Running out of gas

20 Oct 2010 By Fiona Maharg-Bravo

The Spanish energy giant was recently ordered by an international court to pay more for gas from Algeria’s Sonatrach, with the rise backdated to 2007. Madrid is lobbying Algiers over the matter. But it doesn’t have much leverage. Gas Natural’s chunky dividend may have to be cut.

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Miguel Sebastian, Spain's Industry Minister, travelled to Algeria on Oct. 18 to discuss, among other things, a price dispute between Gas Natural, the Spanish energy giant, and state gas supplier Sonatrach.

A government spokesperson said Spain hoped Gas Natural could resolve the conflict soon, Reuters reported.

Gas Natural said it would have to pay a maximum of $1.97 billion to Sonatrach after an international arbitration court in Paris ruled on Aug. 16 in favour of Sonatrach in the dispute.

In a statement on Oct. 1, Gas Natural said the ruling would have a 450 million euro ($614.6 million) impact on its 2010 net profit. The group would also have to pay a higher price to Sonatrach in the future. The impact on 2012 earnings before interest, depreciation, taxes and amortisation would be an estimated 400 million euros, the company said.

The Paris court said Sonatrach had the right to increase the price of gas supplied to the Spanish utility from its North AfricanEuropean pipeline from 2007. Gas Natural has appealed the decision and called it "disproportionate".

Reuters story: Spain hopes for quick deal with Algeria over gas prices

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A government spokesperson said Spain hoped Gas Natural could resolve the conflict soon, Reuters reported.

Gas Natural said it would have to pay a maximum of $1.97 billion to Sonatrach after an international arbitration court in Paris ruled on Aug. 16 in favour of Sonatrach in the dispute.

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