Egypt fuel subsidy spending drops by 29 per cent

18 November 2014

Government spends $3bn in first quarter of fiscal year

Egypt’s spending on fuel subsidies has dropped by 29 per cent in the wake of reforms that hiked up prices for consumers.

The government spent £E22bn ($3.1bn) on energy subsidies in the first quarter of the fiscal year 2014-15, an Oil Ministry official said on Monday.

A total of £E31bn was spent during the same period in the 2013-14 fiscal year, with £E126bn spent over the full year.

Egypt cut energy subsidies in July, raising the prices of some fuels by as much as 80 per cent.

The country, which was until recently a natural gas exporter, is experiencing its worst energy crisis in decades as domestic demand for gas outstrips natural production.

The government owes foreign energy companies hundreds of millions of dollars, and firms including the UK’s BG Group and Germany’s RWE say further subsidy cuts are needed to help Egypt repay these debts.

In October, BG Group said in a statement that payments from Cairo had reduced the company’s domestic receivables in Egypt from $1.4bn to $1.2bn.

Egypt’s failure to pay on time has reduced investment from foreign oil companies and has delayed several gas field development projects including UK-based BP’s giant West Nile Delta (WND) North Alexandria concession, which has estimated recoverable reserves of 5 trillion cubic feet of gas and condensate.

The North Alexandria field development project is currently on hold, while BP and the Egyptian government renegotiate terms.

Earlier this month, Egypt announced it is planning to issue a tender for $2bn in funding, guaranteed by forward sales of crude shipments, in order to pay off its remaining debts to foreign oil companies.

On 17 November, petrol prices in the country were ranked 31 in the world by price monitoring website GlobalPetrolPrices. Venezuela was ranked number one, with the lowest petrol price, and the US was ranked 29.

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