No wonder it's resorting to Israel: how Egypt's gas production is falling victim to debt
Dues owed to foreign partners for the petroleum sector have grown to $6.3bn through July 2014, as compared to $6bn at the end of April 2014
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Egypt’s natural gas production has declined by approximately 675m cubic feet daily compared to last year, according to a report by the Ministry of Petroleum.
Oil and gas companies have noticeably decreased production rates as a result of the government’s inability to pay debts, the report stated.
The report explained that gas production declined over the first seven months of this year to 4.6bn cubic feet per day, compared to 5.275bn per day through the end of 2013.
Among the most prominent companies that have reduced gas production are Burullus Gas Company, which produced 1.2bn cubic feet daily last year. That number was reduced to 750m cubic feet throughout July, which accounts for 16.4% of Egypt’s total production, according to the report.
Petrobel Petroleum Company decreased its production to 1.07bn cubic feet per day compared to 1.25bn last year. The company’s current output represents 23.3% of Egypt’s total production.
The report noted that several petroleum companies operating in Egypt noticeably reduced gas production rates this year by delaying linking new projects and failing to complete well development operations according to previously agreed time schedules.
Badr Petroleum Company increased gas production rates to approximately 394m cubic feet daily, representing 8.6% of Egypt’s production, compared to the 355m cubic feet that it produced daily at the end of 2013, the report said.
El Wastani Petroleum Company (WASCO) raised its gas production to 210m cubic feet per day, compared with 190m last year. North Sinai’s production reached 48.8m cubic feet from 35m cubic feet the previous year.
Production rates through the end of this year will not exceed 4.9bn cubic feet of gas per day, thus continuing a decline in the productivity of wells and small projects linking them to production, said a company official of the Egyptian Natural Gas Holding Company (EGAS).
Egypt’s production of gas is naturally declining at a rate of 100m cubic feet of gas per month, which requires linking large production projects to compensate for the shortage and to increase production.
The government’s delay in reimbursing foreign partners threatens Egypt’s gas production as it will lead to a decline in production until 2018, when total production will reach 4.85bn cubic feet per day, according to the ministry’s report.
Dues owed to foreign partners for the petroleum sector have grown to $6.3bn through July 2014, as compared to $6bn at the end of April 2014, and this is in return for the partners’ share of oil and gas obtained by the government, according to the official.
The government aims to repay a minimum of $1.5bn in dues owed to foreign oil companies by the end of the year 2014, according to previous statements by Sherif Ismail, the minister of petroleum.
Payments owed to foreign partners are increasing by about $200m a month in the absence of the ability to make regular payments, the official said.
The government obtains a share of its foreign partner’s gas and crude oil from Egyptian fields at about $700m per month. Part of this is paid by exporting the raw product from Ras Gharib because it is heavy and cannot be refined in an Egyptian plant, and part of it by giving a share to some of the companies.
The Ministry of Petroleum paid about $1.5bn to foreign partners working in the sector last December from corporate debt, according to the official.