The petroleum debts due to foreign firms working in the oil and gas field declined to $2.3 billion at the end of last June, down from $6.3 billion during 2013.
The Petroleum Ministry announced a plan to completely settle the dues before the end of 2020. Egypt Today answers the significant questions, explaining when the crisis was provoked and what the government’s plan is to terminate it.
When did the crisis appear?
The problem sparked 10 years ago during fiscal year 2004/2005.
What is the reason behind the first debt?
Egyptian consumption of diesel, gasoline and natural gas exceeded domestic production. The Petroleum Ministry then decided to buy shares of production from foreign partners, in addition to importing gas from abroad.
How could the government handle the situation?
The debt declined to $548 million as the Petroleum Ministry settled parts of the dues. This affected the financial results of fiscal year 2006/2007, so the debt witnessed another decrease, reaching $534 million during the same year.
The debt is still not very much, so how did it amount to $3 billion?
The high jump in global oil prices, which exceeded $130 per barrel, doubled the debt to $1.5 billion. The dues decreased after that to $1.1 billion, but not for a long time. It jumped again in fiscal year 2009/2010 to $1.3 billion.
Did the 25th January Revolution add new debt?
After the 25th January Revolution, the Egyptian economy was challenged by the tough situation. The debt amounted to $3.1 billion and doubled to $6.3 billion a year later. The Ministry of Petroleum stopped repaying the monthly tranches, as the country had a clear shortage in foreign currency reserves, so its priorities were directed to buying oil products from abroad in order to meet the domestic market’s needs.
Who are the lenders?
Among the creditors are Shell, BP, Dana Gas, BG, Eni and other companies operating in the Egyptian petroleum sector.
How did the crisis affect the exploration and production works?
Many firms stopped their activities as they were no longer confident in the Egyptian market. There was not a single petroleum agreement from 2011 to 2013, in contrast to seven agreements in fiscal year 2009/2010 and four agreements the previous year.
What are the government’s moves to settle all the debt?
The Petroleum Ministry started to repay parts of the debts at the end of 2013. Thereby, the due decreased to $5.4 billion, down from $6.3 billion. Then the ministry held agreements with the foreign firms to schedule the dues by paying new tranches alongside the former commitments. That decreased the debt to $3.5 billion and $3.4 billion in FY 2014/2015 and 2015/2016, respectively. The total debt is now stable at $2.3 billion.
Is anything changed in the exploration after the repayment plan?
83 oil agreements were signed, including 62 new agreements and 21 amendments to the agreement of exploration in an area of 160,000 square kilometers, with investments valued at $15.5 billion.
Positive results were also revealed in several major discoveries, such as the development of the northern Alexandria field, the discovery of the Zohr field and the implementation of the ninth phase of the West Delta deep fields.
Domestic production jumped from 3.5 billion cubic feet of natural gas per day in 2013/2014 to nearly 5.1 billion cubic feet per day.
Is it possible to end the total debt shortly?
Petroleum Ministry officials say they target settling the total debts before the end of 2020 by repaying the monthly tranches regularly. Minister of Petroleum Tarek El-Molla announced that his ministry intends to repay $750 million by the end of 2017.
(Source: Egypt Today)