March 7 is repeated.

He also produced the draft MoU with EATCO which, with slight changes (postponement of the date of commitment to a pre-feasibility study and a fuller description of the tasks that EATCO undertakes to carry out in this first phase) will be used at the next meeting. He also produced a form Confidentiality Agreement between EATCO and UFACEX, which may be used as a model for work with engineers/consultants, who will be mentioned below.

The MoU with the Egyptian Authority is being drawn up as a draft in two different versions: depending on whether EATCO is simply an agent activating the project or more of an investor partner. This document may not be finalized until such time as these and other points of the agreements with EATCO have been defined […]

WHEREAS

1. UFACEX is a Spanish Company working in the field of electricity and gas.

2. UFACEX is interested in entering in the market of [...] Egypt by means of […] developing, constructing and operating a single train of Liquefied Natural Gas Project (LNG Project) in Egypt.

3. EATCO has been rendering advisory and assistance services in Egypt for many years, EATCO is also investing in several projects in oil and petrochemical sector, and is interested in co-operating with UFACEX, in the above-mentioned LNG Project.

Both parties have met in Cairo on 26th-28th January 2000 and in Madrid on 8th-9th March 2000 and have agreed to study and analyse co-operating in the LNG Project. Both Parties agree to the following […]²⁷

First of all, we would like to thank your Excellency for the opportunities we had to meet with you to discuss the LNG Project in Egypt. Since our last meeting on the 21st of March, and in accordance with your suggestions, we have moved forward, in co-operation with our Egyptian partner EATCO, in the development of this interesting project. [...] [O] ur understanding is that the support of the Egyptian Authorities and the commitments of our Companies could be established in terms of a Protocol or a Memorandum of Understanding (MOU) […]²⁸

The First Party [Mr Yehia El Komy] provided the required services for the establishment of this project. It introduced the Spanish Companies to the Egyptian Government through meetings with the Minister of Petroleum and other officials in the Egyptian Government. The First Party also played a main role in obtaining the required official approvals for the establishment of the projects, in addition to the raw natural gas supply approvals, the land allocation, and the coordination with official and financial entities for the establishment of the project.²⁹

ARTICLE 2 - PURPOSE AND SCOPE OF THIS MOU.

The purpose of this MOU is to determine the general framework of the Natural Gas Sale and Purchase Agreement and the responsibilities and commitments to be assumed by each Party with the aim to support the development of the Project. The Parties will cooperate and act in good faith and diligently to pursue the development of the Project.³⁰

In successive visits to Egypt, we have completed a set of tasks aimed at establishing a framework of information upon which decisions can be made with respect to the LNG Project. […] The long-term supply of Natural Gas for the LNG Plant will come from the Government of Egypt's share [of gas] in the production of international operators through a longterm purchase contract (25 years extendable by another period of identical duration) with EGPC. [...] [I]n recent conversations with the Minister of Petroleum, the Minister stated that the interests of the Government of Egypt in relation to the export of gas are 12 bcm, out of which 4 of them would be exported through 'Pipeline’ and the rest as LNG.³¹

'LNG Facility’ Area: 1. The Management Committee is informed of the activities carried out over the last week by the Group responsible for Site analysis [...]³³

Based on the request of the Spanish Unión Fenosa company to purchase the gas needed to produce about 4 million tons per annum; with the company to cover the costs of setting up the liquefaction and storage facilities and the shipping pier and to secure the necessary financing for this purpose; and with the company to also take care of the operations to transfer the liquefied natural gas to Spain; and with the responsibility of the Egyptian side being restricted to supplying gas in the quantities and specifications untilliquefaction.³⁷

Agreement is to be reached on a sale price for the gas upon signing the final contract. [...]

At the end of the negotiations, agreement was reached between the two parties to implement the prices. This is considered to be a success for the petroleum sector in the field of pricing gas for export, [...] This contract has been signed in principle between the Egyptian General Petroleum Commission and the Unión Fenosa company on 15 July 2000, on condition that the competent authorities approve the agreements that have been made regarding the price of the gas, given the potential for this to contribute to the dollar currency returns earned by the petroleum sector […] This will increase with the average export ratios. […] [T]he matter is being submitted to the Board of Directors so that they may review and approve the draft agreement to sell gas to the Unión Fenosa company and begin the implementation procedures thereof.

Chairman of the Board of Directors. [Signature]. Engr. Mohammed Ibrahim Tawilah.³⁸

Decision: after discussion, the board of directors of the Egyptian General Petroleum Commission reached the following decision:

1. To approve the contents of the memorandum [concerning the SPA and gas prices].

2. The Engr. / chairman of the Board of Directors of the [EGPC] , and the Engr. / deputy chairman of the Board of Directors of the [EGPC] are to be authorized to conclude the contractual procedures as required.

[…]

Endorsed, Minister of Petroleum. [Signature] 24 July 2000. Engr. Sameh Fahmi.³⁹

In April 2000, Unión Fenosa […] requested to sign a contract on purchasing the Egyptian natural gas to manufacture, liquefy and export, and market it in Spain. In this framework, an understanding memorandum was [executed] between the Egyptian General Petroleum Corporation (EGPC) and Unión Fenosa in May […] During the landmark visit which was paid by His Excellency President Mohamed Hosni Mubarak to Spain and which supported the project within the framework of encouraging the economic cooperation between the two countries, and after signing the above mentioned memorandum, intensive negotiations were carried out between the two parties. The negotiations lasted till after the termination of the visit and they aimed to sign the gas sales agreement and implement the first project for natural gas liquefaction and export in the history of Egypt. […]

The above mentioned table shows that the agreed upon prices for the sale of natural gas to Unión Fenosa company are in the range of international prices.

In light of the foregoing, the matter is submitted before the Council of Ministers to kindly approve the following:

- signing a contract with the Spanish Company Unión Fenosa to purchase a quantity of natural gas estimated to be about 4 billion cubic meters per year for 25 years of a total quantity estimated to be about 3.5 trillion cubic feet of gas […] according to the conditions and prices mentioned in the memorandum to be paid in dollars.⁴⁴

Approval […]

Signing a [n agreement] with Unión Fenosa Company to develop a project for the liquefaction of natural gas for export to Spain […] Thus, H.E the Prime Minister wrapped up the meeting at 3:30 p.m. He thanked the members of the Cabinet and wishes them continued success.⁴⁵

I have the honor to inform you that we have negotiated with the Spanish company after the Cabinet meeting in a final attempt to improve the maximum price as per the proposed equation for the sale of Egyptian gas and in light of the desire of the Spanish company to closely cooperate with the Egyptian government, the negotiations succeeded and the company agreed to improve the maximum price to be increased by25% […] The Egyptian General Petroleum Corporation has signed the contract with the Spanish Company Unión Fenosa S.A. according to the above mentioned and the main conditions which were stated in the memorandum submitted to the Cabinet. I take this opportunity to congratulate His Excellency President Hosni Mubarak and you for signing the first contract in Egypt's history to export the Egyptian gas.⁴⁶

