The automatic pricing committee for petroleum products returns to session at the end of September for the first time since Egypt paid the final $440 million of foreign oil partners’ arrears on June 10, completing a clearance that had reached $6.1 billion in June 2024.
The payment restored companies’ confidence and prompted pledges of $19 billion in investment over three years, but it enters no part of the pricing equation the committee governs, which turns on Brent crude prices, the dollar exchange rate, and the government’s commitment to the International Monetary Fund to sell fuel at cost. The citizen, meanwhile, had already paid for the accumulation in advance: declining production, power cuts in the summer of 2024, billions of dollars in gas imports, and a repayment bill funded by the Ras Al-Hekma deal and budget allocations whose details were never put to parliament, according to two experts who spoke to Zawia3.
Foreign companies extract oil and gas in Egypt under production-sharing agreements, and the Egyptian General Petroleum Corporation (EGPC) buys the partner’s share of output to cover the domestic market and pays for it in dollars. When dollars run short, the EGPC falls behind on payment and “arrears” accumulate — commercial liabilities of the EGPC, not sovereign debt, though the IMF counts them as one of the largest risks to public finances because the state guarantees EGPC’s debts.
According to statements by Tarek El-Molla, who served as Petroleum Minister from 2015 to 2024, made in 2017, arrears first appeared in 2004 and 2005 at around $610 million when domestic consumption of diesel, fuel oil, cooking gas, and petrol exceeded local production, prompting the ministry to buy the partner’s share and import the shortfall. They multiplied after 2011 to $6.3 billion as global oil prices rose and resources were redirected toward imports, with fuel stocks at times covering no more than two days’ supply, causing companies to halt new investment and leaving not a single oil agreement signed between 2011 and 2013. When a repayment schedule was agreed at the end of 2013, arrears fell to $2.3 billion in 2015/2016, 83 agreements were signed or amended, and gas production rose from 3.5 billion cubic feet per day in 2013/2014 to 5.1 billion in 2017 with the discovery of the Zohr field, and the government set a target of zero arrears by the end of 2020.
The COVID-19 pandemic, then the Russian-Ukrainian war, then the flight of hot money and the shrinking of foreign reserves caused the accumulation to resume, bringing arrears to $6.1 billion as of June 30, 2024 according to the ministry and 6.2 billion in October 2024 according to the IMF, slightly below the 2012 peak.
How $6.1 Billion Was Paid
Repayment began after the Ras Al-Hekma deal with the UAE worth $35 billion in February 2024, according to Reuters. In March 2025, the Council of Ministers approved a reform package for EGPC that included raising fuel, gas, and electricity prices to cost price by end of 2025, and allocating 75 billion Egyptian pounds (approximately $1.45 billion at the time) from the budget to EGPC to pay down arrears, with a matching amount for the electricity holding company. By end of 2025 arrears stood at approximately $2 billion according to the IMF and approximately $1.3 billion according to the ministry. In January 2026, Prime Minister Mostafa Madbouly said the government had paid approximately $5 billion and was targeting reducing the remainder to $1.2 billion by June 2026 while keeping up with monthly invoices. The pace then accelerated: $770 million in April, $440 million in May following a $714 million payment, then the final installment on June 10, three weeks ahead of the target.
Petroleum Minister Karim Badawi, in announcing the clearance, said the accumulation “had a direct impact on investment flows” and that the step closes the sector’s biggest challenge and marks a turning point within it. Madbouly said international institutions and companies had praised the move, and that its effect on the citizen would materialize through accelerated exploration work costing companies hundreds of millions of dollars, some of which would enter service in the coming period. The government announced investment commitments exceeding $19 billion over three years: $8 billion from Italy’s Eni, $5 billion from Britain’s BP, $4 billion from US company Apache, and $2 billion from UAE-based Arcus Energy.
Egypt’s gas production, according to data from the Joint Organizations Data Initiative (JODI), fell from a range of 6.5 to 7 billion cubic feet per day in 2021 and 2022 to 4.76 billion in 2024, then 4.09 billion in 2025, as consumption rose. Madbouly said in August 2025 that output had dropped from more than 6.6 billion cubic feet per day to 4.1 billion over two or three years, and that the government expected a return to previous levels by 2027 thanks to the regularization of payments. But production continued falling even after the clearance itself, recording 3.78 billion cubic feet per day in April 2026, its lowest level in years, while Egypt imported 985 billion cubic feet of gas through pipelines and liquefied natural gas shipments between July 2025 and June 2026, with EGPC handling LNG imports on behalf of the government according to the IMF.
The effects of the accumulation had reached every household in the summer of 2024, when the shortage of gas and dollars caused daily power cuts of two hours or more under a load-shedding plan running since July 2023, until the government announced an emergency plan in June 2024 worth approximately $1.18 billion to import LNG and fuel oil, with power cuts stopping from the third week of July 2024. The citizen thus paid for the arrears twice: darkness at home, then imported gas purchased at global market prices.
