Foreign oil companies demand raising price of gas supplies to Egypt

Foreign oil companies operating in Egypt have requested the Egyptian government to raise the price of gas supplied to Egypt in exchange for the development of fields, amidst a crisis of high fuel subsidy bills and accumulated debts owed by the Egyptian government to foreign companies.

According to figures from the ministry of petroleum, Egypt pays $2-3 per million BTUs to gas production companies, whereas the price in Britain is higher than $10 per million BTUs, according to international companies.

Anadolu news agency quoted the executive director of Shell Egypt Jeroen Richtinon Sunday as saying that the Egyptian government has to pay more for the gas it purchases from foreign partners to help them increase their production, particularly from undeveloped fields.

Richtin added that most international oil companies have reservations on the current price, estimated at $2.5 per million BTUs.

He pointed out that international gas exploration and production companies are slow in developing untapped fields in Egyptian coastal areas for a number of reasons, including the low price paid by the government. The cost of extraction and production has risen sharply over the past decade, he added, which requires raising prices to match the increase in cost.

Egypt has been suffering from a notable drop in gas production due to the slowdown by foreign partners in developing some fields, while companies say that the Egyptian government’s accumulated debts exceed billions of dollars.

Foreign companies dominate the energy sector in Egypt, the largest oil producer in Africa outside OPEC, and the second largest gas producer in the continent after Algeria.

Egypt’s debts to foreign oil companies jumped to $5.9 billion by the end of April, compared to $4.9 billion in December 2013. This is equivalent to roughly one billion dollar increase in the first four months of 2014.

Since the army’s overthrow of president Mohamed Morsi last July 3, 2013, Gulf countries have pumped generous aid into Egypt, including oil assistance from Saudi Arabia, UAE, and Kuwait worth $6.4 billion.