Shortfall Has Egypt Seeking To Delay Paying Foreign Gas Producers

Egypt, facing a $2.5 billion current account shortfall since September 11, wants to delay payments to foreign companies producing gas for local consumption, Oil Minister Sameh Fahmy said on Tuesday. ``It is not obligatory, it is not a decision, if anyone accepts this we welcome this,'' Fahmy said. Italy's ENI is the leading producer in the sector, followed by Royal Dutch/Shell, U.S. Apache Corp, BG Group plc of the UK and Edison SpA of Italy.

``The international oil companies are under pressure from the Egyptian government,'' said a foreign company executive who asked not to be named. ``The real problem here is that ordinary Egyptians pay for gas and electricity in Egyptian pounds at a heavily subsidized rate and the government buys the gas from the foreign companies in hard currency, so it is losing money,'' the executive said.

Foreign energy companies produce the bulk of Egypt's natural gas, which is sold into a domestic market consuming 2.6 billion cubic feet of gas per day. Fahmy, speaking at a conference organised by the Middle East Economic Digest, said Egypt sought the same flexibility it had granted foreign partners who had sought changes in the terms of concession agreements in previous years. The minister later said that gas payment delays of ``a year or something like that'' were under discussion, but did not give any further details.

Industry sources had said Egypt was seeking a payment holiday of a year for national grid operator Gasco. Mohamed Tawila, chairman of the Egypt Natural Gas Holding Company, in a seperate interview said specific terms had not been worked out on a payment deferral scheme, but that talks had begun following September 11. Egypt was reviewing its domestic gas pricing system, but had no immediate plans for changes, Fahmy told conference delegates.

Cairo hopes to start its first gas exports by July 2003 via the Arab Gas Pipeline, which will initially provide gas for Jordan's Aqaba power station. Egyptian tourism receipts, a key source of foreign exchange, fell dramatically in the months following the September 11 attacks on the United States, with the government expecting a $2 billion drop this fiscal year ending in June. Egypt won pledges earlier this month for $10.3 billion in international aid, including $2.1 billion in balance of payment support this year.