Reuters – Egypt’s oil minister said on Thursday that BP’s $10 billion gas project, stalled for three years, had restarted and that production would begin in 2017, a sign of progress in efforts to ease the worst energy crunch in decades.
The minister told reporters on a visit to al-Aseel oil field in the western desert that production at BP’s North Alexandria concession would begin in 2017, with 450 million cubic feet per day initially being extracted. He said output would rise to 800 million cubic feet per day in 2018.
Those volumes would mean a significant boost to current production, which Ismail told a local newspaper this month was expected to reach 5.2 billion cubic feet (bcf) per day by the end of December.
The total amount of the Algerian shipments will be enough to meet around three days’ worth of average daily consumption, according to Reuters calculations, enough to provide serious short-term relief to gas shortages that have resulted in regular power cuts in Egypt this year.
“Gas imports are planned for a period of the next four to five years, until energy self-sufficiency is achieved,” Ismail told reporters on Thursday, referring to overall imports.
Political turmoil and violence since the 2011 revolt that ousted autocrat Hosni Mubarak has hit the economy hard. The government has struggled to pay foreign companies for gas and work on some major new gas projects has ground to a halt at a time when generous state subsidies are stoking growing demand.
Egypt’s steadily declining gas production has been exacerbated by foreign firms’ wariness about increasing investment when the government owes them money and has diverted most of the gas promised for exports to meet domestic demand.
The near-daily power cuts are forcing energy-intensive industries to close factories or sharply cut production.
PAYING BACK COMPANIES
But given that power cuts and long lines at fuel stations have stoked public anger in recent years, he will have to act carefully when reforming the wasteful subsidies system that accounts for a quarter of government spending.
The latest government figures put Egypt’s debts to foreign oil companies operating there at $5.7 billion, but officials including Ismail acknowledge that debts are mounting even as the government pays off what it owes now.
BP, one of the largest foreign investors in Egypt, had initially planned to start production at its North Alexandria project this year, the minister said. Ismail said a delegation from BP would arrive on July 17 for talks with the government.