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Tuesday, March 24, 2015
Some international E&P firms operating in Egypt could be making more for their efforts as the government’s $20 billion in planned power projects could result in more money for the natural gas they produce in the North African country.
On March 23 the Egyptian Ministry of Petroleum said that it had signed an agreement to raise the price it pays DEA Egypt for the natural gas it produces. In addition BG Egypt will reportedly be getting $3.95 per million British thermal unit (mmbtu) for natural gas from new developments, up $1.35 per mmbtu over previous terms.
Pricing is based on a number of variables and not every firm will see a change. The government appointed a committee that looks at company reserves and costs, and the body takes a decision on the price based on information provided by companies such as how much it costs to build infrastructure, drill, and resources present.
The government is considering raising prices on new gas supplies that it deems to be proven. This means that Egypt has confirmed, through seismic surveys, that an area has a 90% chance of having the resource.
Egypt sits on an estimated 77 Tcf of proven natural gas reserves according to EIA and most of these potentially large gas deposits lie offshore, undeveloped due to complexity and costly technology required to exploit them.
A number of firms are currently in negotiations with the government to increase their take from natural gas production. The government needs to up its pay structure in order to make the production of these reserves worthwhile. As it stands now the government is struggling to keep the lights on across the country and has had to enter into costly import deals to ensure feedstock for power generation
The country’s president, Abdel Fattah El Sisi, implemented a fast-track power plan aimed at doubling the country’s current capacity of around 30,000 MW in five years.
Despite the announcement of new gas prices, Egypt has struggled in the past to pay foreign operating companies. The country began making headway in payments in January, giving $2.1billion owed to foreign energy firms. Dana Gas received $60 million of the $212million in overdue payments while BG received $350million, 27% of its outstanding receivables.
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