Egypt's Petroleum Ministry ties arrears payment to production boost amid decreasing gas output

According to a statement from the petroleum ministry on Monday, Egypt plans to link arrears payment to increased production as part of its plan to settle outstanding debts with international oil companies.

The statement said that the ministry recently introduced an incentive package to encourage partners to increase output above current levels. Additional revenue generated by this increase will be used to reduce existing debt.

Karim Badawi, Egypt's Petroleum Minister, said that Egypt had begun to implement mechanisms to ensure regular payment to oil partners. These include consistent fixed payments to promote continuity and dependability in arrears repayment.

The details of the incentive package are not disclosed, but they aim to increase production in Egypt, where domestic gas output has dropped significantly, reaching a six-year high in May.

Egypt had ambitious plans to become one of the world's major gas exporters following Eni’s discovery in 2015 of the Zohr off-shore field. However, to meet its domestic needs, it has been forced to enter the LNG market.

In the first half this year, average production at Egypt's biggest gas field, Zohr, dropped to 1.9 billion cubic foot per day, causing concern over technical issues or reduced investment.

Eni responded last week by pledging to begin efforts to restore some gas production at Zohr as early as next year.

Badawi met with TotalEnergies CEO Patrick Pouyanne on Monday to discuss the progress of the Cronos field, and how to connect its production to Egypt’s facilities.

The Aphrodite field in Cyprus is the second offshore gas field that could be linked to Egyptian export infrastructure. Partners of the $4 billion development plan for Aphrodite proposed to export gas via a pipeline into Egypt's transmission system.

At a Monday industry event, Cypriot energy minister George Papanastasiou stated that Cyprus was strategically positioned to leverage Egyptian pipelines, liquefaction plants, and subsea pipelines to gain access to European markets. It could also be used to supply the Egyptian market. (Reporting and Editing by Matthew Lewis in Cairo)

(source: Reuters)