I would like to present to you a summary of the meeting held with the CHIYODA company (Mr Nagata and Mr Kenzo Ukibe) on the preliminary UFG assessment of potential sites for an LNG plant in Egypt.⁴⁸

The role of the Egyptian Petroleum sector: Sale and supply of gas in the quantities and specifications required to the liquefaction facilities at the project's site in northern Egypt, at a price paid in hard currency and ranging from 0.75-1.25 USD MMBTU […] Attached is a table [that] indicates the sale prices of natural gas which is distributed […] in some countries competing with Egypt. The prices are almost identical to the price of selling gas to liquefaction units […]

The Project was submitted to the Economic Commission of the Board of Directors of the Egyptian General Petroleum Corporation and approved on 20/7/2000. The Economic Commission recommended consulting the board of the Egyptian General Petroleum Corporation in this regard and the board approved the project in its 12th session on 20/7/2000. The Project was also submitted to the Council of Ministers and the council approved the project on 25/7/2000.⁴⁹

WHEREAS, Buyer intends to contract with Seller for the firm supply and transportation by Seller of NG to the Complex, in which the NG will be liquefied and transformed into liquefied natural gas ('LNG'), to be exported for sale to Spain and other territories.

Section 5.1. Seller shall at all times keep a back up supply to meet an on stream (load) factor of 95% of the LNG Complex.

Section 23.2. Adequacy of Supply. Seller is the sole responsible [party] for securing adequate supplies of N [atural] G [as] for performance of its obligations hereunder. Seller shall, throughout the Term, provide Buyer or Lenders with such further assurances as Buyer or Lenders may reasonably request from time to time regarding the continued adequacy of N [atural] G [as] supply sources relied upon by Seller to perform hereunder.

Section 24.3. Adequacy of Supply of N [atural] G [as]. Seller is aware that the supply of N [atural] G [as] to Buyer under this Agreement is a key element for the successful development of the Project, and therefore Seller represents and warrants that its availability of NG will be sufficient to feed the Complex under the terms and conditions of this Agreement. Also Seller represents and warrants that it has, and will have during the Term, all the legal, administrative and corporate rights, licenses and authorizations to deliver the N [atural] G [as] at the Delivery Point and to comply with all its obligations under this Agreement.

15.3 Failure of Market.

(b) In the case of the Seller, Force Majeure shall not include changes in market conditions including, without limitation, changes that:

(i) Directly o [r] indirectly affect the demand for or price of N [atural] G [as].

(ii) Result in the diversion of N [atural] G [as] to other users.

(iii) Are due to the inability of the transportation system and/or pipeline (whether for reasons of maintenance, repairs or lack of capacity or otherwise) to meet consumer demand and/or Buyer demand.

Section 21.1. EGPC's support to the Project. EGPC undertakes to procure that the Egyptian authorities undertake not to interfere with the rights of Buyer under this Agreement, and not to dictate or promulgate any act or regulation which could directly or indirectly affect the rights of Buyer under this Agreement, or affect the capacity of Buyer [sic] to perform its obligations under this Agreement, even in the case of a N [atural] G [as] shortage in Egypt, save for Force Majeure as defined in this Agreement.

EGPC shall also assist and actively collaborate with Buyer to obtain any authorization and/or legal, administrative or governmental benefit to Buyer for the Project and/or the construction of the Complex.⁵⁸

According to the relevant laws applicable in the Arab Republic of Egypt, the Egyptian Petroleum Corporation is entitled to execute the [SPA] [...]

No law, ordinance, statutes or regulations of the Arab Republic of Egypt or of any local authority applicable to or binding on EGPC or by which EGPC will become bound [...] will be violated by the execution and delivery of the [SPA].⁵⁹

On behalf of the Ministry of Petroleum I have the pleasure to inform you that the Egyptian Government official [sic: officially] endorsed the natural gas Sales and Purchase Agreement signed on August 1st, 2000 between UFACEX and EGPC [...]⁶⁰

The agreement's purpose is:

Preamble.

I. UFACEX is exploring the commercial feasibility of building, owning and operating a natural gas liquefaction facility within the area of and adjacent to the Damietta Port, such complex to comprise special facilities for the transmission, processing, storing, loading and shipping of supplies of natural gas and exports of liquefied natural gas within the Damietta Port site.

II. To this effect, UFACEX, subsequent to the execution of a Memorandum of Understanding of May 17 2000, with the EGYPTIAN GENERAL PETROLEUM CORPORATION (EGPC), have executed on August 1 2000, a Natural Gas Sale and Purchase Agreement with the EGPC for an initial period of 25 years to be extended under mutual agreement to an additional period of 25 years.

This liquefaction complex may also include power generation facilities.

According to such Agreement, the commencement of supply on natural gas shall take place on the second half of year 2004.⁶¹

Article 1 — Subject of the Agreement:

The First Party hereby’ undertakes and agrees to grant the right to use to the Second Party, which accepts to acquire it, regarding an area located at Damietta Port, Egypt. This area shall be defined by’ reference to: (I) The area offered by the First Party as described in the map attached as Exhibit 4 to this Agreement and (H) that area marked with horizontal stripes as UF process area within the northern boundaries defined by points A, D, E, F, and G in Exhibit 5 to this Agreement. Both Exhibits 4 and 5 shall describe the area of this Agreement (The Area). The Area shall be surrounded by a wall made of bricks, similar to those available inside the Port.

Article 2 — Object:

The Second Party shall have the right to use the Area to build, own and operate a natural gas liquefaction facility (Complex), for the purpose of transmitting, processing, storing, loading and shipping supplies of natural gas and exports of liquefied natural gas by’ the Second Party’. Such Complex shall also include other facilities such as jetty, a flue gas flare, power generation facilities, and others that might be convenient.⁶³

In a new meeting held in Cairo (October 18th, 2000) between EGPC (Mahmoud Latif Amer), GASCO (TBA), Mr Yehya El Komi and other member[s] of our company, [it] was said [to] us that [...] [technical details regaiding the gas supply].⁶⁴

In a letter to EGPC, Unión Fenosa requests further meetings to resolve technical details about the gas to be supplied, saying:

[W]e would like to have a meeting next Tuesday October 31 - 2000 at 10.00 a.m. hour between EGPC, GASCO, EATCO, UFACEX and our CONTRACTOR (CHIYODA Corp.). [...]

