Amid an energy crisis in Egypt, global giants in the sector have been lining up at a conference this weekend to pledge multibillion-dollar investments in the North African country. Chief among them, the British BP PLC has inked a $12 billion deal that should lead to the production of 3 billion barrels of oil equivalent, according to Reuters.
Already one of Egypt’s largest foreign investors, BP is now poised to play an even more critical role as the nation attempts to boost the production of oil and gas within its own territory. The agreement announced Saturday “is expected to meet a quarter of the country’s energy needs,” the Financial Times reported.
During the conference at the Sharm el-Sheikh resort by the Red Sea, the British BG Group PLC announced plans to invest $4 billion in Egypt over a period of two years, the Financial Times said. Meanwhile, the Italian Eni SpA signed a $5 billion investment deal, covering a span of four to five years, Reuters said.
Egypt is the largest oil-producing nation in Africa that doesn’t belong to the Organization of the Petroleum Exporting Countries. Yet it has struggled to meet rising domestic demand -- a shortfall punctuated by regular electricity blackouts.
Experts say years of government energy subsidies have made the problem worse, compounding the economic blows related to the Egyptian Revolution of 2011. According to the U.S. Energy Information Administration, those subsidies cost Egypt $26 billion in 2012, adding to a high national deficit, and making it more difficult for the country to pay back debts to foreign energy operators.
According to RTCC News, Egyptian officials last July initiated a five-year plan to phase out energy subsidies. “Last year, because of the severe economic situation, the government decided it was a reality that had to be faced, even though they knew that people would not be happy,” Hoda Baraka, an environmentalist based in Cairo told the publication in an interview in January.
Egyptian ministers at the conference this weekend said subsidies alloted in the country’s budget have now been cut down to $10 billion, the Financial Times reported.