Why the Clearance Will Not Lower Prices
Medhat Nafeh, Professor of Economics and Finance at Cairo University, tells Zawia3 that zeroing out arrears is an important positive signal to foreign investors, since their accumulation between 2021 and end of 2025 was a direct cause of the decline in production capacity and oil and gas exploration, and that the effect on prices will not come directly but through increased domestic production and a partial reduction in reliance on imports, particularly the expensive LNG that requires additional regasification costs.
Mohamed Ramadan, economic researcher at the Egyptian Initiative for Personal Rights, explains that paying the foreign partner’s dues is linked to expanding companies’ activity and accelerating field development, not to the pricing formula for domestic products, for two reasons: the government is committed to the IMF to reduce energy subsidies and will continue doing so even if it exits the program; and Egypt produces approximately half its petroleum product needs and imports the other half, meaning pricing is tied to global prices “even if oil or gas production increases,” with the government calculating subsidy costs as the difference between the domestic price and the global price. Former Petroleum Minister Osama Kamal, now head of the Senate Energy Committee, had said in April 2026 that Egypt imports 40% of its petroleum product needs and produces 60%.
The automatic pricing committee works with two determinants: the Brent crude price and the dollar exchange rate, and reviews prices every three months. The government committed to the IMF to reach cost price for grades 95, 92, and 80 petrol, diesel, and fuel oil by end of 2025, and completed this, with the automatic pricing mechanism to resume by end of the second quarter of 2026, as Madbouly announced on July 1. In a single year, the government raised prices three times: in April 2025; in October 2025 by approximately two Egyptian pounds per liter (11 to 15%); and on March 10, 2026 by approximately three pounds per liter at rates between 14 and 30% for fuel and gas, ten days after the US-Israeli war on Iran erupted on February 28 and disrupted navigation through the Strait of Hormuz, bringing the price of grade 92 petrol to 22.25 Egyptian pounds per liter (approximately $0.43). In parallel, petroleum subsidy allocations in the 2026/2027 budget fell to 15.84 billion Egyptian pounds (approximately $305.79 million) from 75.03 billion Egyptian pounds (approximately $1.45 billion) in the 2025/2026 budget, a drop of 78.9%.
Salma Hussein, Senior Economist at the Egyptian Initiative for Personal Rights, tells Zawia3 that the most important aspect of the clearance is that companies immediately stop fulfilling their exploration and maintenance contract obligations the moment Egypt falls behind on dollar payments, and that the repayment matters given the disruption of regional petroleum markets following the disruption of the Strait of Hormuz, because it allows the state to use domestically extracted petroleum as a buffer rather than exporting it. “But this will not affect prices.” Prices are not tied to supply availability but to the global price, and the state is committed to lifting subsidies from small consumers, while it may subsidize energy for major tourism, cement, and fertilizer companies, “to the point where it is said we are subsidizing the European citizen when we subsidize the fertilizer industry,” since much of it is exported. As for petrol, cooking gas cylinders, and household electricity, the government passes any global price increase directly onto the citizen’s pocket. She adds: “We do not have precise, annually updated knowledge of the production cost of any type of petroleum product, which means any discourse on petroleum subsidies lacks accuracy due to the absence of information.”
Hussein considers the portrayal of the clearance as a path to attracting investment whose benefits will reach the citizen to be an inaccurate framing, because the petroleum sector is capital-intensive and profit-repatriation-intensive, creates little employment, and does not put money into people’s hands through wages or services. The citizen needs labor-intensive sectors to feel a difference. Ramadan warns against citizens imagining that the clearance means a reduction in the state’s debt: these are arrears that are not counted within the external debt, which approaches $164 billion.
Hussein describes giving priority to clearing petroleum arrears at this moment as “a smart and wise decision” taken by a government operating “with the logic of taking from one point to benefit another” amid import difficulties, but it is a decision “that lacks a great deal of transparency”: “We know no details about any contracts with foreign companies since the Mubarak era.” The companies are giants with accountants and negotiators superior to many governments, and the absence of popular and parliamentary oversight of contracts leaves questions unanswered: “Why do we borrow? On what terms? And was this scale of debt unavoidable?” In the same logic, Madbouly announced alongside the clearance announcement the signing of agreements for the Jabal Al-Zayt wind farm with a capacity of 580 megawatts, with a direct return of approximately $420 million directed to the Ministry of Finance to reduce public debt.
Hussein says the petroleum sector is among the least transparent sectors, and that the IMF, since the 2016 agreement, has required enhanced transparency and oversight of EGPC without this being followed up, and that the information in EGPC’s budgets diminishes every year with large gaps appearing between the announced plan and actual execution. The file remains on the IMF’s desk: its report issued in August 2026 states that EGPC remains heavily indebted and that its large debt interest burdens it despite the clearance, and calls for a report on its sustainability plan’s progress by end of September, alongside quarterly financial reports on the corporation. Hussein argues that any measure to protect public money must pass through popular and parliamentary oversight as “the third eye” between the government and the companies, which is currently unavailable, “and therefore performance cannot be properly assessed, whether good or bad.”
By the end of September, two things fall due simultaneously: the pricing committee meeting, and EGPC’s report to the IMF. The first decides what the citizen pays at the fuel pump. The second tells us whether the corporation that paid $6.1 billion over two years is capable of not accumulating again.
