The Ministry of Petroleum and Mineral Resources intends to pay part of the arrears owed to foreign oil companies operating in Egypt within a few weeks, according to an official at the ministry. The source, who preferred to remain anonymous, said the government would pay no less than $1 billion in arrears to foreign partners within weeks using the second tranche of the World Bank loan and the African Development Bank loan. Minister of Petroleum and Mineral Resources Tarek Al-Molla, said the $3.5 billion in arrears to foreign countries would be reduced by half. In December, the government announced it had signed an agreement with the African Development Bank worth $500 million, the value of the second tranche of the loan the bank is giving Egypt over three years. The World Bank also agreed to pay the second tranche worth $1 billion of its $3 billion loan to Egypt, which arrived last month with the African Development Bank tranche. Governor of the Central Bank of Egypt (CBE) Tarek Amer said Egypt would pay back $1.5 billion in arrears to foreign oil companies, and the banks have already started transferring funds that were frozen for years. Al-Molla earlier said that the Egyptian General Petroleum Corporation had received in the past fiscal year $5.4 billion worth of crude oil and natural gas from foreign partners and paid back $5.5 billion. “This confirms the ministry's intention of paying off its arrears to its partners,” he said. Over the past three years, the Ministry of Petroleum has slashed its arrears to foreign oil companies by half to $3.5 billion, instead of a staggering $6.3 billion by the end of 2013. According to the source, the ministry wants to encourage foreign companies to increase their investment to raise production of oil and gas to meet domestic energy needs.
“The foreign partners were understanding of Egypt's economic situation and bore delays by the government in paying back arrears that had accumulated for years,” the source said. “We are trying to give them an additional incentive by paying part of these arrears.” Egypt produces about 4.45 billion cubic feet (bcf) of gas daily. Some 300 million are used daily at the gas fields to operate extraction equipment, and the rest is sent to the domestic market.
According to figures from the Ministry of Petroleum, it is planning to increase the domestic production of gas by giving incentives to foreign companies to reach 5.3 bcf of natural gas in the coming fiscal year. This should rise to 6.8 bcf by 2018/2019.
