Petroleum subsidies are expected to be EGP 5bn lower than the predicted EGP 61bn to reach EGP 56bn in the state budget for the fiscal year (FY) 2015/2016, Minister of Petroleum Tarek El-Molla announced Monday.
In the FY 2014/2015 budget, petroleum subsidies recorded EGP 76bn.
El-Molla, who made his announcement during a luncheon held by the US Chamber of Commerce, attributed the subsidy to the fall of international oil prices while also addressing rumours that foreign oil partners might exit the market.
The minister said the government has a strategy to increase and diversify energy supply to meet increasing demands. “Do not believe anyone who says our partners are leaving the country,” El-Molla said.
The minister highlighted that the total investment of foreign partners during 2015 amounted to $7bn and that this figure clearly indicates their commitment and belief in Egypt’s economy.
Between FY 2011/2012 and December 2015, Egypt’s debt to international oil companies decreased from $6.3 to $3bn, about 50%.
The minister addressed the current challenges the government is facing, which is the increase in energy consumption and decline of production. “Mature fields are a challenge and we have to compensate the decline in production by adding new wells and increasing exploration.”
El-Molla said that it takes three to five years to discover a new well while full production will occur within eight years. Once the well reaches maximum production yields, the level of production starts to decline over the span of eight years until the well dries.