BG Egypt Suspends Some Development Wells over Price Dispute

BG Egypt has suspended work at some Egyptian development projects after it failed to agree with the government on the price of gas, an Egyptian General Petroleum Corp (EGPC) official told Reuters.

“BG has stopped work at 9A+ and 9B after failure to reach an agreement on the fixed price to be paid for extracted gas, and it withdrew rigs working on the 9A+ wells on the seventh of March,” the EGPC official said.

Egypt’s Ministry of Petroleum denied BG Egypt had stopped development as a result of price disagreements and said in a statement that “negotiations over timelines for the projects” are ongoing.

The development areas include several deepwater wells in the West Nile Delta.

BG Egypt, a subsidiary of Royal Dutch Shell, is looking to raise the price it is paid for gas to $5.88 per million British thermal units from $3.95 currently, the official said.

Egypt has over the past year raised the price it pays many international oil companies for natural gas production in order to encourage more investment.

BG Egypt has worked out deals with Egypt’s EGPC to earn the higher price of $5.88 at other development wells, which it is continuing work on.

Egypt, which is facing an acute foreign currency shortage, has delayed paying foreign petroleum companies their arrears, which reached about $3 billion at the end of December 2015.

BG Egypt has made setting a timetable for repayment of its arrears a condition for re-starting work at the suspended development wells, the EGPC official said.

Once an energy exporter, Egypt has turned into a net importer because of declining oil and gas production and increasing consumption. It is trying to speed up production at recent discoveries to fill its energy gap.

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