EGYPT SEEKS MONEY
Egypt is going through a foreign currency crisis and is struggling to pay it debts to international trading partners, among them LNG suppliers.
The currency crisis follows the blow Egypt suffered following the downing of a Russian jetliner on 31 October when flying over the Sinai Peninsula from the Sharam el Sheikh resort to St. Petersburg, Russia. All 224 onboard the flight were killed. Following the incident, tourism to Sharm el Sheikh suffered a sharp decline as European airlines curtailed flights and governments increased security arrangements. ISIS, the terror group which controls large swathes of Iraq and Syria and has an affiliate organisation in the Sinai Peninsula, claimed responsibility for the attack.
Egypt is obliged to pay for LNG shipments within 15 days of a shipment's unloading. Now the Egyptian authorities are looking to extend that timeframe. Egypt used to get financial support from the Gulf Cooperation Council (GCC) countries and probably will still get it. However, due to lower energy prices, the support now is more limited. Egypt buys six to eight LNG cargoes monthly, each worth $20-$25 million. It is now in arrears of $350 million for that energy, one source estimated.
This year, Egypt ramped up massively its import of LNG, following a continuous decline in natural gas production in the country, blamed on the energy policy of former President Hosni Mubarak. Among the moves to increase import, Egypt issued tenders for 75 LNG Cargoes worth $2.2 billion. The cargoes were spread between energy companies and trading companies, among them Trafigura and Noble Group (not to be confused with American explorer Noble Energy).Egypt also pays debts to international oil and gas companies.
The difficulty with LNG payment comes at a time when Egypt is technically rich in gas reserves. In August 2015, Eni announced that it had made the world's biggest discovery of natural gas in Egyptian waters, offshore in Eastern-Mediterranean. The massive Zohr gas field discovered is estimated to hold 30 trillion cubic feet of gas.
Egypt currently receives its LNG through two floating storage and regasification unit (FSRU) vessels, which began operating in the country this year. Egypt is considering hiring a third FSRU next year or in 2017 to meet its gas demand.
During 2015, Egypt attempted to restore its struggling energy sector through repayment of debts. The country paid several billions dollars of debts owed to international companies so that they would return to explore in the country. They also offered new contracts and much improved prices to international companies. Following that, the Zohr discovery was made. In May, BP also announced an investment of $12 billion to develop Egyptian offshore gas fields.
However, until all the new discoveries and agreements come online, Egypt is reliant on the import of LNG to meet its gas needs. For now, the country is struggling to service those debts.
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