Dana Gas, an energy company based in the United Arab Emirates, is trying to leverage its government’s financial aid to Egypt to get preferential treatment on payment for its goods there.
Dana has operations in the Nile delta, Upper Egypt and the Gulf of Suez that produced the equivalent of 39,100 barrels of oil a day on average during the first quarter. Yet like other foreign energy firms in Egypt, it has been stung by unpaid bills as declining tourism, thinning foreign currency reserves and large budget deficits limited the government’s ability to pay.
As Egypt prepares for a presidential election this month that former army chief Abdel Fattah Al Sisi is expected to win, the U.A.E. and other Arab Gulf countries have sent billions of dollars in energy shipments and financial aid. Analysts say Gulf countries are supporting Mr. Sisi because they are worried about the domestic threat posed by the Muslim Brotherhood, which won elections in Egypt two years ago but was branded a terrorist group after a coup orchestrated by Mr. Sisi last summer.
Given the extent of U.A.E. aid to Egypt — it has committed about $7.5 billion — Dana Gas chief executive Patrick Allman-Ward said Thursday that he hoped the Egyptian government would favor Emirati companies in repayments.
Dana was owed $278 million in Egypt at the end of the first quarter, part of about $5.7 billion of total dues to foreign energy companies.
“We have been in discussions with the U.A.E. government about ways in which we can try and ensure the generosity of the U.A.E. government is flowing preferentially to Emirati companies operating there,” Mr. Allman-Ward said.
Egypt’s petroleum minister has promised $1 to $1.5 billion of payments will go to foreign companies in June, Mr. Allman-Ward said. Dana has also been in talks with the government to work out a regular payment plan.
While payments to foreign companies have been sporadic in recent years, Egypt desperately needs the energy. Power outages have become common during peak demand hours in the summer, a problem that tipped popular opinion against Mr. Morsi and fed protests that paved the way for last year’s coup.
Foreign companies have responded to the unpaid bills by scaling back production and refusing to invest in exploration of new oil and gas fields pending a solution to the receivables issue. Dana is tying new investment to payments.
Rapprochement with foreign companies figures to be a priority for Egypt’s new government given the political importance of the energy issue, but it’s unclear whether these companies are prepared to stake more money on a country where instability has been the norm for more than three years since the revolution in 2011.
Mr. Allman-Ward hinted that Dana still saw opportunities in Egypt, pointing to an improving macroeconomic environment and a government that seemed committed to getting things back on track. Dana, he said, was “anxious to do our bit” to address the energy crisis.
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(via WSJ Blogs)
