BEIRUT

Regional

Egypt oil, gas possible once subsidies ease

  • File - Egyptians wait in their cars at a gas station in Cairo, Egypt, Monday, Jan. 16, 2012. (AP Photo/Ahmed Ali)

LONDON: Explorers in Egypt expect constraints on domestic energy prices to loosen, urging new investment in oil and natural gas fields.

Companies including Citadel Capital SAE, Circle Oil PLC and Petroceltic International PLC expect President Abdel-Fattah al-Sisi to make good on promises to reduce subsidies of more than $20 billion a year and ease demands that producers sell fuel on the domestic market well below international prices, they said at a conference in London on June 27.

The changes would allow the government to cut the budget deficit and pay suppliers money owed for fuel, said Mohammad Shoeib, a managing director at Cairo-based Citadel. It’s a necessary first step if Egypt wants to lure back investors driven from the country by recent turmoil as it tries to both increase exports and meet surging domestic energy demand.

The government “should tackle the problem and not escape it,” Shoeib, whose company has about $10 billion invested, mostly in Egyptian energy projects, said in an interview. “It should happen very soon.”

Egypt is poised to become a net fuel importer as authorities divert gas from export projects to meet local demand, sometimes failing to pay the suppliers. The practice prevented the U.K.’s BG Group PLC from meeting contracted liquefied natural gas shipments this year. The company has been in talks with the government about guarantees for future exports, with receivables for gas still owed by Egypt doubling in a year to March 31.

Egypt plans to pay at least $1.5 billion to energy suppliers before the end of the year, or about a quarter of its debt as of April, Reuters reported June 26, citing Oil Minister Sherif Ismail.

Egyptian General Petroleum Corp., the state energy company, “is doing the best it can” to pay off the debt, said Chris Green, CEO at Circle Oil.

“The key thing is reducing subsidy,” Green said.

Sea Dragon Energy Inc. plans to acquire additional assets in the country, said Chief Executive Officer Paul Welch. “The time is great now to get involved in Egypt.”

Oil producers receive international prices for their products in Egypt, while gas suppliers are paid only a fraction of what they could earn from exports when they sell on the domestic market, said Stephane Foucaud, a London-based analyst at FirstEnergy Capital Corp.

“The gas price simply has to increase” and that will “unlock exploration” because some fields are not economic to drill at the current tariff, said David Thomas, chief operating officer at Petroceltic. “The country is full of opportunity. My question is, when the race will start?”

 
A version of this article appeared in the print edition of The Daily Star on July 01, 2014, on page 5.
Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Summary

Explorers in Egypt expect constraints on domestic energy prices to loosen, urging new investment in oil and natural gas fields.

Companies including Citadel Capital SAE, Circle Oil PLC and Petroceltic International PLC expect President Abdel-Fattah al-Sisi to make good on promises to reduce subsidies of more than $20 billion a year and ease demands that producers sell fuel on the domestic market well below international prices, they said at a conference in London on June 27 .

Egypt plans to pay at least $1.5 billion to energy suppliers before the end of the year, or about a quarter of its debt as of April, Reuters reported June 26, citing Oil Minister Sherif Ismail.


Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here