Egypt's Oil Minister Sherif Ismail (Photo: Reuters)
Egypt plans to repay all of the $4.9 billion debt owed to foreign oil and gas companies within six months, the oil ministry said on Thursday, a move it hopes will prompt them to step up exploration and ease the worst energy crunch in decades.
Egypt has delayed payments to oil and gas firms as its economy has been hammered by almost three years of instability since a popular uprising ousted autocrat Hosni Mubarak.
Arrears had begun to accumulate before the revolt, but worsening state finances saw the debts mount to billions of dollars while the government diverted gas that had been earmarked for export, to meet domestic demand.
Gas production has steadily declined in Egypt while consumption keeps rising, but firms have been reluctant to increase investment in exploration and production, particularly in costly offshore areas, until the government pays them back.
The oil ministry said in a statement that Egypt planned to borrow $2 billion to help it finance the repayments, seeking to pay back 60 percent of the arrears by year-end. Egypt said in October it had repaid $1.5 billion of the money owed, leaving $4.9 billion outstanding.
"This offering, comes as one of the short-term measures taken by the government to pay the IOCs' (international oil companies) arrears," Oil Minister Sherif Ismail said in the statement.
He said that state oil and gas boards EGPC and EGAS were holding another round of talks with the oil companies, in parallel with the repayments, to "manage their expectations".
The gas shortage has left the Arab world's most populous country struggling with its worst energy crisis in years. Blackouts became an almost daily occurrence over the summer months and the government has also diverted gas away from heavy industries, doing substantial damage to the bottom lines of some companies.
Egypt began cutting subsidies on fuel and electricity in July as part of economic reforms aimed at curtailing its budget deficit and curbing growth in domestic energy consumption.