Mr Yehya El Komi shall be in contact with you or Mr Hassan Akl to confirm and prepare this meeting."⁶⁵

[I]n order to progress with our project we will thank you if you could officially inform us about the steps to be done in order to obtain the necessary approvals in front of the Egyptian Authorities to construct our LNG plant in Damietta site (what kind of documents have to be done and the Egyptian Authorities to present these).⁶⁶

With reference to The Cabinet's approval in its session [...] that [SEGAS)] [...] subject to the provision of the Free Zone regime (under formation) to construct, operate and transfer A Specialized Petroleum' Jetty in accordance with (BOT) system for handling, loading, unloading and export liquefied Natural Gas and petroleum products according to (BOT) system in compliance with the provisions of the Law No. 22 of 1998 which amended Law No. 1 of 1996 issued regarding specialized ports in order to serve the project of establish, owns and operate a complex for Natural Gas liquefactions and export thereof [...]⁶⁹

Based on the License Basis signed between Damietta Port Authority’ and [SEGAS], as an affiliate of UFACEX, on December 6, 2000 for the building, ownership, operating and transfer of a specialized petroleum Jetty’... and to build, operate and own a natural gas liquefaction plant, in an area of land owned and administered by’ Damietta Port Authority.

And with regard to the above and the preliminary approval by the Egyptian Cabinet to such project, issued on February’ 6, 2001 and the final one signed by the Cabinet on March 17, 2001.⁷¹

[I]n order to go ahead with our project we will thank you if you could officially inform us about the steps to be done in order to obtain the necessary’ approvals in front of the Egyptian Authorities to construct the LNG plant in Damietta site (what kind of documents have to be done and the Egyptian Authorities to present these).⁷⁵

And with regard to the above and the preliminary approval by the Egyptian Cabinet to such project, issued on February 6, 2001 and the final one signed by the Cabinet on March 17, 2001.⁷⁸

Firstly: The committee ha[s] examined the following documents:

1. The resolution of committee formation No. 116 of 2001.

2. Hand-over report of the land from the New Communities Authority dated 25/3/2001. (Annex no. 1)

3. Cabinet Decree No. 335 of 2001 granting license for concession to construct a specialized jetty and approving the project.

4. License issued by Damietta Port Authority and the annexes thereof regarding the landplot for the project.

5. The attached map signed by DPA and SEGAS, which specifies the boundaries.

6. And according to the minutes of meetings held between the two parties regarding hand-over of the landplot and evacuation thereof from occupations, relocation and construction of the fence and the documents relating to all such matters and other related matters.⁸⁰

Please find attached hereto the following documents [...] A photocopy of the Business Registry document (provided by Yehia El Komi) [...]⁸¹

Reference to your Fax [...] concerning the agenda of the proposed meeting in Cairo next week, we would like to emphasize the following:

1. Gas supply to the first train will be 450 MMSCFD equivalent to 4 bcm as per article 4 of the contract which may have been repeatedly communicated with you in several occasions.

2. EGPC participation of 10% in Damietta LNG plant is based on the concept that EGPC will be the only Egyptian shareholder in this project.

Mr Fernández Martínez testified:

During the EPC Bid Process in 2001, the two consortiums that we considered recommended increasing the capacity of the LNG train to 7.56 Bcm instead of 4.4 Bcm as originally agreed. This would allow a large increase in capacity with almost the same initial investment and equivalent operating costs because of significant economies of scale. We proposed the increase in the size of the project and the Ministry of Petroleum agreed, repeatedly assuring UFG that Egypt had ample gas supply to accommodate expanded capacity and approved the expansion. Later, in 2002, UFG offered Egypt the opportunity to participate directly in the Damietta Project and thus monetize Egypt's natural gas resources by selling LNG directly on the international market. The Government expressed its interest in having EGAS and EGPC buy this increased capacity.⁸²

Article 2: The said company shall be vested with the status of juridical [legal] personality and shall be considered a [private] person of the Special Law.

Article 3: The Minister of Petroleum shall be the minister concerned with applying the provisions of [...] Law No. 203 of the year 1991 concerning this company and the affiliated companies [...]

Article 4: The Company's purpose shall be to operate in all activities of natural gas, and it shall in particular have power to:

(1) Promote and merchandise gas activities investments;

(2) Propose the plans for natural gas industries and projects;

[...]

(5) Assume the management and supervision work on gas activity as shall be determined by the Minister of Petroleum; [...]

Article 5: The Company shall be powered to invest its property and funds by itself or through its affiliated companies. [...]

Article 6: The management of the company shall be assumed by a board of directors to be formed [...] upon the proposition of the Minister of Petroleum [...]

Article 7: The Board of Directors is the higher authority controlling the company's affairs and disposal of its matters. It may adopt whatever decisions it deems necessary toward realizing the purpose for which the company is established and within the context of the targets, plans and general policies of the State.

Article 8: The Company's general assembly shall be formed under the chairmanship of the Minister of Petroleum [...] to be selected by virtue of a decree of the Prime Minister upon the proposition of the Minister of Petroleum [...]

Article 11: The Company's property shall be considered privately owned state-property. The company shall settle the annual profits [...] to the Ministry of Finance.

Article 12: The Company's articles of association shall determine its duration. This shall be issued by virtue of a decree of the Minister of Petroleum [...]⁸³

According with our meeting held on September 4th, in which we commented about the evacuation of the Military Base that occupies [...] the Damietta site which also coincide with the location of the LNG Storage Tank No. 1.

Up to date we have not received any response from the militaries after the meeting held on September 4th in Damietta, I beg your best efforts in order to cause the evacuation of the base and not take any longer concerning the construction of the LNG plant.⁸⁵

His Excellency,

After our meeting held on October 16, 2001, I would like to mention again that the military housing that occupies one part of the site over which the Plant is being built has not been removed... we kindly ask for your best efforts in order to solve this matter as soon as possible.⁸⁶

We would like to thank you for your brief technical presentation [...] concerning Unión Fenosa technical evaluation of the EPC contract offers [...] [W] e [are] still waiting for more information and or clarifications to enable us [to] draw a conclusion regarding your recommendation to award the EPC contract.⁸⁷

[I]n view of the interest that you showed when you visited our GNL Plant at Damietta Port on October 31, 2001, I feel bound to advise you that the military housing occupying part of the land on which the Plant is being built has not yet been removed. [...] We therefore beg your cooperation in solving this problem as soon as possible. There is no disagreement as to the terms of evacuation; all that is required is an order to carry it out.⁸⁹

His Excellency,

In regard of our meeting held on October 31, 2001 at Damiet [t] a, I would like to mention again that the military housing that occupies one part of the land over which the GNL plant [is] being built has not been removed... As you know, the Port Authorities have provided a new site for the Military housing [...] and [...] we kindly ask for your best efforts in order to solve this matter as soon as possible.⁹⁰

The Spanish Egyptian Gas Company (SEGAS) is licensed to carry out its activities in the Private Free Zone [...] The duration of this license is 25 years, could be extended after the approval of GAFI. [...]

