Italian Edison wins Algerian long-term natural gas contract case

Author: Lucie Roux

2013/05/01

Italian utility Edison has won its arbitration case against Algerian producer Sonatrach to have its long-term natural gas contract lowered.

The decision, made by the Court of Arbitration at the International Chamber of Commerce on 23 April, will boost Edison's profits for 2013 by about €300m.

Because of the 1 May public holiday, Edison was not available to comment on the new terms of the contract.

The rising cost of gas under long-term contract, when compared with spot gas, led the Italian company to arbitration negotiations with Sonatrach in August 2011.

A resolution to the supply contract between the companies could lead to some development on the proposed 8 billion cubic metre (bcm)/year Galsi pipeline, which would link Algeria directly with Italy. The long-term contract between Edison and Sonatrach was understood to be one hurdle in reaching a final decision on the project (see ESGM 23 August 2013).

The Algerian case is the third recent arbitration victory Edison has had with its gas suppliers.

Last autumn, the same court ruled in Edison's favour against Italian incumbent Eni, concerning a 4bcm/year supply contract from Libya (see ESGM 1 October 2012).

Less than a month earlier, the Court of Arbitration ruled in favour of Edison with regards to an LNG delivery contract from Qatar's RasGas (see ESGM 11 September 2013). That victory, over a 6.4bcm/year contract into the Rovigo LNG terminal, saved Edison €450m.

The premium of Edison's long-term contract price over lower PSV hub prices has had an adverse impact on the company's results in recent years.

Edison is Italy's second biggest gas importer, after Eni. The company supplies around 20% of the Italian market. Lucie Roux