LONDON/CAIRO: Egypt has gone from fuel famine to glut thanks to gifts from Gulf states since the army removed the Islamist president in July — and that is giving the state oil company and foreign traders new headaches.
The Egyptian General Petroleum Corp (EGPC), facing rising fees for delaying tankers as gift cargoes fill its ports, has begun to cancel or postpone contracted purchases. Traders have, for now, lost one of their best customers in the Mediterranean and some say the confusion has put them off dealing with Cairo.
Chaos in Egypt’s fuel supply chain that left drivers fuming in long lines at the pumps played a part in popular protests that preceded the military takeover. Now Egypt’s oil import terminals are so crowded that some tankers have been lying off Alexandria and Suez for two months, running up bills.
EGPC Chairman Tarek El Molla said last week that he was giving priority to discharging cargoes donated as part of aid packages from Saudi Arabia, Kuwait and the United Arab Emirates. Delays to shipments ordered on the open market are incurring penalties, known in the shipping trade as demurrage.
“Contracted cargoes are waiting on the water,” Molla said. “So we started telling them to please postpone, please cancel.”
Traders say EGPC has been failing to issue the letters of credit, or L/Cs, needed to finalise payment before unloading, creating delay and uncertainty about deliveries that is making it difficult for firms to hedge their trading books:
“It’s pretty disastrous for anyone who has shorts into Egypt,” said one, referring to traders like himself who have a contract to supply Egypt. “They keep saying ‘No L/C, no L/C’. But there is no incentive to get one because of the donations.”
That trader waited nearly two months to discharge a petrol tanker in early October and does not intend to send more product for the time being. Some petrol tankers from major trading houses and major oil companies are still lying off Egyptian ports since arriving in August and September.
An international oil major is among those to have cancelled its gasoil deliveries to Egypt for the remainder of the year, a source familiar with the matter said. It was also due to supply gasoline but its August delivery is still waiting off Suez.
BP was the only major oil production company among the main winning bidders of Egyptian gasoil purchase tenders into Alexandria and Suez for the second half of 2013. It declined comment on whether it had cancelled deliveries.
Other winning bidders were Litasco, Vitol, PetroIneos, Glencore, Phillips 66, Trafigura and Mercuria.
Additional demurrage will also add to EGPC’s rising debts to international energy companies. Some traders have not been repaid for delays that occurred before President Mohamed Mursi and his Muslim Brotherhood were pushed from power. And Cairo is already under pressure to pay back over $6bn it owes to foreign upstream producers.
Saudi Arabia has become the biggest fuel supplier to Egypt, sending gasoline and gasoil as well as cooking and heating gases like propane and butane. It has been supplying the bulk Cairo’s petrol needs since August, traders said, to the extent that Egypt does not need to import any more.