Dana Gas has negotiated an agreement with the Egyptian government to invest $350m in developing new wells and redeveloping older ones and connecting them to existing infrastructure, according to CEO Patrick Allman Ward, speaking at MEED’s Invest in Egypt 2014.

This is in return for taking liquid production to pay down $160m in overdue receivables by mid-2018. “We don’t need all the money now,” said Allman-Ward. “But we do need a clear and transparent mechanism for future payments.”

The investment will increase Dana Gas’ production in Egypt by 25 to 30 per cent, as well as increased liquid production.

“We will invest $350m in the next three years,” Allman-Ward said. We shall invest in new development wells, existing wells and connections to existing network. This will result in a 20-30 per cent increase in gas production and increased liquid production. We will take all of that incremental liquid production to pay down the receivables component. The government gets what it needs and we get what we want.”

Egyptian gas production has stagnated due to low prices paid by the government to producers and its failure to pay them for the gas consumed in the domestic market. The government owes $4.9bn to international oil companies. Political instability since 2011 has also affected production.

“Dana Gas like other petroleum companies has overdue receivables,” Allman-Ward said.

“We have been in a bit of a crisis of trust with the government over the course of the last couple of years. They have asked us to pay for the gas and we’ve said pay us and we will produce the gas. We managed the breakthrough. We have made it clear that we don’t need to be paid everything right now, but we need a clear, transparent and independent payment mechanism. We shall recover all our overdue receivables by the middle of 2018.”

Important Egyptian industries depending on cheap gas feedstock include cement, petrochemical and fertilisers. The Egyptian government has recently taken steps towards renegotiating gas prices to make projects feasible.

Dana Gas produces 40,000 barrels a day of gas in Egypt, from onshore wells in the Nile Delta. Since buying the assets of the local Centurion in January 2007, Dana Gas has invested $1bn in exploration and developing finds. This has resulted in them doubling their reserves, and increasing production by 40 per cent.