SPA BETWEEN NLNG AND ENEL

Nigeria LNG Limited (NLNG) and ENEL of Italy entered into a contract in 1992 for the supply to ENEL of about half of the NLNG's plant annual production. ENEL's commitment to receive this LNG and to build an LNG receiving terminal in Italy was a crucial consideration in the decision by shareholders in NLNG to proceed with the Nigeria LNG Project.

In August 1995, the contract between NLNG and ENEL was amended. This confirmed ENEL's commitment to purchase 3.5 billion cubic metres LNG per annum and to build necessary receiving facilities at Montalto di Castro if an alternative site at Monfalcone was not approved by 15 May 1996. Monfalcone was not approved, so Montalto di Castro again became the site at which ENEL was to build the LNG terminal under the contract.

NLNG has recently been informed by ENEL that ENEL does not intend to build the LNG Receiving Terminal at Montalto di Castro, and that ENEL does not intend to receive the LNG under the contract.

NLNG regrets ENEL's conduct. NLNG has initiated arbitration proceedings in Switzerland to obtain compensation from ENEL for all losses resulting from ENEL's breach of contract. These have yet to be quantified, but are likely to be very substantial. The value of the contract is estimated over its 22.5 years life to be at least US$12 billion.

ENEL's decision not to perform the contract will not affect the construction of NLNG's plant at Bonny (Nigeria), nor will it affect NLNG's sale to their other LNG buyers. Whether the envisaged expansion of the Bonny plant will now take place has yet to be determined.

Nigeria LNG Limited
December 17, 1996