The Company shall be bound by the rules of the Investment Law No. 8 of 1997 and its executive regulations, as well as all the current and future decisions regulating Free Zones [...] "⁹¹

It is important to emphasize the reference that is made about the official signing ceremony of the EPC Contract, awarded to the consortium formed by Hallibu[rt]on KBR (formerly Kellogg Brown & Root), Japan Gasoline Compa[n]y Co. and Técnicas Reunidas S.A., as per the unanimous agreement of SEGAS Board of Directors held on September 20, 2001. The signing ceremony took place on December 19, 2001.⁹²

Through [] the Damietta's Port Authority we have maintained several meetings, some of them, being attended by Militaries in Charge, reaching an agreement in which we would take care of the expenses that this military housing re-location may originate, and the Port Authorities would provide them a new site inside the Damietta's Port. [...]

[O]ur situation right now is critical and if this relocation does not occur on an immediate date, there would be a delay on the starting up of the plant with the consequent detriment for both countries, Spain and Egypt, and will entail a loss of income from the GNL sale. [...] [O]n the practice of your responsibilities as Minister of Defence of the Government of the Arab Republic of Egypt, I kindly ask for your intervention, [i]n the knowledge that in your hands is the solution to this issue, that although small for your responsibilities, is of great significance for the well being of the project that we consider of great interest and importance for both countries.⁹³

EATCO, however, have only offset credits to SEGAS [...] in the amount of 651,033 US $, and has made a direct disbursement of 548,967 USS which represent a total amount of 1,200,000 USS. EATCO, therefore, still remains liable to the Company in the amount of 3,120,000 USS. [...] Accordingly, EATCO is required by the Board to fund the amount of 3,120,000 US Dollars immediately.⁹⁵

His Excellency,

[W]e have received the confirmation of the evacuation of the military base, located on our site at the Port of Damietta [...] I want to thank you in a very special way, [for] the effort carried out and the interest shown to this matter, in order to achieve finally that the site is totally free to begin the construction [...]

I would like to emphasize the relevance of this event due to the fact that it avoids any interference for the development of this important project for both, Egypt and Spain.¹⁰²

Once on receipt of the confirmation of the military base evacuation from our site at the Port of Damietta, and being aware of your continuous dedication, efforts and personal intervention in order to make possible the beginning our LNG tank no 1 construction, I want to show you my most sincere gratitude.

I would like to emphasize the relevance of this event that prevents us from any interference on the development of this important project for both, Egypt and Spain.¹⁰³

[B]y means of this letter[,] we hereby notify you that effective as of August 2001, of the following:

1. The Egyptian Natural Gas Holding Company (EGAS) a Petroleum entity incorporated by law No. 203 of 1991 has been fully assigned by EGPC, in executing the SPA […]¹¹²

[W]e hereby notify you [of] UFI's intention to assign the SPA [...] to UFGas and we request from you...your written permission for such assignment of the SPA, and of all [of] UFI's rights and obligations under the SPA, to UF Gas […]¹¹³

The purpose and effect of this Agreement is to set forth the terms and conditions that will govern the participation by EGPC and EGAS in SEGAS and the collaboration between the Parties in the development of the Plant.¹¹⁵

Reference is made to the letter of Mr Antonio Basagoiti addressed to HE. Sameh Fahmy Minister of Petroleum, concerning his proposed institutional visit to Egypt. In this regard, I have the pleasure to inform you that Mr Basagoiti's appointment with H.E. the Prime Minister has been scheduled on Tuesday, Sep[t]. 2nd, 2003.¹¹⁹

The visit is confirmed by return fax from UFG:

I would like to reconfirm the visit of our Chairman, Mr Antonio Basagoiti, to H.E. the Prime Minister next Tuesday 2nd of September in Cairo.

If possible, we would like to take this opportunity to meet also H.E. Sameh Fahmy, Minister of Petroleum on Tuesday 2nd of September.

I would like to inform you as well, that Mr Basagoiti will visit the installations under [...] construction of the GNL plant in Damietta on Wednesday 3rd of September.¹²⁰

[REDACTED]

Once again in Madrid after the visit to Damietta, I would like to thank you for the opportunity to show you our LNG Plant, where you could appreciate the magnitude of the Project and the progress of the construction works [...] As you can understand, dear Mohamed, now it is extremely important, as I had the opportunity to comment with you and with H.E. the Minister last Thursday in Damietta, to make a final effort in order to achieve that the Participation Agreement and the Tolling Contract enter in full force before the end of March, as it is agreed.¹²¹

2.15. The Parties agree to remove from the UFGas Tolling Contract the definition of 'Premium ROE' and, accordingly, all references to such term (as defined in the UFGas Tolling Contract) shall be removed from the UFGas Tolling Contract.

2.16. The definition of the term 'Basic ROE' as provided for in Article 1 (Definitions and Interpretation) of the UFGas Tolling Contract is amended and restated to read as follows:

'Basic ROE means 11%'¹²⁴

EGAS and SEGAS make the same amendments to their Tolling Contract:

2.17. The Parties agree to remove from the EGAS Tolling Contract the definition of 'Premium ROE' and, accordingly, all references to such term (as defined in the EGAS Tolling Contract) shall be removed from the EGAS Tolling Contract.

2.18. The definition of the term 'Basic ROE' as provided for in Article 1 (Definitions and Interpretation) of the EGAS Tolling Contract is amended and restated to read as follows:

'Basic ROE means 11%'¹²⁵

On the basis of the Board of Directors and the Extraordinary General Assembly resolutions we will then obtain the relevant GAFI Decree and Commercial Registration, after which EGAS and EGPC will become officially shareholders of SEGAS and their representatives will be formally appointed as Board Members.¹²⁶

And later:

The required documents, according with the Laws and Regulations of Egypt, were presented to GAFI in order to obtain the approval of the increase of capital issue. As soon as we will obtain this approval from GAFI, we will immediately present the documentation to the Commercial Register, in order to register the modification of the Articles of Incorporation.

We are doing our best efforts to finalise the participation process in accordance with the Egyptian Laws and Regulations as soon as possible.¹²⁷

Construction of the plant began in March 2002, with production starting in late November 2004.¹²⁸

A news article at the time reports:

Egypt's first shipment of liquefied natural gas (LNG) left the port of Damietta for Spain yesterday, opening up a new export sector crucial to the country's economic future.¹²⁹

As you are aware of, pursuant to the Agreement dated 20 April 2005, SEGAS, EGAS and UFGas have agreed that the Commercial Start Date of the Damietta LNG Plant shall take place after the date of signature of such Agreement (this is, after 20 April 2005).¹³⁰

President Hosni Mubarak, accompanied by Dr Ahmed Nazif, the Prime Minister and Eng. Sameh Fahmy Minister of Petroleum, inaugurated on Monday 30 May, 2005 the first LNG facility in Egypt located in Damietta in Mubarak Complex for Natural Gas and Petrochemicals.¹³¹

EGPC reports directly to the Egyptian Minister of Petroleum, which has ultimate responsibility for exploitation of all mineral resources of the Arab Republic of Egypt. All decisions of the Board of Directors are required to be notified to the Minister of Petroleum for approval [...]¹³³

Following the recent conversations held in Cairo, our companies are ready to carry on a deep analysis and to significantly contribute to the further implementation of an energy saving programme in the power generation and industrial sector in Egypt. [...]

