LONDON: Egypt owes at least $5bn to oil companies, half of it overdue, corporate reports have revealed, in a development highlighting the country’s struggle to meet soaring energy bills while subsidising prices to avoid public unrest.
Egypt has been delaying payments to firms producing oil and gas on its territory as it has struggled with dwindling currency reserves, rising food bills and sliding tourism revenues since the 2011 revolution that overthrew Hosni Mubarak.
Most oil firms hope to recoup the debts in full, but they acknowledge it could take years. While they are still planning to invest in new projects in Egypt that will help it avoid an energy meltdown, the debt situation remains a challenge.
The government’s delay in paying its debts to oil and gas producers could hold back investment in the sector and potentially endanger Egypt’s energy security.
“The delays in payments to the operators end up hurting Egypt itself as a potential decline in investment and production may lead to lower government revenues and a supply gap, in a potential vicious circle,” said Majid Jafar, managing director of the board of Dana Gas.
Dana is owed $230m by Egypt in overdue payments for gas supplies and says it is in active dialogue with the government over the debts.
Financial disclosures by firms such as BP, BG, Apache, Edison and TransGlobe Energy show Egypt owed them more than $5.2bn at the end of 2012.
BP was owed $3bn as of the end of 2012, of which around $1bn was overdue. BG was owed $1.3bn, of which $600m was overdue. Edison has $400m overdue, followed by TransGlobe and Dana with over $200m each.
Egyptian officials have never disclosed debt figures and have challenged estimates ranging between $7-$9bn. Egyptian officials and oil company sources say some debts are being repaid but the scale and speed are unknown.
At the end of December, Egypt owed TransGlobe, a small Canadian oil explorer, $220m. Company officials declined to give the current number, saying it will be detailed in first quarter financial results in early May. The company has stakes in five concessions in the country.
Since the revolution, the government has been making its payments for oil after about 8-1/2 months on average, which is about a month longer than was the situation before, Chief Financial Officer Randall Neely said.
“It’s always an ongoing dialogue ... with them to make sure we are a priority to get paid so that we can continue to function appropriately in the country and grow production,” Neely said.
“I wouldn’t say it’s shaken our confidence in terms of working in the country. We continue to be positive in terms of our ability to get things done and the opportunity set within the country,” he said.
Reuters
