Egypt Accelerates Oil Company Payments, Encourages $10 Billion BP Gas Investment

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The Egyptian government plans to clear all of its arrears to foreign oil companies by 2017, according to news reports. Previously, the plan was to pay $3 billion out of a total of about $6 billion by 2017.

By September this year, Egypt's Ministry of Petroleum plans to pay $1.5 billion to companies such as BG group (LSE:BG.L) (Reading, England) and BP plc (NYSE:BP) (London, England).

In June, the country's debt to foreign oil companies decreased to $5.7 billion, from $5.9 billion in May, according to Tarek Al-Molla, head of Egyptian General Petroleum Corporation (EGPC).

As foreign companies increase their investments and explorations in Egypt, their entitlements with the Egyptian government rise. Prime Minister Ibrahim Mahlab finalized an investment this month with BP, clearing the investment of $10 billion in gas fields during the next four to five years. The fields discovered by BP are estimated to hold 5 trillion cubic feet of gas, with a daily production capacity of 1.2 million cubic feet. This capacity is equivalent to 20% of Egypt's current daily gas production.

Several companies suspended operations and temporarily closed facilities in the country during the volatile political situation following the ousting of President Mohamed Morsi. The government is now working to encourage companies to invest in extraction and exploration. These activities are desperately needed to address Egypt's energy crunch.

Electricity blackouts have been frequent over the past three years, and a number of government officials have blamed the power cuts on growing fuel subsidies and declining gas production.

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