Egypt hopes the BP-funded gas project will help resolve its energy crisis

Egypt announces reopening of suspended gas project

A BP-funded liquid gas project in Egypt, suspended three years ago, will be restarted according to Egypt’s oil minister in a bid to relieve deepening energy crisis.

Although BP refused to comment on the announcement, it has been suggested the $10bn (£5.9bn) gas project could start gas production in 2017. According to oil minister Sherif Ismail, a delegation from BP would arrive to Egypt on 17 July for talks with the government.

Desperately trying to lure back investors that fled the country since the political turmoil and violence started in 2011, the Egyptian government has promised to pay companies including BG Group and BP $3bn by the end of 2017 to help it develop energy reserves.

In April, energy minister Sherif Ismail said Egypt would pay about $1 billion "within two months" but the government has not yet announced that it has paid.

BP, one of the largest foreign investors in Egypt, had initially planned to start production at its North Alexandria plant this year, the minister said.

The North Alexandria gas project is expected to produce about 450 million cubic feet (13 million cubic metres) of gas per day, once operational and gradually increase the output to up to 800 million cubic feet per day by 2018.

Those volumes would mean a significant boost to current production, which Ismail told a local newspaper this month was expected to reach 5.2 billion cubic feet (bcf) per day by the end of December.

In another move that could help improve investor confidence, Sherif Ismail also said Egypt would pay $1.5 billion of the money it owed to foreign energy companies by the end of 2014.

The news comes a day after Algeria agreed to ship five cargoes of liquefied natural gas (LNG) to Egypt this year, according to a source at Algerian state energy firm Sonatrach.

The total amount of the Algerian shipments will be enough to meet around three days' worth of average daily consumption, enough to provide serious short-term relief to gas shortages that have resulted in regular power cuts in Egypt this year.

"Gas imports are planned for a period of the next four to five years, until energy self-sufficiency is achieved," Ismail told reporters on Thursday, referring to overall imports.

The government has struggled to pay foreign companies for gas and work on some major new gas projects has ground to a halt at a time when generous state subsidies are stoking growing demand.

Egypt earlier this year forecast gas production would fail to meet surging domestic demand in the next fiscal year that begins 1 July, signalling more blackouts ahead.

Egypt's steadily declining gas production has been exacerbated by foreign firms' wariness about increasing investment when the government owes them money and has diverted most of the gas promised for exports to meet domestic demand.

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