BG Egypt halts some development wells over gas price disagreement

BG Egypt has suspended work at some development projects in Egypt after the company could not reach agreement over the price of gas with the government, an official at state-run Egyptian General Petroleum Corp (EGPC) told Reuters Tuesday.

“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.

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 in the sector.

BG Egypt has previously 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 as 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 as soon as possible.