His Excellency, our companies have significant know-how in CCGT power stations, in the repowering of existing facilities and in energy saving programme. We are ready to make available this know how and to cooperate with Your staff as well as all the concerned Egyptian Authorities and related Companies for the implementation of the programme. [...]

His Excellency we are ready to arrange for a meeting with Your experts and representatives at Your earliest convenience in order to start the proposed activities […]¹³⁷

As you are aware of, a Force Majeure event was notified to you under the Tolling Contracts on July 11, 2005. In this respect, as anticipated in the last BoD of SEGAS we are glad to formally notify you that the Force Majeure event has been removed. Therefore the Commercial Start Date of the plant will be at 00:00 of September 1, 2006, as agreed in the last BoD of SEGAS.¹³⁸

I refer to our discussions that took place regarding holding a meeting to discuss terms and conditions of the Sale and Purchase Agreement for Damietta Train 1.

In this respect, please advise your availability during 30th and 31st October 2006, if required 31st October, to hold said meetings in Madrid, Spain […]¹³⁹

Tolling Contracts provide that, as from the Commercial Operation Date (COD), and not before, the Annual Delivery Program (ADP) shall be set, according to [which] the production amounts corresponding to each Toller out of the production capacity of the Plant and their respective contracted capacity under each TC are determined.

COD has been set on the 15 th of October 2006, according to the letter sent by SEGAS to the Tollers on the 21st of September 2006.¹⁴⁰

An[n]ex 1. Summary Table:

From 01-01-2007 to 01-07-2007:

If Brent >=33 USD/Bbl → 0,25 USD/MMBtu,

From 01-07-2007 to Commercial Start Date of Train 2, or 1 January 2012, whichever comes earlier:

If Brent >= 33 USD/Bbl → 0,25 USD/MMBtu, or

If Brent >=38 USD/Bbl → 0,375 USD/MMBtu, or

If Brent >=43 USD/Bbl → 0,50 USD/MMBtu,

From to Commercial Start Date of Train 2, or 1 January 2012, whichever comes earlier:

If Brent >= 33 USD/Bbl → 0,25 USD/MMBtu, or

If Brent >=38 USD/Bbl → 0,375 USD/MMBtu, or

If Brent >=43 USD/Bbl → 0.50 USD/MMBtu. or

If Brent >=48 USD/Bbl → 0,60 USD/MMBtu, or

If Brent >= 53 USD/Bbl → 0,70 USD/MMBtu.¹⁴¹

In mid 2000 and before signing the contract with Unión Fenosa and through the final negotiations carried out with His Excellency’ Eng. the Minister of Petroleum, the first adjustment to the price equation was made with an increase to the maximum limit to reach 1.25 USD in case the price of Brent crude is more than 24 dollar/barrel [...] In addition to the above mentioned and within the framework of the instructions of Eng./ Minister of Petroleum to improve the terms of the contract signed with Unión Fenosa, a contract was signed with the company to increase the energy of the liquefaction plant to reach approximately 7 BCM annually [...] In the framework of the efforts which you have exerted in this regard based on your instructions to continue the negotiations with Unión Fenosa to introduce a new adjustment on the price equation of national gas (second adjustment) which is supplied to the company to be liquefied in favor of its interest in Damietta liquefaction plant in light of the current increase in the international prices of energy.

Eng. Hani Suleiman, the First Under-Secretary of the Ministry of Petroleum, and Eng. Sherif Ismail, Chairman of Egyptian Natural Gas Holding Company (EGAS) made an official visit to Spain during the period from 29-31st October, 2006. Several meetings were held with the officials of Unión Fenosa Company and after extensive discussions and negotiations for the adjustment of the maximum price which was determined by 1,25 USD\MMBTU in the original contract signed in August 2000, the negotiations were recently resumed […]¹⁴²

The loss of production that we have experienced in the last months, due to lack of feed gas, is causing Unión Fenosa Gas a significant impact that gets worse during the months when the demand increases due to low temperatures in the winter season, and this prevents us from meeting the committed supplies with our clients in the Spanishmarket. [...]

Understanding and appreciating the continuous efforts of EGAS to improve the feed gas to Damietta, once again, I would like to ask you for a new effort in order to increase the feed gas to Damietta […]¹⁴³

Reference is made to your letter dated January 26th, 2007, concerning the feed gas to Damietta LNG Plant and your analysis for the production profile for 2006 and the production plan for 2007, please be informed that EGAS exert[s] its best endeavor[s] to improve the feed gas supply to Damietta LNG Plant [...]¹⁴⁵

Dear Elias [Velasco, UFG's Chairman] [...] Looking for further mutual cooperation in the future.¹⁴⁶

Article One - The board of directors of the Egyptian General Petroleum Corporation shall be presided by the Minister of Petroleum and the membership of: - Minister of Finance; Minister of Electricity and Energy; Minister of Investment; Minister of Trade and Industry; Minister of State for Local Development [...] Three [members] with expertise in the main activities of the Corporation from the employees of the Ministry of Petroleum and its affiliated authorities to be appointed under a resolution by the board of directors upon the proposal of the Minister ofPetroleum.¹⁴⁷

A gas supply-demand gap emerges in the short-term (in 2009/2010) and therefore it is very important that progress is made on signing upstream GSAs and sanctioning new development projects this year. There is enough discovered gas to be developed until 2017/2018, after which point yet-to-find (undiscovered) reserves will need to be produced. [...]

In order to ensure supply to the LNG plant to the end of the loan tenor in 2022, some 26 tcf reserves need to be discovered and developed by 2016/2017, assuming that no further LNG exports are sanctioned. This is equivalent to an average annual discovery rate of 2.6 tcf/year over the next 10 years, which is lower than the average discovery rate of 4 tcf/year seen over the last 5 years. [...]

Wood Mackenzie has not performed any geological studies to establish if this level of reserves can reasonably be found in the timeframes required for the SEGAS Project but if exploration drilling and success rates are maintained at previous levels and new fields are developed in a timely manner then Wood Mackenzie believes that this target can be met.¹⁵⁰ [...] Wood Mackenzie has reviewed EGAS' data and in light of its experience in analysing Egypt's energy market and forecasting gas demand worldwide, we believe EGAS' gas forecast to be reasonable.¹⁵¹

I would like to analyse again with you the situation concerning the feed gas supply to Damietta, that we have been experiencing during the first part of the current year 2007 and that will become even worse during the rest of the year 2007, according to the fax received from EGAS informing SEGAS about the forecasted gas supplies for the next months (June to August) [...]

