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26 February 2024

Low oil price could delay Egypt payments: Dana Gas

Gulf nations urged to tap their massive assets. (Reuters)

By Reuters

The collapse in oil prices could prolong the efforts of UAE-based Dana Gas to recover overdue receivables from Egypt, its chief executive said on Wednesday.

Egypt, which has fallen behind on oil payments during four years of political instability, signed a deal with Dana in September allocating the company additional condensate production that it could sell on the international market, to offset the debt.

Chief Executive Patrick Allman-Ward told reporters in Dubai that the amount owed had fallen to around $160 million, from $280 million in September, and that he hoped to clear the debt by mid-2018.

But he also said that the oil price fall could prolong the process. Benchmark Brent crude prices have fallen by half since the end of September to below $47 a barrel.

"Clearly our calculations were based at $85, which we thought at the time was a very conservative assumption - clearly we are not there at the moment," he said.

He said he believed that oil prices would rebound to above $80 a barrel in nine to 18 months.

"It is going to take us six months anyway to start seeing significant volumes of liquid production hitting our production profiles, so hopefully by that time the oil price will be in a better place," he said.

"It will impact but it will not have a particularly significant or severe impact."

Allman-Ward said Dana was still receiving $2.65 per million British thermal units (mmBtu) for gas, and that there was a provision in the concession agreement to increase this price if it was not commercially viable.

"We are in discussions with the Egyptian government to see if we can come to an agreement to make (it) economically viable," he said on Wednesday, adding several options are being discussed including either raising the fixed price or link it to prices on the international market.

Dana has been in talks with the Egyptian government to secure a higher price for some of the natural gas it extracts since November.

Cairo is also negotiating increased gas prices with other energy firms including Italy's Eni and Germany's RWE DEA, particularly in cases where prices are not high enough to cover the costs of production.

Egypt's Oil Ministry said in November it hoped to repay the $4.9 billion it owed to foreign oil and gas companies by May.