CAIRO: Egypt has started to repay a $1.5 billion installment of accumulated debt owed to foreign energy partners, the Ministry of Petroleum announced in a Thursday statement.
To arrange this payment, the Ministry of Petroleum arranged a loan from the National Bank of Egypt in collaboration with other local banks worth a total value of 10 billion EGP ($1.4 billion).
After the payment, the debt fell to $4.9 billion, as the government had paid $1.5 billion earlier in December 2013 after the foreign partners—including BG and BP—threatened to halt exploration and production activities.
Minister of Petroleum Sherif Ismail said in the statement that Egypt’s oil sector is aiming to reduce oil arrears to foreign partners to motivate them to intensify their exploration operations and increase oil production. This in turn would assist Egypt in reducing petroleum imports.
The government has forged an agreement with foreign oil companies to pay their arrears in full by 2017, the State-owned Al-Ahram reported July 22.
Egypt is struggling to overcome a serious energy deficit, which has resulted in rolling blackouts since 2013.
Adding to the problem, President Abdel Fatah al-Sisi raised fuel prices and cut energy subsidies in the new budget by 10 percent, saving around 44 billion EGP. The budget amounted to 100.3 billion EGP, compared to 144 billion EGP in the previous year.
The government plans to remove energy subsidies completely within three to five years, Minister of Finance Hani Kadry has said. The government is also negotiating new deals for natural gas exploration to meet growing demand, notably for running power plants.