London, 5 Jan 2004 — Shearman & Sterling LLP advised the project company, El Behera Natural Gas Liquefaction Company, on the development and financing of the Egyptian LNG project. Train 1 of the US$1.150 billion deal signed on 19 December 2003.

The project is sponsored by BG of the UK, Petronas of Malaysia, Gaz de France of France and the Egyptian state gas company. The second train of financing of around US$550 million is expected in January 2004.

The project involves the development and financing of the design, construction, operation and maintenance of a single train natural gas liquefaction facility at Idku, Egypt. It is Egypt's biggest ever project financing to date, and as a result Egypt is set to become the world's seventh largest exporter of liquefied natural gas (LNG) by 2006 — achieved in a very short space of time during a period where the Middle East project finance market continues to be affected by the events of 11 September 2001 and has also suffered from the regional destablisation caused by the Iraq war.

The Egyptian LNG Project also marks a number of firsts in the project finance arena, including being:

• the first LNG project with a structure designed to facilitate the addition of new liquefaction trains;
• the first project financing to utilise the political risk cover available from the European Investment Bank as part of its Euromed facility;
• the first use of a bankable tolling agreement for an LNG plant in the region; and
• the time taken to develop and finance the project is less than for any other Middle Eastern LNG project.

The Shearman & Sterling project and development finance team was led by managing partner Kenneth MacRitchie and included associates Adam Cooper, Tim Pick, Shalini Sequeira, Rowena van de Grampel and Nicole Clouthier. Other Shearman & Sterling partners involved included Chris Bright (competition), and Michael McGowan (tax).

Kenneth MacRitchie commented:

"Middle-Eastern project financings in countries which are new to international deals on this scale are always complex, and Egyptian LNG has proved to be particularly so given its scale and high profile, the political sensitivity in this year's regional environment and the current project finance bank market.

"I believe this deal reinforces Shearman & Sterling's reputation as the project finance team which gets the difficult deals done. Our team helped the sponsors to achieve their commercial objectives and complete the deal in a tight timetable through our legal expertise, problem-solving ability and sheer commitment and dedication to the job."