By Noah Chasek-Macfoy
The Egyptian General Petroleum Company (EGPC) repaid local banks a total of $575 million towards outstanding loans in the first quarter of the current fiscal year, reported MENA.
The sum paid to local banks is just a portion of the total funds EGPC has repaid to banks. During the first quarter of the 2012 fiscal year and the last quarter of the 2011 fiscal year, the EGPC repaid $3.2 billion to banks from which they have loans, bringing the EGPC’s total debt to banks down from $10.8 billion to $7.6 billion. The EGPC remains the most indebted entity within the Egyptian government.
Financial obligations to international oil and gas exploration and development companies is one of the largest consistent burdens on the state-run company. Earlier this fiscal year, president of the EGPC, Hani Dahi, announced that his company had spent $25 million in past year and a half to fulfil its financial obligations to foreign oil and gas companies. In July alone, the EGPC settled almost $1.2 billion on payments to exploration companies.
The EGPC has faced difficulty repaying its obligations to foreign oil and gas companies on time. Last year the EGPC came to a an agreement with foreign companies to continue operating while the EGPC paid the overdue obligations on a timeline that extended through the end of the current fiscal year at interest rates of between 1.5 and 2.5%. Despite the deal, earlier this month a number of companies requested that the EGPC settle its debts in a single payment.
The EGPC is currently discussing the details of a plan with the National Bank of Egypt (NBE) that would make an immediate single payment possible. Several weeks ago, NBE proposed that it buy the EGPC’s debt to foreign companies allowing EGPC to more slowly repay the debt. While estimations of the debt in the media have ranged from four – seven million dollars, the NBE deal set the sum to be paid to the oil and gas companies at 4.5 billion dollars.
This is not the first time EGPC has gone to banks to help make up the shortfall in payments owed to foreign companies. The EGPC has traditional loans to Morgan Stanley, BNP Paribas, and Islamic funding agreements with the International Islamic Trade Finance Corporation. Locally the EGPC already owes NBE approximately $3.6 billion of its outstanding $7.6 billion to banks. This past May, the EGPC failed to gain new loans from both the Central Bank of Egypt and NBE, with both banks citing that the EGPC had breached its credit ceiling.
Because of increasing demand at home caused by Egypt’s on-going fuel crisis, the EGPC has been redirecting oil resources, otherwise intended for export to the international market, for local consumption. The lost revenue from decreased exports in addition to the need to subsidise increasing imports has exacerbated the EGPC’s struggles to pay the foreign companies, which extract Egypt’s oil and gas resources.