BP has announced an agreement has been reached to invest about $12 billion with a partner to develop natural gas resources in Egypt. The oil company plans to develop a large quantity of offshore gas with the project, called West Nile Delta. The amount is expected to be equivalent to about one-quarter of Egypt’s output. After the gas has been extracted, it will be shipped onshore to be consumed by customers in Egypt’s domestic market. Gas from the project is expected to begin flowing in 2017.
The deal may turn out to be a boon for the government of President Abdel Fattah el-Sisi. El-Sisi is a former military chief who assumed power in 2013 after the ouster of Egypt’s longtime president, Hosni Mubarak, in 2011 and the ouster of democratically elected president, Mohamed Morsi. Since the political turmoil that led to the ouster of the presidents, international oil and gas companies have been increasingly at odds with the government.
The oil companies have been major investors in Egypt, leading to the doubling of gas production from 2003 to 2009. During that time period, the country became one of the leading producers of natural gas in Africa. However, worries about the political turmoil has led to a decline in output in recent years, as companies pulled back on their investment.
Causing additional issues, the government has run up substantial arrears on payments owed to the companies for the oil and gas they produce. BP has estimated that about $3 billion is currently owed to the industry, with roughly a third of the total owed to BP. The government, which controls the oil and gas sales for the country, has reduced the amount owed to the companies by a considerable amount but has not yet eliminated them.