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Tuesday, January 28, 2014
The news out of Egypt has not been getting better on the political front or the petroleum front for the companies operating there. The latest news has BG Group declaring a force majeure on its LNG agreements in Egypt.
In Egypt, diversions to the domestic market during Q4 were higher than expected. The revised pooling arrangements put in place for 2013 were not honored and domestic diversions are currently at around capacity, close to 1 Bcf/d. As a result, BG Group has been unable to meet in full its obligations to deliver gas to Egyptian LNG and given the current levels of domestic diversions and the continued uncertainty around the level of future diversions, BG Group has served force majeure notices under its LNG Agreements to buyers and lenders. BG Group remains committed to the Egyptian LNG Project and will continue to negotiate with the Egyptian authorities and other stakeholders to seek a long term solution.
The news was reported in a release on the run up of publishing its preliminary Q4 and full year results. While the force majeure in Egypt was not a positive, its LNG shipping and marketing total operating revenue was approximately $2.6 billion, in line with guidance. BG saw non-cash, post-tax impairments of approximately $1.3 billion associated with Egypt.
Commenting on the update Chris Finlayson, BG Group chief executive said: “Despite the good progress we have made in 2013 we face short term issues. This is very disappointing. We have elected to issue force majeure notices in Egypt reflecting the ongoing diversions of gas volumes to the domestic market.”
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