Gov’t sets up regular payouts for oil and power companies after clearing arrears

The government is set to pay foreign oil firms nearly USD 240 mn a month under a new mechanism designed to prevent another buildup of arrears, Al Arabiya reports, citing a government official. The move is part of a broader push to stay current on energy-sector dues — across both oil and power — after years in which unpaid bills choked investment and output.

The payment mechanism: The Oil Ministry’s new “full payment” system will cover the state's monthly purchases of foreign partners’ shares of locally produced crude and gas. A dedicated committee is being formed to prepare monthly payment schedules for companies across concessions, with payments changing in line with actual production.

REMEMBER- The ministry is trying to sustain the petroleum sector’s return to growth after more than two years of contraction. The state cleared its outstanding arrears to foreign oil companies in June, down from USD 6.1 bn two years earlier. The new mechanism is meant to keep the government current after resolving the legacy debt, which had constrained investment and contributed to falling domestic output. The government wants to secure USD 6.2 bn in FDI for the oil sector this fiscal year to fund well development and lift domestic output.

The largest recipients: Eni, Shell, and Apache — which together account for 50-60% of monthly payments owed to foreign partners — have agreed with the government on regular monthly settlements, the source said.

Field work is picking up: South Valley Petroleum Company (Ganope) began aprogram to revive production at the Al Baraka field in Aswan’s Kom Ombo area with Canadian concession partner Mediterra Energy — workovers on existing wells plus two development and exploration wells in the first phase, with more to follow depending on results. Separately, Cheiron Finance, a subsidiary of Cheiron Energy, signed a USD 550 mn financing agreement with a consortium of Gulf and international banks to develop gas fields in Egypt and refinance debt.

Extending to renewables

Oil isn’t the only sector the government is clearing up: It has reduced roughly USD 500 mn in arrears owed to foreign independent power producers under power purchase agreements and is now paying around USD 60 mn a month, a government source tells EnterpriseAM. The plan is to clear the remaining balance while keeping payments regular to prevent another backlog.

Keeping payments on track: A joint Finance Ministry and CBE committee is monitoring the schedule and managing liquidity pressures, especially during sudden exchange-rate moves. Currency volatility has raised the government's monthly power-purchase costs by some USD 1.4-3 mn, our source says. The government is targeting USD 900 mn in new electricity-sector investment this fiscal year, supported by more reliable PPA payments and continued grid expansion.