(AFP photo)
The Ministry of Petroleum’s crisis in paying back arrears to foreign partners has reached its limit. The crisis goes back to the petroleum sector having to bear subsidy expenses through its own revenue – and in response, partners have been reducing their gas and oil production rates.
The bill for fuel subsidies has increased annually due to the Egyptian General Petroleum Corporation (EGPC)’s inability to pay its dues to foreign partners. Dues owed to EGPC by the Ministry of Finance are about EGP 95bn to cover the cost of subsidising petroleum, said a senior ministry official.
All petroleum agreements stipulate an interest on dues owed by the government to its partners in the case of late payment, and the interest rates vary with each agreement, the official added.
The agreements, while obliging the government to pay due interest, equally oblige the partners to carry out the needed investment for development and exploration in oil and gas fields. However, partners have begun to reduce their investments in violation of these agreements, which have resulted in lowered rates of gas and oil production. Partners justify this action by claiming they lack the necessary financial liquidity to carry out these projects as a result of the incomplete payments made to them by the government.
