Egypt signed six new agreements for oil and gas exploration in the Western Desert and the Gulf of Suez this week. Worth a total of US$400 million, the contracts could be a sign that the sector is finally seeing an influx of cash after a two-year dry spell.
Petroleum Minister Sherif Ismail told the state-owned Middle East News Agency (MENA) that deals with foreign and Egyptian companies are worth US$271.5 million in investments, plus another US$124 million in grants that will be allocated to drilling 41 wells.
The agreements were signed with the Netherlands’ Shell, Italy’s Eni, the United Kingdom’s British Petroleum, Canada’s TransGlobe, Egypt’s Tharwa and the Egyptian General Petroleum Corporation.
The energy sector has suffered from the state’s inability to pay its dues to foreign energy companies in a timely manner. The government has also faced difficulty attracting new investments and exploration contracts in the sector. Last month, the Oil Ministry said Egypt had repaid US$2.1 billion of its debt to foreign energy firms, with another US$3.1 billion still outstanding, Reuters reported.
The state-owned Egyptian General Petroleum Corporation (EGPC) is a main player in the oil debt, and recently secured a US$1.5 billion syndicated loan to finance its repayment of debts to foreign companies.
As a result of increasing consumption and a drop in production, the country has turned from a net exporter to a net importer of energy. But there seems to be a slight reversal in this trend according to the ministry, with Egypt signing 36 petroleum deals between November 2013 and October 2014. The ministry promised a further 20 new deals in a statement issued January 9.
Also on Sunday, Ismail told Reuters that the government would complete an agreement with Russia’s Gazprom for liquefied natural gas (LNG) shipments later this month in a bid to help meet necessary gas supplies. Egypt recently finalized a contract with Norway’s Hoegh LNG to complete the infrastructure for LNG imports by building a floating storage and regasification unit, due to be completed by the end of March.
This flood of latest contracts are a drop in the ocean of Egypt’s foreign direct investments (FDI), which have fallen sharply since 2011 and have yet to see a significant rebound. From July to September of last year, FDI stood at LE1.8 billion, which has weighed on already dwindling foreign reserve.
In the last decade, the petroleum sector has contributed 27-66 percent of FDI, according to the Investment Ministry, and it is a crucial sector the current government is focusing on revitalizing.
Shell Egypt and Apache Corporation signed an agreement in December to start exploring for shale gas through fracking, a controversial method of mining gas using high pressure water and chemicals to release gas from reserves that are untouchable by conventional drilling.