Pioneers in the gas market
UFG was founded in 1998 as a gas subsidiary of the electricity utility Unión Fenosa.
Natural gas was set to increase its participation in the energy balances of all European countries and all estimates predicted a strong increase in the consumption of this fuel. The gas was set to have a clear dominance in the energy model in the following decades.
In Spain, it was anticipated that new electricity generation would be developed mostly by building combined cycle power plants. The supply of these plants would greatly increase gas consumption in Spain and would make the relationship between the gas and electricity sectors stronger and being "upstream" in the gas business would be a key success factor.
UFG has been committed to active participation in all the links of the natural gas value chain since its inception, to ensure better control of processes and achieve greater flexibility. Being present throughout the chain of the gas business, it could supply the new power plants on favourable terms, marketing gas in both the Spanish and international markets, and take advantage of new combined cycle projects worldwide.
The contract formalized in July 2000 with the Egyptian General Petroleum Corporation (EGPC), ratified by the Cabinet of the Egyptian Government, and with a duration of 25 years, was one of the most important operations for the future of the company.
The UFG gas project in Egypt included the construction of a liquefaction plant in Egypt, the shipping of LNG and the construction of regasification plants and pipelines connecting the plant with the combined cycle power stations and the national gas network.
The liberalization of the gas market in Spain created new opportunities for the growth of UFG, both in the area of supply, as it could obtain a stake in the gas coming from Algeria via pipeline, and in the marketing and distribution market. In October 2001, an auction was held to open the contract to new operators for gas coming from Algeria by pipeline. UFG obtained 0.84 bcm until December 31, 2003. This amount represented 20% of the total gas auctioned and at a competitive price which placed the company in an advantageous position in the industrial market in the short term. The availability of this gas allowed the initiation of marketing to the industrial market.
In 2002, a broad alliance of cooperation on gas was formalized with the Government of the Sultanate of Oman. Within this agreement, UFG signed a short-term supply contract with the company OMAN LNG for a total of 1.8 bcm of LNG for the years 2004 and 2005., One of the most significant aspects of the agreements formalized with the Government of the Sultanate of Oman is the building of a third liquefaction facility in port area of Qalhat in the city of Sur, in Oman. From 2006, this would produce 4.4 bcm of LNG a year, of which 2.2 bcm would be available to UFG for marketing each year for 20 years,. The agreement would also extend to joint participation in other gas infrastructure in Spain.
That same year saw the start of the construction of a liquefaction plant in the port of Damietta (Egypt), the first line of which was expected to come into operation in late 2004.
For logistic activities, UFG contracted, for a "time charter" period of 25 years, two LNG carriers with a cargo capacity of about 140,000 m3 each, which would carry about 4.0 bcm of LNG per year.
In December, a strategic alliance was signed with the Italian company, ENI SpA. The incorporation of this partner provided financial solidity to the gas project, boosting its competitiveness and strengthening its position in international markets. The agreement provided for the entry into the capital of the company with a 50% interest and was implemented through a capital increase worth 440 million euros, fully subscribed by the Italian company. In June 2003, they closed the transaction after receiving the relevant approvals from the European Commission and the Spanish Government. This strategic alliance would ensure the achievement of important competitive advantages and synergies in terms of organization and financial management. In addition, it would enable the development of operational improvements throughout the various stages of the chain and extend the competitive position in national and international marketing.
UFG also took part in the development of two regasification plants located in Spain, in Sagunto (Valencia) and Mugardos (Galicia), which came into operation in 2006 and 2007, respectively. Complementing these regasification projects, UFG signed a long-term agreement with Enagas for regasification and transportation of LNG (Liquefied Natural Gas). In 2008, with the acquisition of Unión Fenosa by Gas Natural, a new company resulted, Gas Natural Fenosa , with half the capital stock of UFG, the capital of the company being divided 50% between Gas Natural Fenosa and Eni SpA .