Understanding the continuous efforts of EGAS to improve the feed gas to Damietta, once again, I kindly ask you a further effort in order to increase the feed gas supply to Damietta, thus, allowing Unión Fenosa Gas to meet its commitments with the customers, recovering at the same time the production lost and fulfilling the Annual Delivery Program of 78 ships established for year 2007.¹⁵²

[K]indly be informed that Quality Communications Productions (QCP) is currently preparing a report for the Economist magazine entitled 'The Gateway to Opportunity'. The objective of this report is to inform on the latest developments and opportunities in the Oil & Gas sector, communicating our position to the world, marketing our competitive advantages to the international community, while at the same time reinforcing the idea of Egypt as an ideal investments venue.

This report will feature, through professional and top quality in terms of both content and design, not only the government and state holding companies, but also the private sector companies, both Egyptian and multinational, who are behind the success of Egypt's Oil, Gas & Petrochemicals industry.

The Editor-in-Chief [...][and] the Project Director [...] are now working on the report. They will contact you to further explain technical & commercial advantages of participating in this report. [We] would appreciate it if you could spare some time for this important issue.¹⁵⁶

UFG agrees to co-operate.¹⁵⁷

In mid-2000, before signing the contract with Unión Fenosa and through the final negotiations carried out with His Excellency the Engineer Egyptian Petroleum Minister, the price equation was first adjusted as the maximum increased to 1.25 USD in case the price of Brent crude is more than 24 USD/barrel [...]

In light of the instructions of the Eng/the Minister of Petroleum to improve the terms of the Contract with Unión Fenosa, it was agreed with the Company in June 2003 on the exploitation of the surplus capacity of the liquefaction factory in order for the Petroleum Sector to benefit from a percentage up to 50% from the total capacity of the factory which decreases gradually to reach 42% during the initial five years of operation [...]

In light of this agreement, which allows the Petroleum Sector to liquefy the gas owned by the State and sell same according to international prices maximizing the revenues for Egypt, the average price of exporting the Egyptian share of the liquefied gas from the liquefaction factory in Damietta during 2005/2006 has reached around 5.7 USD/MMBTU. [...] Moreover, such investments exist in Egyptian territories, and the replacement value is estimated by approximately 2.3 billion dollars in addition to what the establishment of the plant in the free zone area in Damietta represents of economic and social development and employing of Egyptian labour and operating ancillary and assisting activities to the project in the governorate, all of which represent direct and indirect economic returns to the Egyptian economy. This matter is submitted for your consideration and guidance [...]¹⁵⁸

Rachid Mohamed Rachid, minister of trade and industry, says he and his colleagues are not projecting a gas shortage and the government has moved to curb energy demand by raising prices for industrial purchasers or off-takers. But he concedes demand is growing very fast.

'We are not expecting gas shortages in the short term. We have laid out the energy policy and the pricing strategy for the next 15 years. The reality is that we are growing much faster than we expected. The increase in energy consumption is growing at double-digits,'Mr Rachid said.¹⁵⁹

EGAS [...] commits to [...] (b) supply to UFGas the under-supplied quantities, which the Seller failed to deliver to UFGas in 2006 and 2007 [...]¹⁶⁰

In mid-2000, before signing the contract with Unión Fenosa Gas and through the final negotiations carried out with His Excellency Engineer the Egyptian Petroleum Minister, the price quotation was first adjusted as the maximum increased to 1.25 USD in case the price of Brent crude is more than 24 USD/barrel [...]

In addition to the above mentioned and in the framework of the instructions of the Minister of Petroleum to improve the terms and conditions of the contract signed with Unión Fenosa Company, a contract was signed with the company to increase the capacity of the liquefaction plant with annual energy estimated by 7 BCM/annum. Petroleum sector benefits of that by a proportion up to 50% although the contribution of the sector whose investment was estimated by 1.3 billion USD in the project has been limited to only 20% [...]

In the framework of the efforts which you have exerted in this regard and based on your instructions to complete negotiations with Unión Fenosa Company to introduce new amendment on the price equation of natural gas (second amendment) which is supplied to the company to be liquefied in favor of Damietta liquefaction plant in light of the current increase in the international prices of energy.

Eng. Hani Suleiman, the First Under-Secretary of the Ministry of Petroleum, and Eng. Sherif Ismail, Chairman of Egyptian Natural Gas. Holding Company (EGAS) made an official visit to Spain during the period from 29-31st October 2006. They held several meetings with the officials in Unión Fenosa Company and after extensive discussions and negotiations in order to adjust the maximum price which was determined by 1.25 USD\MMBTU in the original contract signed in August 2000, negotiations have recently resumed [...]¹⁶¹

First: Natural Gas Local Consumption: Strategy of the ministry of petroleum aims at expanding the depend [e] nce on Natural Gas utilization [...]¹⁶⁵

EGAS [...] commits to supply the under-supplied quantities which the Seller [EGAS] failed or will fail to deliver to UFGas in relation to the full entitlement of UFGas of Contract Year 2008 [...] according to an annual recovery program in such a manner that UFGas shall recover all such quantities, starting in the year 2009 and ending before December 31, 2012.¹⁶⁶

Following the principles of agreement reached during the last visit to Madrid and the side letter (SPA) signed on July 11th, 2008. Please be informed that, based on the concerned authorities' approval pertaining the concept of the above mentioned documents, UFGas is kindly requested to activate the new applied gas prices effective of July 1st, 2008 [. ]¹⁶⁷

UFGas is specially affected by this situation [falling feedgas supply] in such a manner that UFGas' gas reserves have been reduced dramatically and cannot face its customers' firm contractual commitments, and more than that is not able to satisfy the Spanish Regulator provisions. This will negatively impact on the image of UFGas in the Spanish gas market as well as on the image of Egypt as a gas supplier country to the Spanish market.

