Egypt has paid 78% of its arrears to foreign oil and gas companies since March

The government now only has USD 1 bn in outstanding arrears to foreign oil and gas companies, after having cleared another USD 1 bn in arrears last week, an unnamed government source told Asharq Business . Egypt has cleared USD 3.5 bn in arrears since March, marking a 77.8% reduction in the government’s outstanding arrears over a seven-month period by our math.

Clearing arrears is part of a larger plan to increase local production following a costly few months of energy imports to bridge the gap between local production and demand that emphasized the need to get the country’s energy production back on track. Alongside efforts to proactively clear arrears, the Oil Ministry is now offering new incentives to energy players that include increasing production sharing ratios with foreign companies in exchange for new investments, enhancing exploration efforts, and increasing extraction rates with the aim of boosting local production starting 2025.

It seems that the Oil Ministry’s efforts are already bringing home the goods, with several international energy giants recommitting to the country with big-ticket investments. Among these are Italian energy giant Eni that is set to resume drilling at the Zohr gas field in December of this year, with the arrival of a rig to drill two new wells. We also recently found out from unconfirmed reports that US gas giant Chevron is set to begin drilling its Singer exploratory gas well in the Mediterranean this month with investments of USD 150 mn.

And it looks like there’s more energy investment news in the pipeline — excuse the pun — with Emirati oil and gas giant Dana Gas recently saying in a statement (pdf) accompanying its latest earnings release that they are waiting for USD 24 mn out of a total USD 59 mn of outstanding dues owed by the government before it launches a USD 100 mn project to develop production. The proposed 11 new wells are expected to add 80 bn cf of gas reserves and save “over USD 1 bn for Egypt’s economy, reducing reliance on imported LNG and mazut for power generation,” according to the company

After several years of production declines, the government has ambitious targets to meet, with unconfirmed reports that Egypt is looking to boost natural gas production by 30% to 6 bn cubic feet of gas per day by the end of 2025. This new target follows the country’s natural gas production having fallen 20-25% over the past two years, Oil Minister Karim Badawi said at a presser last month.