Petroleum Africa
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Friday, March 7, 2014
As the Egyptian government struggles to meet its growing domestic natural gas needs and strives to repay the almost $5 billion it owes foreign producers, those foreign producers are looking at greener pastures for their investment dollars. One of Egypt’s number one investors, BG Group, has stated that it will not invest anymore funds into Egypt until the government knocks down some of the debt it owes it and assurances by the government are made.
In an effort to keep firms from leaving, expand exploration, and bring new finds to commercialization, the country is enhancing terms for exploration. Enhancing terms may have not have a huge effect on the bigger firms but a Reuters report citing Wood Mackenzie said it may pay off for the smaller firms who have continued to invest in new acreage. The latest licensing rounds have attracted bids despite the issues the country is facing on varied fronts.
The new enhancements being offered that appear to be working include companies being allowed to push for higher prices depending on distance from shore, reservoir depth, and what the discovery will cost to develop. Other new perks include allowing firms to offset the signature bonus, a one-off fee paid to seal an exploration deal, against receivables rather than pay upfront.
Another big change is that new concession holders would be able o sell directly to commercial users, such as steel or power plants, bypassing government entities, executives and analysts said. This change is also a plus for the government as the end users would pay more, relieving the government from some of its huge subsidies.
On payments owed to companies for arrears the government has been working to whittle that debt down. Egypt has already repaid foreign producers arrears worth $1.5 billion, and would repay a further $3.5 billion by 2016. This however does not console the larger producers who are owed substantial amounts, but does boost Egypt’s smaller players. Smaller firms operating in Egypt have been able to see a greater portion of their debt knocked down as compared to the big boys; case in point-Sea Dragon Energy has stated that it is not longer owed any funds in arrears, while BG is still owed $1.5 billion.
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