EGPC secures $1.5 billion syndicated loan

The state-owned Egyptian General Petroleum Company (EGPC) has secured US$1.5 billion in financing, through a syndicated loan from the National Bank of Egypt, HSBC and the National Bank of Abu Dhabi.

Domestic banks Commercial Bank International, Arab African International Bank and Arab Bank joined the coalition as secondary coverage providers and main loan arrangers, according to a statement released today by the National Bank of Abu Dhabi.

The EGPC will have three years to repay the loan, the exact terms of which have not been publicly disclosed. The funds will be disbursed by the end of December 2014.

According to the statement, the consortium was selected from among five other coalitions bidding to supply the funding.

On November 13, the Egyptian government announced plans to issue a tender for $2 billion in pre-export financing to help repay its debt to international oil and gas companies. Under the scheme, the loan would be guaranteed by forward sales of crude oil shipments.

“This transaction will ensure that we will have repaid a substantial amount of the arrears by the first quarter of 2015 to motivate our partners to intensify exploration and production activities. Through boosting local production of oil and gas, and thus minimizing imports, we will be able to spare the necessary cash to continue paying EGPC and [state-owned gas firm] EGAS due debts to [international oil company] partners,” said Oil Minister Sherif Ismail in the November 13 announcement.

Egypt’s energy consumption has outpaced production, leaving the government scrambling to fill the gap.

Under the country’s production sharing agreements, the Egyptian government is allocated a percentage of oil and production for domestic use. In recent years, the government has increasingly resorted to dipping into stocks of gas and oil produced in Egypt but contractually allocated to the foreign companies who extract it.

In doing so, the country has racked up billions of dollars in debt to these firms, who must be paid for the oil and natural gas the government takes. It has also hurt the country’s appeal as a destination for potential oil and gas investments, since the government cannot guarantee that companies operating in the country will be paid on time.

The current administration has made repaying these debts a priority, saying it aims to repay 60 percent of outstanding debt by the end of 2014, and the balance before the end of May 2015.

It repaid $1.5 billion to oil companies in December 2013, and an additional $1.5 billion early this month after securing an LE10 billion loan from local banks.

As of mid-November, the government said oil debts amounted to $4.9 billion.