Egypt’s Ministry of Petroleum and Mineral Resources’ dues to international oil companies were reduced to $2.3bn by the end of last fiscal year (FY) 2016/2017, following the implementation of the state’s economic reform programme.
The ministry repaid about $2.2bn to foreign oil companies last June, including exploration costs, reducing the total dues to $2.3bn, the lowest level since 2013.
The Egyptian General Petroleum Corporation (EGPC) intends to pay a new part of its dues to foreign partners before the end of the current FY 20172018, benefiting from the next tranches of the World Bank and African Development Bank (AfDB)’s loans.
According to a senior source from the Ministry of Petroleum, the ministry has submitted a request to the government to pay a part of its dues to foreign partners before the end of the first half of this year.
“We await the government’s approval to use a part of the next tranches of the AfDB and the World Bank’s loans to Egypt, to finance the payment of a part of the ministry’s dues to foreign partners,” the source said.
The AfDB has signed a loan of $500m in December 2016 to finance the Egypt Economic Governance and Energy Support Programme Phase II. The loan is the second tranche of a three-year $1.5bn programmatic series, covering FYs 2015/16 to 2017/18.
The World Bank also announced its approval to grant Egypt the final $1bn tranche of a previously agreed $3bn loan.
Egypt’s dues to foreign oil companies dropped by the end of last December to about $3.5bn, compared to about $3.6bn at the end of last September. According to the minister of petroleum, the EGPC paid in August 2015 the equivalent of about $600m of the ministry’s dues to foreign partners in Egyptian pounds, bringing the total dues to about $2.9bn compared to $3.4bn at the end of last FY.
Egypt’s crisis of dues to foreign partners started in FY 2004/2005, reaching about $610m after the purchase of one of the foreign partners’ shares. However, it decreased in the following two fiscal years, recording $534m in FY 2006/2007.
During FY 2007/2008, the dues increased to about $1.5bn, but declined again in the following year to $1.1bn.
The dues owed to foreign partners recorded $3.1bn in FY 2010/2011, before they increased in the following FY to $6.3bn.
According to the source, the Ministry of Petroleum seeks to pay all dues to foreign companies to encourage them to inject more investments and increase their oil and gas production rates.
According to the International Monetary Fund (IMF)’s recent report, after completing its second review of the country’s reform programme, the government is expected to pay $1.2bn of its dues to foreign partners in the current fiscal year, while the IMF will reduce the next payment of these dues to $800m instead of $1.1bn. Hence, the Egyptian government will complete payment of all dues to foreign partners before the end of June 2019.
The Egyptian government is also expected to pay about $400m to its foreign partners before the end of December, according to the fund’s report, which exceeds the IMF’s earlier expectations.