Nigerian LNG set to resolve gas dispute with Italy's Enel

Jan. 5, 1998 The board of directors of the Nigerian LNG Company (NLNG) has given management approval to reach a settlement with Enel of Italy, against which it has filed arbitration in Switzerland over breach of contract.
The NLNG board, which was technically dissolved when petroleum resources minister chief Dan Etete withdrew the Nigerian non-executive members, was able to take the decision because of its partial reconstitution.
Two directors of the state-owned Nigerian National Petroleum Corporation (NNPC) have been appointed to the board. Based on the two new appointments, a quorum was formed, thereby enabling the meeting to reach a decision on the controversial NLNG/Enel dispute.
The reconstituted NLNG board also gave approval for NLNG to sign a revised agreement with Enel.
The new agreement, according to sources, is similar to the one which was cancelled in Dec. 1996. The main difference, is that LNG will now be delivered to the Gulf monitor terminal, which will act as agents for Enel.
A swap arrangement is said to have been agreed between Gulf and Enel, but NLNG is not a party to the arrangement.
As yet, there is no indication that NLNG will stop arbitration proceedings against Enel. Sources close to NLNG said shareholders of the company, who met immediately after the board meeting on Dec. 29, have ratified the decisions of the board at an extraordinary meeting, in accordance with NLNG articles of association.
In Dec. 1996, Enel, which had entered into a sales/purchase contract with NLNG for 3.5 bn cubic meters of gas per annum, unilaterally repudiated the contract, claiming not to have a receiving terminal for the gas.
Enel rested the repudiation of the contract on its inability to get the Italian government's approval to build a receptor terminal at either Montalto di Castro or Monfalcone.
NLNG, not satisfied with the breach, took the case to the three-man arbitration panel in Geneva, claiming damages.
Enel, which earlier filed a defence before the panel, made peace overtures, approaching NLNG and submitting a proposal on how to receive the gas through another terminal.