Monday, January 25, 2016

Egypt Said to Get $20 Billion of Oil Products From Saudi Arabia
Abdel Latif Wahba
January 24, 2016 — 12:25 PM EST

Egypt will get about $20 billion in oil products from Saudi Arabia over five years, a government official said, marking the kingdom’s latest display of support for its struggling North African ally.

The deal grants Egypt easy payment terms, said the official, who asked not to be named because the agreement details will be made public at a ceremony attended by both heads of state. Saudi Arabia’s oil ministry couldn’t immediately be reached for comment.

The two countries also finalized a 3-month oil deal worth $1.5 billion that both sides were negotiating earlier this month, the official said. That deal is part of the 5-year agreement.

The agreement is the latest in a series of Saudi pledges of economic support for Egypt, even as the oil-rich kingdom cuts subsidies to shore up its finances. Saudi Arabia, along with Kuwait and the U.A.E., poured tens of billions into Egypt to support the regime following the 2013 military-led ouster of Islamist President Mohamed Mursi.

In January, Saudi Arabia promised to invest 30 billion riyals ($8 billion) in Egypt through its public and sovereign funds. It also agreed to provide $1.5 billion to develop the Sinai peninsula, and granted $200 million of loans for small- and medium-sized enterprises.

Natural Gas Suppliers Consider Suspending Egypt Contracts

Jan. 22, 2016 4:42 p.m. ET

LONDON—Egyptian state-owned natural gas company Egas has missed payment deadlines for liquefied natural gas, as the country struggles to build up foreign reserves after blows to its tourism industry over the past year.

Two suppliers to Egas have confirmed to The Wall Street Journal that all companies with active supply positions in Egypt have been affected by payment delays.

Egas didn’t respond to a request for a comment.

“The payment difficulties are affecting all parties,” a person from a European gas trading firm said, adding that his company was one of the unpaid parties.

Another person from an international oil company said that his firm is also waiting to be paid for LNG deliveries to Egypt.

The payment problems have been continuing for about three months, the people said. One boat has been diverted away from Egypt, the BP-controlled British Sapphire. People close to the matter said this was because of payment delays, but, they said, Egas has denied this.

BP declined to comment on the subject.

Egypt’s energy funds could be being affected by cash flow from the Gulf Cooperation Council countries, according to Olivier Jakob, an analyst at Switzerland-based Petromatrix.

“Egypt is basically financed by the GCC, so this was one of the things to watch for when oil prices dropped,” he said. “If GCC cash flow is affected, this could have implications for Egypt.”

Several options are being considered according to the suppliers to Egypt. Egypt may be discussing a fuel swap with Saudi Arabia, which would give Egypt credit for distillates and gasoline and free up cash that could be used to pay for natural gas.

One products trader said an oil products deal has already been sealed with Saudi Arabia. He said the kingdom had agreed to provide 70% of Egypt’s product needs from February for a period of three months.

No one at state-owned Saudi Arabian Oil Co., better known as Saudi Aramco, could be reached to comment on the subject.

One trader was also expecting the World Bank or the International Monetary Fund to implement a system to bail out or help Egypt with payments.

Chris Jarvis, the IMF mission chief for Egypt, said, “We are not in talks on a new program or a loan. So far, the authorities have not requested IMF financing, but we would be ready to consider such request when the authorities feel it is opportune. The Fund stands ready to help Egypt and its people.”

No one at the World Bank was immediately available for comment.

Parties are also considering suspending their contracts with Egypt altogether, but the process could be far from simple.

“Contracts vary and some may or may not have the right to terminate because of delayed payments,” a supplier to Egypt said.

The payment date for LNG is normally around 20 days after the cargo is delivered. Contractually, late payments may not provide a legal basis for stopping deliveries.

Egypt is considered a high-risk country to supply with LNG because of the associated credit risks with the country. But LNG market players have been participating in riskier positions because of oversupply in the market. The oversupply means there is a real need to offload volumes wherever possible.

Egypt’s reputation as a high-risk country had waned in the past year when it ramped up deliveries of LNG. The country even installed a second floating LNG terminal in September to boost the amount of gas it had access to.

