Posted on May 10, 2013

OPEC member and gas-rich Qatar will supply Egypt with up to 24 cargos of liquefied natural gas starting May 28 as the North African country struggles to meet its domestic energy needs, the first under-secretary for agreements and exploration at the Egyptian Oil Ministry said in remarks published on Wednesday.

Under the swap deal, BG Group PLC and Malaysia's Petroliam Nasional Bhd will give Egypt about 500 million cubic feet a day of the natural gas they extract in the country to help ease its fuel shortage, while Qatar Gas will send the LNG directly to the companies' overseas customers, Tarek el-Barkatawy said according to the state-owned Middle East News Agency, or MENA.

Over four months Qatar will send 18 to 24 cargos of up to 3.3 billion cubic feet of natural gas each, Mr. Barkatawy said. The Egyptian oil ministry said earlier this week that the two countries are still negotiating the credit terms for the deal, but the North African country will not pay for these shipments immediately in order to preserve its foreign reserves.

Egypt is working to secure oil- and gas-supply deals on favorable credit terms from major Arab producers in an attempt to ease fuel shortages and a government cash crunch that have proved politically damaging for the country's Islamist President Mohammed Morsi.

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Libya, another member of the Organization of the Petroleum Exporting Countries, has agreed in principle to offer Egypt close to one million barrels a month of crude oil on a lengthy one-year credit term, officials from the two countries told The Wall Street Journal. OPEC member Iraq has also agreed on a draft contract to supply Egypt with four million barrels of crude a month on three-month interest-free credit, officials from both countries said.

Egypt, a significant gas producer with much of its output consumed domestically, began reining in exports last year and is planning to issue a tender soon for local firms to import liquefied natural gas to meet its domestic needs. It is in talks with Russia for gas supplies, while Algeria informed the Egyptian government it can only start negotiating natural-gas deals next year once it boosts its domestic production from new fields.

The country has faced a diesel shortage since last year, which has in turn led to rising food costs, long queues at filling stations and electricity blackouts. The fuel crisis has compounded broader economic problems in the country, which in 2011 overthrew the government of Hosni Mubarak in a popular uprising, paving the way for the electoral victory of Mr. Morsi's Muslim Brotherhood.

Egypt's government is short of funds and has been negotiating with the International Monetary Fund over a $4.8 billion loan, which analysts and investors say is critical for the country. IMF officials left Cairo last month without agreeing on the terms of the loan. 

by Summer Said