Egypt to pay $1.3 billion in oil company arrears by June amid energy crunch

Egypt said it will settle $1.3 billion in overdue payments to international oil companies by June, moving to ease a long-standing strain on its energy sector. The petroleum ministry issued the statement Saturday, bringing forward an earlier repayment plan and signaling a more urgent effort to address arrears that have slowed new investment and complicated operations.

The debt has been accumulating for years. By June 30, 2024, Egypt owed $6.1 billion to foreign oil companies, a gap driven by a persistent shortage of foreign currency. That shortage affected more than budgets; it delayed payments to partners, slowed drilling programs, and stalled field development. Officials say the currency situation has improved, but some companies report that unpaid dues are beginning to build again, highlighting the fragility of the recovery.

Arrears clearance may attract foreign investment

The revised schedule marks a change from January, when the government projected $1.2 billion would remain unpaid by June. With the pledge to settle $1.3 billion, Cairo signals a stronger commitment to restoring confidence among foreign operators. For companies that had scaled back spending or delayed projects, reliable payments could prompt a resumption of operations.

Egypt’s domestic oil and gas output has been falling since a peak in 2021. Industry executives say consistent payments are critical for maintaining production in mature fields and for investment in new exploration. Reducing arrears could help reverse the decline and limit the country’s growing reliance on imports, whose costs have risen sharply.

Energy bills have more than doubled since the U.S.-Israeli conflict with Iran intensified global prices, putting extra pressure on a budget already constrained by economic shocks. Authorities have considered steps to curb consumption, including remote work for government employees and early shop closures, reflecting the challenge of balancing supply with economic activity.

Foreign partners secure Egypt’s energy future

Foreign partners remain vital. Russia’s Zarubezhneft operates offshore blocks with reserves exceeding 200 million barrels, Lukoil has invested $22.5 million in exploratory wells in the Eastern Desert, and Rosneft holds a 30 percent stake in the Zohr gas field, one of Egypt’s most important assets. Russia also provides nuclear fuel and technical support for the El Dabaa nuclear plant, underscoring its broader role in Egypt’s energy mix.

Accelerating repayments is not just about settling old debts; it is about securing future supply. By delivering on the $1.3 billion pledge, Egypt aims to reassure investors and encourage new spending. Whether that will translate into higher production depends on prompt payments and company responses, but the announcement signals a step toward stabilizing the sector amid rising domestic demand and global energy pressures.