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Thursday, January 15, 2015
The severe downturn in oil prices could cause the Egyptian government a problem in paying foreign operators funds in arrears. The government owes an estimated $3.1 billion to oil and gas producers operating in the company for past production.
The government recently paid down around $2 billion of this debt, but continuing payments could be in jeopardy if funds received for its crude production do not pick up. It is estimated that the government would need to receive at least $80 per barrel on crude exports to continue making regular payments, with oil prices currently almost half of that Egypt will be even more financially strained than it already is.
One of the country’s producers, Dana Gas, believes payments could be delayed. Last September, the UAE-based firm signed a deal with the Egyptian government that would allow for it to recover most of the money it was owed. Under the deal between the two, Dana would be provided additional condensate production to sell on the international market to raise money.
Patrick Allman-Ward, Dana’s chief executive, told reporters in Dubai that he while he still hoped to recover all overdue receivables by mid-2018, he knows that the company’s calculations were based at a higher rate than today’s per barrel price.
“Clearly our calculations were based at $85, which we thought at the time was a very conservative assumption – clearly we are not there at the moment. How far and how long the current decline will last we don’t know.” He added, “That’s for the liquids, but for the gas we continue to get paid $2.65” per million BTUs.
Egypt is still in arrears to the tune of an estimated $160 million to Dana Gas
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