We would also like to remind you of the recent agreement reached between UFGas and EGAS in July 2008 by means of which EGAS is bound to supply at least 15 LNG cargoes in the 2nd half of year 2008.¹⁶⁸

First of all I would like to thank you very much for the valuable time you gave to me and to my colleagues on October 16th in your office. I am so pleased with the very open and candid discussion we had and your consistent support of our joint successful SEGAS LNG project. In the past, with your great vision, we managed to build together the first LNG project in Egypt and to penetrate the first European LNG market for the Egyptian gas. Today you made us comfortable that SEGAS project will continue its success with your extended support and our mutual cooperation to maintain a satisfactory agreement for both countries, Egypt and Spain [...]¹⁶⁹

Regarding the miss-supply of gas to UFG due to shutdown of Burullus gas fields from November 21st to December 2nd, and taking into consideration the total gas volumes received by UFG at the end of the year 2008, we are willing to meet [to] try [...] to reach a satisfactory agreement for the Parties, including all the pending issues that we have still on the table. To this purpose, and in line with the general principles commented in the meetings held on October 16th with H.E. the Minister of Petroleum, and on October 15th with you, I would like to propose the following wording for [...] the Side Letter in order to close it:

'Every month, starting from April 1st 2009, if the average of the six preceding month of the monthly quotations of Brent exceed 15$/bbl or fall below 98$/bbl, the Parties shall meet and review this scheme set forth hereby.'¹⁷⁰

A Cairo court on Tuesday overruled the Egyptian government's decision to allow exports of natural gas to Israel and said the constitution gave parliament the right to decide on sales of natural resources.¹⁷¹

The global financial crisis that began in 2008 made investors unwilling to start new natural gas exploration projects. In light of global economic uncertainty and the high cost of development, many investors postponed exploration and development activities, particularly offshore, which accounts for about 80% of Egypt's gas production.¹⁷³

The petroleum sector pursues a balanced policy by allocating one-third of the natural gas reserves for domestic consumption and a maximum one-third for export while keeping the remaining reserves for future generations.¹⁷⁴

I think that it would be convenient [...] to define as well an annual recovery program for the under-supplied quantities relevant to the period from 2006 to 2009.¹⁷⁶

We feel it is necessary to draw your immediate attention to the operational requirements and associated risks that the shortfall of gas supply is generating in SEGAS LNG Plant. Recent circumstances of availability of gas to SEGAS have reached to a point where Owner must notify the impossibility to maintain the stable operation of the Plant if this situation is repeated and comes to stay for a continuous period.¹⁷⁷

The situation of the gas supply to Damietta LNG plant is dramatically worsening day by day, facing the risk of a shutdown of the plant due to a gas supply below the minimum flow threshold. This fact will cause, inter alia, a very negative impact at international level on the reputation in terms of reliability of all the Parties involved in the Project. Therefore I suggest arranging a meeting in Cairo at your earliest convenience to agree an action plan in order to overcome the present problems.¹⁷⁸

In the same time and considering the difficulties caused by the big delays in the upstream development plans associated with the international economic crisis, EGAS has thoroughly discussed this serious issue with the upstream parties in the way to accelerate those development plans in order to add valuable gas quantities to the present system which is the key solution for all problems caused by lack of gas supply for SEGAS and all other consumers as well.¹⁷⁹

As shown in our presentation [...] the feed gas shortfall has been increasing during the last months, with a mere 50 % compliance of the ADP in January 2010, and is having a huge impact on UFGas' cost structure.

The attached presentation notes:

Reputable international sources suggest a relevant increase in Egyptian gas exports, whilst the supply to Damietta LNG Plant has been dramatically reduced.¹⁸⁰

A Cairo court on Saturday gave the Egyptian government legal clearance to allow natural gas exports to Israel, cancelling a lower court's verdict to stop exports.

The Higher Administrative Court, an appeals court for cases involving the state, also ruled Egypt should monitor the price and quantity of its exports and ensure it met local energy needs before exporting.

[...] 'It is not within the jurisdiction of the courts to hear appeals against the government's decision to export gas to eastern Mediterranean markets, including Israel,' said Mohamed Husseini, who chaired the court's meeting.

The state's decision to export gas to Israel was 'sovereign,' he said.¹⁸²

As agreed during the meeting I am sending to you a copy of our presentation that summarises the main subjects under discussion, i.e. current gas supply, recovery plan and pricing issues, as better detailed here below.

In respect of the gas supply, UFGas appreciates EGAS' effort to improve feed gas supply from the 1Q levels to around 500 mmscfd (67% of the ADP) during the first days of April 2010, as well as EGAS' commitment to ramp up supply in the coming years and to achieve supply up to nominal plant capacity in 2013 and onwards.¹⁸⁴

EGAS has planned this Recovery Program by assigning to UFGas all potentially expected excess production starting from 2014 to last till the full recovery achieved. Additionally, the priority will be given to UFGas in any capacity not being exploited by the third party gas entitled to EGAS capacity after BG/Petronas contracts' expiry.¹⁸⁵

The Parties execute this additional Side Letter due to EGAS' continued failure to meet its payment obligations under the EGAS Tolling Contract with SEGAS.¹⁸⁶

At 15:00 hr today SEGAS Operations got a phone call from EGAS [Toller Representative at SEGAS LNG Plant in Damietta] requesting to immediately proceed cutting the feed gas, stopping the production and maintaining the Plant in total recirculation under the threat of grid operator closing the feed gas valve if not done in 10 -15 minutes. SEGAS complied with the instruction [... ]¹⁸⁷

We hereby want to record that the sudden suspension of the supply constitutes an unacceptable breach of your obligations to supply natural gas to the LNG plant in accordance with the terms and conditions of the gas supply agreement dated 1st August 2000. [...] We consider all this directly attributable to EGAS and we reserve our rights with respect to the subject matter under the Contract or elsewhere to protect our interests and recover any damages suffered.¹⁸⁸

As for the committed volumes during the transient period of shortfalls, the positions are aligned with the exception of the first quarter of year 2011. We have made the effort to adjust the quantities as per Egas' indications and we appreciate Egas' position to commit to such minimum volumes as they are of extreme importance to guarantee a minimum throughput in Damietta LNG Plant and a minimum level supply to markets.¹⁸⁹

Street protests in Egypt intensified on 25 January 2011. I remember hearing that there were calls for people to join the demonstrations in the press that week. The press was saying that big demonstrations would take place on 28 January 2011, after Friday noon prayers.¹⁹⁴

At the same time, Egypt was also suffering from an unfolding energy crisis that manifested itself in country-wide electricity shortages and daily power cuts. In addition to the inconvenience and hardships this caused households, energy shortages also had a negative impact on industry, which in many cases, such as heavy industries like cement production, were operating at 50-60 per cent capacity. This energy crisis had a strong negative impact on the economy, with significant reductions in industrial production and employment.¹⁹⁵

The Global Financial Crisis and the 2011 revolution caused instability and security concerns that made investors reluctant to invest.¹⁹⁶

In consequence, investment fell for both exploration for new fields, and development of existing fields with existing infrastructure in order to maintain or increase capacity. The latter, in particular, caused a rapid decline in the levels of gas production.¹⁹⁷

Egypt's military rulers swore in a new Cabinet on Tuesday. Energy veteran Eng. Mahmoud Latif, formerly known as the head of the Egyptian Natural Gas Holding Company (EGAS), became the new Petroleum Minister […]

Latif was a key figure in implementing Egypt's integrated gas strategy and was the head of many petroleum companies including the Egyptian Natural Gas Company (GASCO), the General Petroleum Company (GPC) and Badre El Din Company (BAPETCO). In a later stage, Latif was appointed as the chairman of the state-owned Egypt Natural Gas Holding Co (EGAS).²⁰⁶

Eng. Mahmoud Latif the New Petroleum Minister said [t] hat, petroleum sector will give priority to domestic market in the provision of petroleum products and natural gas.²⁰⁷

We negotiated and initialed a draft Heads of Agreement (the 'HOA ') with EGAS during that meeting, which covered the three points mentioned. We agreed that EGAS would submit the initialed draft HOA to the Government for approval.²⁰⁹

Eng. Abdallah Ghorab, the President of the Egyptian General Petroleum Corporation is announced as [n] ew Petroleum and mineral resources Minister, He replaces Eng. Mahmoud Latif [...]²¹³

New Heads of Agreement initialized on 23.02.2011 and subject to ratification by March 31st.

