LONDON/CAIRO Feb 19 Egypt's hope of importing
liquefied natural gas to stave off an energy crunch this summer
may fall through after a Norwegian firm pulled out of a deal to
install an LNG import terminal, sources with knowledge of talks
between Cairo and the company said.
If it fails to secure a means of importing LNG, Egypt would
have no place to turn for fuel supplies as already painful
shortages are set to become more acute with the approach of
The latest setback came when Hoegh LNG, which was
recently awarded the contract to provide a floating terminal,
rejected the commercial terms offered by state-run gas company
EGAS, the sources said.
The tender process to find a company to provide the terminal
began around 18 months ago, well before the army toppled
Islamist President Mohamed Mursi last July.
Hoegh LNG's chief concern was the lack of financial
guarantees to underpin project costs, the sources said.
The cash-strapped government's financial troubles have
forced Cairo to delay payment of debts to foreign oil companies.
"[Hoegh LNG] won the tender, but the conditions offered by
the counterparts in terms of commercial and financial guarantees
were not good enough," one source said.
Even so, the Norwegian shipper may yet clinch the deal,
because the two sides are still in talks, the sources said.
"There is a process which has to be completed. Hoegh LNG are
in that process," a Hoegh LNG spokesman said.
Egypt's energy ministry said the process to award a terminal
provider was ongoing and declined to give further details.
Terminal providers say Egypt could have a terminal in place
to receive LNG within six months of a contract award.
At the latest count, around six floating import terminals,
or Floating Storage and Regasification Units (FSRUs), were
available globally. Hoegh LNG owns two, and U.S. company
Excelerate Energy, which was a rival bidder, has four, the
Officials in the military-backed interim government
installed after Mursi's ouster blame his administration for
failing to secure a floating terminal last year.
But Egypt's energy troubles predate Mursi. They are rooted
in fuel subsidies that cost the government $15 billion a year, a
fifth of the state budget, and which encourage consumption.
The subsidies also drain foreign currency reserves that
could be used to pay off $6 billion in debts to foreign energy
companies and improve payment terms to encourage investment.
It is unclear whether the government has approached any
rival companies, including Excelerate, to replace Hoegh.
Oil Minister Sherif Ismail told Reuters on Feb. 9 that the
government was "very close to closing the bid for the FSRU".
But he indicated that it might be too late for the terminal
to be of use in importing badly needed gas supplies for the
"It is our prime concern and intention to solve this problem
for Egypt, if not for this year by 100 percent, then at least
for the years yet to come," he said.
Ismail said Egypt would need to import an additional $1
billion worth of petroleum products to meet energy needs for the
summer, on top of securing significant gas supplies.
With the latest setback, however, those additional gas
supplies may be out of Egypt's reach for now.
(editing by Jane Baird)