Egypt's energy reforms spark rush of oil and gas deals
MILAN/CAIRO: Energy-hungry Egypt's willingness to push fuel market reforms and stick to debt repayment plans has led to an unexpected resurgence in oil and gas exploration and supply deals previously delayed by political upheaval.
The country has emerged as a major new oil and gas market as the government looks to ease the worst energy crunch in decades.
In January alone Egypt clinched 15 new exploration deals, amended two more, and closed major tenders to import liquefied natural gas (LNG) from Algeria to Russia, opening up to global energy pricing norms as the government seeks to scrap crippling subsidies by 2019.
Explorers lured by rising earnings on oil and gas production set by the state are seeing the country in a new light even though some are still owed billions, said Martijn Murphy, North Africa upstream research analyst at Wood Mackenzie.
The country of about 90 million relies heavily on gas to generate power for households and industry.
The energy ministry says $2.9 billion of investment has flowed into Egypt's upstream energy sector -- exploration and production -- since November 2013, months after then army chief Abdel Fattah al-Sisi took power.
Three major oil and gas deals worth a total $9.2 billion are also in the works, a spokesman for the energy ministry said. He gave no further details.
"Paying down of debt, offshore pricing reform (and the expectation of more of it to come) as well as Egypt being a huge gas-hungry market" is pulling back investors, Wood Mackenzie's Murphy said.
After four years of turmoil, rising gas demand turned Egypt from net exporter to imminent importer while mounting oil company arrears put off new drilling and production investment.
The result was the worst energy shortages in a decade.
But Egypt has been settling its debts with foreign energy companies, and as of December it owed $3.1 billion after repaying $2.1 billion. Energy reforms show signs of paying off while the plunging price of Brent crude renders energy subsidy cuts relatively painless.
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