The agreement was approved by the Board of Directors of UFGAS 29th March 2011.

UFGas understands it was also approved by EGAS and currently is pending on EGPC and other Egyptian Authorities approvals.²¹⁴

After that meeting, there was silence on the Egyptian side for a while. In May of 2011, EGAS informed us that some of the provisions were 'not acceptable' to the Government, who wanted a higher price for the gas sold to UFG.²¹⁵

[T]he strategy of the Egyptian petroleum sector focuses on the local market demand and gives it absolute priority.²¹⁶

The attachments [...] include the proposal (unofficial) from S. Ismail as we discussed before, for your evaluation and we can discuss after your evaluation and internal coordination, to plan for the next step, I understand that they will act immediately after they receive U.F.Gas verbal agreement to get the competent authorities [sic] approval.²¹⁸

I am writing you further to my previous email and with reference to the subject matter. First, I would like to acknowledge your support to restart Damietta LNG production. However, I would like to express my strong concern due to the low feedgas supplied to the LNG Plant. As you are well aware, to operate the Plant on steady mode requires a minimum feedgas quantity and the currently supplied quantities are below such threshold […]²¹⁹

Regarding the gas price modification to Unión Fenosa, the subject is just approved yesterday 1st November 2011 by EGPC board members and it's in [on] its way for Petroleum Minister and cabinet of ministries approval and we are doing our best to finalize this issue before the elections.²²⁰

We write to you [...] in relation to EGAS' continuous Default in the supply of the contracted feedgas quantities to the Damietta LNG Plant; To this respect we reserve our rights under the Supply Contract and the applicable Laws.

In the process of the negotiations [...] in connection with EGAS' request to increase the price of the gas supplied to UFG, EGAS committed with UFG to supply the Damietta LNG Plant with certain Minimum Committed Feed Gas Quantities during the transient period of shortages until 2013 [...] EGAS has requested twice to stop LNG production on October 26th and November 2nd. Further, the feedgas supply has been extremely erratic [...] [W]e hereby request you to respect the Minimum Committed Feedgas Quantities in the supply to the Damietta LNG Plant to allow UFG Management to support the approval of the Heads of Agreement.²²¹

"Throughout the Period [of the HOA] , EGAS hereby commits to deliver a continuous supply of natural gas to the LNG Plant of no less than a minimum average daily feed gas quantities expressed in million standard cubic feet per day (mmscfd) (hereinafter the 'Minimum Feedgas Commitment'). The Mininum Feed Gas Commitment shall be as provided in the following quarterly schedule; [...] ; resulting in an average Mininum Feedgas Commitment for the year 2011 equal to 487 mmscfd. Year 2012: 560 mmscfd; Year 2013: 600 mmscfd²²⁴

[T]he [HOA] , was an exceptional measure taken by UFG to accept lower deliveries of gas for a transitory period and provide for a recovery plan by which all 'lost' volumes (i.e., volumes not delivered to UFG when due under the SPA) would be 'recovered' by delivery in subsequent years.²²⁵

First of all we would like to thank you for the information provided to us with regard to the shutdown in Burullus facilities and we really regret the consequences of this event.

Notwithstanding the aforementioned, taking into consideration the Sale and Purchase Agreement [...] nowadays UFG cannot accept this letter as a Force Majeure notification based on the following contractual considerations [...]

Consequently, please kindly consider the present letter as an official UFG's rejection of the FM notification mentioned above and eventual suspension of EGAS' obligations under the SPA.²³¹

We understand that the Burullus facility has resumed its operations [...] As we have not timely received full particulars of the event as detailed here above and until we receive and analyze them, we are not in a position to accept your Force Majeure Notification and reserve our rights under Article 17 of the Tolling Contract to reject such notification.²³²

(EGAS does not follow up on its force majeure notices).

[W]e are seriously concerned by your description of the current situation, which led to EGAS' default on the feedgas supplies to the Damietta LNG Plant and would cause the feedgas supply to Damietta LNG Plant [...] to be significantly below the Minimum Feedgas Commitment agreed in the Heads of Agreement [...] [T]his will have direct consequences over us, such as damages, costs and/or additional expenses [...]

[O]ur view is that EGAS must and can act promptly to supply Damietta LNG Plant at the minimum committed level under the HoA (560 mmscfd, on average). The current shortfall stands at around 175 mmscfd, and we see different alternatives that EGAS can implement to comply with its Minimum Feedgas Commitment during 2012. These include a limited prorata reduction of Industry and Other consumers, a limited increase of mazout as primary energy for electricity generation and certain industrial consumers or a combination of both. Such measures are directly under your control and will have as a consequence the avoidance of the Default in the supply to Damietta LNG Plant under the HoA (not to mention those under the SPA).

As the Country faces difficult supply/demand scenarios through the Transient Period 2011-2013, UFG has shown its strong commitment with EGAS, in particular, but also with Egyptian Authorities in general, by recently agreeing a natural gas price increase and a reduction (even temporarily and to be recovered in the future) of the volumes down from the contractual volume to a minimum committed quantity. Now we strongly request that EGAS takes the necessary steps to guarantee the supply of natural gas to the Damietta LNG Plant within the agreed level.

We trust EGAS will support the compliance of our agreement in place, and we are sure that this will strengthen the continued development of our partnership, but also it will strengthen EGAS and the Egyptian Petroleum Sector as a whole, since the opposite (i.e., the continued default under the agreement) will not help UFG to continue supporting EGAS and will surely have as a consequence, apart from the economic losses, deficit in the sector, delay in projects, lack of new investments and finally additional shortfalls affecting both exporters and domestic consumers.²³³

Among the highlights for year 2011 Mr Conti refers to the production of the plant not being adversely affected by the revolution that has taken place in the country during this year adding nevertheless that the final production was significantly under the budget expectations.²³⁴

Reference is made to yesterday's communication received by SEGAS in which a supply to Damietta LNG Plant of only 150 mmscfd was announced due to gas production reduction in certain limited gas fields. As a direct consequence of such nomination, well below the minimum turn down ratio of the Damietta LNG Plant, SEGAS has been forced to stop production for the third time in year 2012.

Contractually, supply of NG to Damiet