Dana Gas, an energy firm based in the United Arab Emirates, could recover all of its outstanding arrears from the Egyptian government by next year, its Group Chief Executive Patrick Allman-Ward said.
“We are hoping that the Egyptian government can deliver on its promises of repaying the entire petroleum sector, and obviously Dana Gas, by 2016,” Mr. Allman-Ward told The Wall Street Journal in an interview in the Egyptian resort town of Sharm el-Sheikh.
However, if Egypt fails to meet its commitment to pay Dana $185 million in arrears, the company would recover the money by 2018 by selling its share and the government’s share of condensates to the international market in U.S. Dollars.
“This is an insurance policy. If the government is unable to pay then we know that through this mechanism, we will, in the worst possible scenario, get the money back by 2018,” he said.
The new deal with the Egyptian government, which will persist as long as Egypt has overdue payments with Dana for a period of six months, made it easy for the company to decide last year to invest $350 million in the country over the next 30 months.
The investments will include drilling nearly 40 new development wells, building new pipelines and debottlenecking an existing plant, he said.
The plan will increase the company’s production from existing facilities in 2017 by about 170 million standard cubic feet of gas per day, by 5,000 barrels a day of condensate, and about 300 tons of LPG, he said.
Since the ouster of President Hosni Mubarak in 2011 and the turmoil that ensued, Egypt has struggled to pay foreign energy companies that provide oil and gas for its domestic market, including: BP PLC, Apache Corp., BG Group and Dana Gas.
Egypt plans to repay its $3.1 billion debt to international energy companies operating in the country by mid-2016, almost a year later than initially planned.
Earlier Saturday, Sherif Ismail, the country’s oil minister, said falling oil prices will help reduce payments Egypt will make its foreign energy partners in the future.
Egyptian officials hope the repayment pledge encourages energy companies to continue injecting investments in research, exploration and development activities into the country.
The country has been facing a slowdown in oil and gas exploration activities over the past few years because of continuing civil unrest since Mr. Mubarak was overthrown. It has been paying hefty premiums for its crude supplies because of the weaker Egyptian pound.
In November, Egyptian officials said the country planned to repay all debt owed to foreign oil and gas companies within six months, a deadline that was approaching before the announcement by Mr. Ismail pushing the date back to 2016.
Mr. Allman-Ward said he was optimistic that Egypt’s energy sector was improving but said besides paying its debts, Egypt will have to reduce its bureaucracy and red tape to become more attractive to international investors.
Foreign energy companies operating in Egypt are also facing a situation where the state-owned companies are acting as partners and regulators at the same time.
“It is a very strange situation to be in where your partner is also the person who is saying what you can and cannot do,” he said.
“It will be helpful to create clearer lines between the two,” he added.
Source: The Wall Street Journal