But the country’s already troubled economy has since been pummeled by a number of incidents, such as the downing of a Russian airliner in the Sinai and several targeted attacks on tourists in the country.

Inflation in the country is in double figures and Egypt has struggled to build up foreign reserves partly because of the repeated blows to its tourism industry in the past year.

BP Egypt says LNG shipment was diverted to manage peak demand

Jan 24

BP Egypt said on Sunday that one of its LNG shipments to Egypt was held back this month as part of a deal over the timing of deliveries, and the petroleum ministry dismissed reports that it was linked to payment problems.

LNG tanker British Sapphire was diverted to Brazil rather than discharging in Egypt earlier this month, and traders had said the diversion was related to payment delays at state gas board EGAS. EGAS also denied the reports.

Egypt is facing a dollar shortage that has hit its ability to import, creating delays in opening letters of credit and causing goods to pile up at ports.

"BP has been awarded an LNG supply contract to Egypt to supply cargoes from mid 2015. Six cargoes have been successfully delivered and BP has either received payment in full or received agreed collateral from EGAS for all 6 cargoes," BP Egypt told Reuters in a statement.

"The seventh cargo was postponed to the third quarter of 2016 based on a mutual decision between EGAS and BP to manage supply for peak summer demand," the statement added.

BP said it remained committed to deliver LNG cargoes to EGAS "in accordance with the contractual arrangements in place".

Egypt became a major market for LNG shippers after the launch of two floating import terminals last year and as the country looks to plug an acute energy shortage that has halted industrial production during summer months and caused rolling blackouts.

According to financial and trade sources, last month Egypt asked for 90 days to pay for LNG deliveries, up from the traditional 15, creating arrears currently estimated at $400-$500 million.

EGAS chairman Khaled Abdel Badie told Reuters on Sunday that lower world oil prices should push the country's LNG import bill for fiscal year 2015-16 down to between $2.75 billion and $3 billion from an originally expected $3.5 billion.

The ministry of petroleum on Sunday denied that there has been issues making payments to foreign energy companies.

"There is no truth to what has been said about delays in the payment of dues to international companies for the value of agreed upon LNG shipments," a ministry of petroleum statement said. (Reporting by Eric Knecht and Abdel Rahman Adel; Editing by Andrew Heavens)

Russia, Egypt to sign memorandum on Russian industrial zone in Egypt soon

January 24, 21:57 UTC+3

The Russian delegation will be led by Minister of Industry and Trade Denis Manturov CAIRO,

January 24. /TASS/. Russia and Egypt will sign a memorandum of understanding on the establishment of a Russian industrial zone in the area of the Suez Canal during a regular session of the intergovernmental commission due to be held on January 31-February 2 in Cairo, well-informed sources in Cairo told TASS on Sunday.

The Russian delegation will be led by Minister of Industry and Trade Denis Manturov. It will include representatives from some 60 leading Russian companies interested in energy and transport infrastructure projects in Egypt.

Apart from that, the Russian Direct Investment Fund is expected to sign a memorandum with a number of Egyptian commercial banks under the project for the establishment of Egypt’s five-billion-U.S. dollar investment fund with participation of the Russian Direct Investment Fund and the United Arab Emirates.

The would-be fund is expected to invest in the construction of subways, a railway line, a logistics center and a tourist hub. Apart from that, the Russian Direct Investment Fund is interested in co-investment with UAE partners of a project for the construction of grain elevators in Egypt. The Fund’s CEO, Kirill Dmitriyev, said earlier Egypt was losing about 30% of grain.

"That is why the subject of grain elevators is very topical. It will help the agrarian sector to be more efficient," he said, adding that the Fund was interested in transport projects to localize Russian car production in Egypt. Presidents Vladimir Putin of Russia and Abdel Fattah al-Sisi of Egypt agreed in Sochi in August 2014 on the establishment of a Russian industrial zone in Egypt to implement the New Suez Canal project and on a simplified procedure for Egyptian-made goods on the Russian market.

According to expert estimates, this component of the New Suez Canal project and possible signing a free trade zone between Egypt and the Customs Union will make it possible to increase national incomes by five to eight percent and will help promote Egyptian goods on the global market.

The implementation of these projects will make it possible to create thousands of new jobs to help Egypt cope with unemployment.


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