Foreign oil companies paid $600m last month, Egypt minister says

Egypt owed $5 billion to foreign oil companies in May, the same level as at the end of last year.

Dana Gas's efforts to clear arrears with the Kurdistan Regional Government remain stalled. Above, a Dana gas plant in the KRG. Dana Gas

Egypt's oil minister said yesterday that foreign companies were paid US$600 million last month as part of the country's programme to clear billions of dollars of arrears by the end of next year.

Meanwhile, the Norwegian oil company DNO, which is 40.45 per cent owned by RAK Petroleum, said yesterday that it had received $30m from the Kurdistan Regional Government following the KRG’s pledge last month to pay up to $100m in September as it moves to clear the billions it owes to foreign oil companies.

Sherif Ismail, Egypt’s minister of petroleum and mineral resources, said Egypt aimed to lower its arrears to foreign oil companies to $2.5 billion by the end of this year, Reuters reported from Cairo yesterday.

Egypt owed $5bn to foreign oil companies in May, the same level as at the end of last year. Mr Ismail last month said that the amount had dropped to $3.5bn and Egypt would be fully caught up by the end of next year.

Companies operating in Egypt and the Kurdish region of Iraq have suffered for several years as the governments of both have stalled on payments because of the strains on their own finances from political turmoil.

None has suffered more than Dana Gas, the Sharjah-based oil and gas company whose main assets are gasfields in Egypt and the Kurdish region. Its shares had plummeted from Dh 1.02 at the beginning of last year to a low of Dh 0.38 in the spring of this year before staging an erratic recovery, partly because of a deal on back-payments it struck with Egypt, and more recently on signs of movement by the KRG. The shares were up nearly 2 per cent yesterday at Dh 0.53.

DNO’s shares were up 2.27 per cent at 9.24 Norwegian kronor each yesterday on news of the KRG payments. The Oslo-listed company’s shares are up 22 per cent since their low of 7.60 kronor last month before the Kurds announced their repayment plan. But they are still way down from their high of 24.95 kronor at the beginning of last year.

DNO said last month that it had swung to a second-quarter operating loss of $23m from a profit of $55m in the same period last year as second-quarter sales plunged about 62 per cent to about $55m.

The losses came despite producing a record quarterly average of 153,346 barrels per day in the three months through June from its Tawke oilfield in the Kurdish region.

Meanwhile, apart from its pro-rata share of any bullet payments the Egyptian government makes, Dana Gas has a deal to invest $350m to develop more than three dozen new oil and gas wells there in exchange for rights to sell gas-related liquids on the international market to recoup back-payments.

But Dana Gas’s efforts to clear arrears with the KRG remain stalled. The company is expecting a final judgment from the international arbitration court this month that it can use to pursue the Kurds for payment of arrears that stood at $2bn at the end of May. The Dana Gas chief executive Patrick Allman-Ward has said the company’s preferred approach is negotiation, but once it has the final judgment it can begin to sue to have Kurdish oil exports seized for payment in foreign jurisdictions.

Meanwhile, other companies operating in the Kurdish region have cautiously welcomed the pledge of payments. These include Genel and Gulf Keystone.

Speaking after last month’s announcement, the Gulf Keystone chief executive Jon Ferrier said: “We are confident that our host government will be able to deliver on their recent pledge to establish a regular payment cycle for our crude … and will start addressing the amount owed in arrears from 2016.”

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