The Sharjah-based Dana Gas has received US$60 million of the $212m in overdue payments from the Egyptian government, one of several foreign energy companies to receive late payments from the country
The move is both a boost for the region’s energy sector and a sign that Egypt is on the road to economic recovery. The country has received aid and investment from the GCC, and as a net importer of oil, it has benefited from the plunging price of crude.
Dana on Sunday said it had recouped 28 per cent of the total outstanding, which would be used to finance upcoming projects.
Italy’s Eni and Malaysia’s Petronas are also understood to have received at least part-payments.
Egypt petroleum minister Sherif Ismail said on Wednesday that the country had paid $2.1 billion owed to foreign energy firms.
The country also paid $350m to BG Group, totalling 27 per cent of its outstanding receivables.
“Any progress on the Egyptian government making payment is encouraging,” said Lachlan Johnston, BG’s head of external communications.
Dana Gas said that it had received a payment of $10m in US dollars, and the balance of the part-payment in Egyptian pounds.
Egypt was forced to renegotiate contract payments as its economy was hit hard in the aftermath of the Arab Spring. Original contracts state that the country will pay all operating companies in US currency, but Egypt has faced a dollar crunch, forcing the renegotiation of payments to be made in local currency.
The Dana Gas chief executive Patrick Allman-Ward said in November that the company did not care what currency payments were received.
“It isn’t that the Egyptian government doesn’t want to pay in US dollars, it’s the fact that they don’t have dollars to pay,” he said.
An official at one smaller company operating in Egypt’s Western Desert said that his company had received a $10m payment made in US dollars. He said the company had now received almost half of what it was still owed by the Egyptian government.
Robinder Singh, the investor relations and external affairs director at Dana Gas, said that, while Egypt was technically required to pay in US dollars, the company was “happy to accept partial payment” in Egyptian pounds given its future plans in the country.
Last year, Dana Gas signed an agreement with the Egyptian government to enhance production and gradually recover its outstanding receivables in phases over a three-year period. “We are able to take [local currency] since we will use that for the capital expenditures in Egypt going forward,” said Mr Singh. He added that the government paid at the exchange rate of the Central Bank of Egypt, which on Sunday stood at 7.15 Egyptian pounds to the dollar.
“When we put in the capital expenditure and enhanced production, Egypt is bartering their portion of the profit which will go toward paying for receivables,” Mr Singh said. “This means that Egypt is basically paying with its share of the profit from production, which is 52 per cent.”
Dana Gas plans to start a new drilling programme in the country, including its first offshore well.
Block 6, located in the North El Arish Concession Area near Gaza, received presidential ratification last year. Under the approval, which was originally given in 2012 but delayed due to political instability, the company was given a four-year window for a minimum work programme.
“Our strategy is to first do seismic [studies] to see the opportunities,” Mr Singh said.
Those studies are expected to begin in the next quarter. Once completed, the company will decide if it should drill on its own or enter into partnerships.
El Arish has been a high-risk area even before the troubles that began after Hosni Mubarak’s removal from power in 2011. Last month, security officials reported that militants attacked a natural gas pipeline there. In addition, a roadside bomb hit an army vehicle, killing two soldiers and wounding a third.
Mr Singh said that there were safety issues, including difficult geology, in the Block 6 area, but that the government was keen on reducing risks for operating companies.
"The government is very supportive because it is desperately in need of incremental gas," he said.
The country suffered declines in its gas exports last year and announced plans to auction 22 oil and gas concessions last month.
lgraves@thenational.ae
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