Business | Oil & Gas

Egypt freezes gas deal talks with Qatar

Qatar already promised Egypt in June five free shipments of LNG to avoid power cuts

  • Zawya Dow Jones
  • Published: 18:57 August 19, 2013
  • Gulf News

Cairo: Cash-strapped Egypt has frozen talks to import liquefied natural gas (LNG) from wealthy Qatar due to the political instability and violence that erupted after the army swept the streets of the supporters of ousted President Mohammad Mursi last week, an official said on Monday.

“We were planning to resume the talks very soon but as you can see, the situation in Egypt is very difficult,” Taher Abdul Raheem, chairman of the state-run Egyptian Natural Gas Holding Co., or EGAS, told the Wall Street Journal.

“The talks are frozen with Qatar and we are not in a position to initiate talks with any other country,” he said, without specifying when the discussion with the Gulf country will be resumed.

Gas-rich Qatar already promised Egypt in June five free shipments of LNG, equivalent to 16 billion cubic feet, to compensate the foreign partners that have already supplied extra domestically produced gas to the North African country to avoid wider power cuts during the summer months.

The gift initially gave Egyptian officials more time to negotiate the terms of a deal agreed in principle in April to secure around 13 LNG cargoes to the overseas customers of two companies currently exporting gas from Egypt-BG Group PLC and Malaysia’s Petroliam Nasional Bhd, or Petronas. Those companies would, in turn, supply an extra 500 million cubic feet a day of domestically produced natural gas, which would otherwise have been exported, to Egypt’s government. The first cargo from the April gas-swap deal was scheduled to be shipped in May, but a disagreement over the price Egypt would pay for the gas held up the agreement.

“The free cargos came at that time as a discount on the bigger deal, and we had hoped that we could still convince Qatar to give us good prices and easy credit terms but we did not manage to resume the talks on that subject, especially when Mursi was ousted a month later,” Abdul Raheem said.

Curbs on production

Oil and gas producers in Egypt have curbed local production due to political unrest, but demand for energy has continued to grow, resulting in rolling blackouts throughout the country that have deepened public discontent.

In response, the Egyptian government last year started looking for deals to buy LNG and issued a tender to build an import terminal that would start to operate in May this year. However, those plans were cancelled, due to political and technical issues.

An Egyptian official familiar with the matter who asked not to be named said that the Egyptian government decided to give up on the Qatari LNG deal because the Gulf state supported the Mursi administration.

“We felt that Qatar won’t be as easy as it was during the reign of Mursi and the coverage of their channel Al Jazeera, for instance, is still very biased towards the Muslim Brotherhood,” the official said.

Qatari officials were not immediately available for comment. The Gulf state’s foreign minister told reporters in Paris on Sunday that his country had never given aid to Egypt’s Muslim Brotherhood and that all support went to Egypt as a whole and “still continues till date.”

Egypt has faced a natural gas and diesel shortage since last year, which has pushed up food costs, seen long lines at filling stations and electricity blackouts. The energy-supply problems have deepened popular discontent with Egypt’s former ruling Islamist government and exacerbated broader economic difficulties there.

The country is also struggling to complete oil-supply agreements with Iraq and Libya aimed at easing diesel shortages. It has been unable to provide acceptable bank guarantees that would guarantee the flow of oil, people familiar with the talks have previously said.

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