Egypt Oil Minister Mr. Sherif Ismail said on Thursday that the government will return money owed to foreign energy companies by end of 2014, in a bid to attract back investors into the country. Suffering from serious shortage in oil amidst soaring demand, Egyptian government has had to ship five cargoes of liquefied natural gas (LNG) from Algeria to meet local demand.
The government has also said that it will return $3 billion of a $6 billion total debt owed to giant companies such as BP and BG Group, by the year 2017, to psych them up to exploration and production of oil in Egypt.
These are good news for these and other energy investment and construction companies that hope to exploit Egypt markets.
Egyptians should brace for more blackouts and dark nights in future, after forecasts earlier this year indicated that domestic demand in the next fiscal year beginning July 1 would not be met.
Egypt will also see a 550 million cubic feet per day increase in natural gas production by end of 2014, according to the Minister. Earlier this month, the Minister announced that the production capacity in Egypt was 500 million cubic feet daily.
Also expected by the end of December this year is a 5.2 billion cubic feet (bcf) per day increase in oil production. According to the Minister, BP will begin production at the North Alexandria concession in 2017, and this will add a total of 800 million cubic feet per day in 2018 into the Egypt’s total oil capacity. Initially, this well is expected to produce up to 450 million cubic feet per day in 2017.
Reuters’ calculations indicate that the shipment from Algeria would feed up three days’ worth of average daily consumption in Egypt.
Egyptian government has struggled to pay foreign energy companies and has launched generous state subsidies that are already stoking the growing demand. Foreign companies are worried of making more investments when they are not yet paid, and when the government is using most of the gas promised for export to meet local demand.
Production companies and factories that depend heavily on power are being forced to close down owing to daily power cuts, and BG Group served its affected buyers and lenders with a ‘force majeure’, in addition to cutting down its production forecasts.
Egypt is experiencing oil and gas production shortages and economic problems after extensive political turmoil and violence hit following 2011 revolt to ouster Hosni Mubarak.