The Automatic Pricing Committee for petroleum products convenes again at the end of September for the first time since Egypt paid, on 10 June, the last $440 million of its arrears to foreign oil partners, which had reached $6.1 billion in June 2024.
The repayment restored the companies’ confidence, and they pledged to invest $19 billion over three years, but it does not enter the price equation, which the committee governs by Brent crude, the dollar exchange rate and the government’s commitment to the International Monetary Fund to sell fuel at cost price. The citizen, for his part, has already paid the price of the accumulation: declining production, power cuts in the summer of 2024, gas imports worth billions of dollars, and a repayment bill financed by the Ras El-Hekma deal and by budget allocations whose details were not presented 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 buys the partner’s share of production to cover the local market and pays for it in dollars. When dollars are scarce, the corporation delays payment and “arrears” accumulate; these are commercial obligations of the corporation, not a sovereign loan, but the IMF considers them one of the biggest risks to public finances because the state guarantees the corporation’s debts.
According to statements made in 2017 by Tarek El-Molla, petroleum minister from 2015 to 2024, the arrears first appeared in 2004 and 2005, at about $610 million, when consumption of diesel, fuel oil, butane and petrol exceeded local production, so the ministry bought the partner’s share and imported the rest. They then multiplied after 2011 to $6.3 billion with the rise in global oil prices and the channelling of resources into imports, to the point that fuel stocks did not exceed two days, so the companies stopped pumping in new investment and not a single petroleum agreement was signed between 2011 and 2013. With the rescheduling of repayment at the end of 2013, the arrears fell to $2.3 billion in 2015/2016, 83 new and amended agreements were concluded, 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 aimed to bring the arrears down to zero before the end of 2020.
But the coronavirus pandemic, then the Russian-Ukrainian war, the exit of hot money and the shrinking of foreign reserves brought the accumulation back, and the arrears reached $6.1 billion on 30 June 2024 according to the ministry, and 6.2 billion in October 2024 according to the Fund, slightly below the 2012 peak.
How $6.1 Billion Was Paid
Repayment began after the $35 billion Ras El-Hekma deal with the UAE in February 2024, according to Reuters, and in March 2025 the Cabinet approved a package to reform the Egyptian General Petroleum Corporation that included raising fuel, gas and electricity prices to cost price by the end of 2025, and allocating EGP 75 billion (about $1.55 billion) from the budget to the corporation to pay off the arrears, and the same amount to the Egyptian Electricity Holding Company. By the end of 2025 the arrears stood at about $2 billion according to the Fund, and about 1.3 billion according to the ministry, and in January 2026 Prime Minister Mostafa Madbouly said that the government had paid about $5 billion and was aiming to reduce the remainder to 1.2 billion by June 2026 while paying the monthly bills regularly. Then the pace accelerated: $770 million in April, and 440 million in May after a payment of 714 million, then the final payment on 10 June, three weeks ahead of the target date.
Minister of Petroleum and Mineral Resources Karim Badawi said, in his announcement of the clearance, that the accumulation “had a direct impact on investment flows” and that the step closes the book on the sector’s biggest challenges and represents a turning point for it, while Madbouly said that international institutions and companies had praised it, and that its impact on the citizen lies in the acceleration of exploration projects, which cost the companies hundreds of millions of dollars and some of which will enter service in the coming period. The government announced investment pledges of more than $19 billion over three years: 8 billion from Italy’s Eni, 5 billion from Britain’s BP, 4 billion from the American Apache, and $2 billion from the UAE’s Arcius Energy.
Egypt’s gas production declined, according to data from the Joint Organisations Data Initiative (JODI), from a range of 6.5 billion to 7 billion cubic feet per day in 2021 and 2022 to 4.76 billion in 2024 and then 4.09 billion in 2025, while consumption rose. Madbouly said in August 2025 that production had fallen from more than 6.6 billion cubic feet per day to 4.1 billion within two or three years, and that the government expected a return to the previous level in 2027 thanks to regular payment. But production continued to fall after the repayment itself, registering 3.78 billion cubic feet per day in April 2026, the 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, and the corporation handles LNG imports on behalf of the government, according to the Fund.
The impact of the accumulation had reached every home in the summer of 2024, when shortages of gas and dollars caused power cuts of two hours a day and more under the load-shedding plan in place since July 2023, until the government announced in June 2024 an urgent plan worth about $1.18 billion to import shipments of LNG and fuel oil, and the power cuts stopped from the third week of July 2024. In other words, the citizen paid the arrears bill twice: darkness in his home, then imported gas at the global market price.
Why Repayment Does Not Lower the Price
Medhat Nafea, professor of economics and finance at Cairo University, tells Zawia3 that clearing the arrears is an important positive signal for foreign investors, because their accumulation between 2021 and the end of 2025 was a cause of the decline in production capacity and in oil and gas exploration, and that its impact on prices will not come directly but through increased local production and a relative reduction in reliance on imports, particularly high-cost LNG, which is regasified at additional cost.
Mohamed Ramadan, economic researcher at the Egyptian Initiative for Personal Rights (EIPR), explains that paying the foreign partner’s dues is linked to developing the companies’ activity and accelerating field development, not to the pricing equation of local products, for two reasons: the government is committed to the IMF to reduce energy subsidies and will continue to do so even if it exits its programme, and Egypt produces about half of its needs of petroleum products and imports the other half, so pricing is linked to global prices “even if oil or gas production increases”, and the government calculates the cost of subsidies as the difference between the local price and the global price. Former petroleum minister Osama Kamal, head of the Senate’s Energy Committee, had said in April 2026 that Egypt imports 40% of its needs of petroleum products and produces 60%.
The Automatic Pricing Committee works with two determinants, the price of Brent crude and the dollar exchange rate, and reviews prices every three months. The government committed to the Fund to reach cost price for 95, 92 and 80 octane petrol, diesel and fuel oil by the end of 2025, and achieved this, on the basis that the automatic pricing mechanism would return by the end of the second quarter of 2026, which Madbouly announced on 1 July. In a single year the government raised prices three times: in April 2025; in October 2025, by about EGP 2 per litre (11% to 15%); then on 10 March 2026, by about EGP 3 per litre, at rates of between 14% and 30% for fuel and gas, ten days after the outbreak of the US-Israeli war on Iran on 28 February and the disruption of navigation in the Strait of Hormuz, so that a litre of 92 octane petrol came to cost EGP 22.25 (about $0.46). In parallel, allocations for petroleum product subsidies in the 2026/2027 budget fell to EGP 15.84 billion (about $328 million) from EGP 75.03 billion (about $1.55 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 thing about the clearance is that companies immediately stop honouring their contracts for exploration and maintenance as soon as Egypt falls behind in paying in dollars, and that the repayment is important amid the turmoil in the regional oil market caused by the disruption of Hormuz, because it allows the state to use locally extracted oil as a bulwark instead of exporting it, “but this will not affect the price”. Prices are not linked to the abundance of supply but to the global price, and the state is committed to lifting subsidies from small consumers, while it may subsidise energy for the biggest tourism, cement and fertiliser companies, “to the point that it is said that we subsidise the European citizen when we subsidise the fertiliser industry”, because much of it is exported, whereas for petrol, the butane cylinder and household electricity, the government passes any global increase on to the citizen’s pocket. She adds: “We do not know accurately, with figures updated every year, the production cost of any type of petroleum product, and therefore any discourse about petroleum product subsidies lacks accuracy because of the absence of information.”
Hussein believes that portraying the repayment as a route to attracting investment whose benefit extends to the citizen is an inaccurate discourse, because the petroleum sector is capital-intensive and intensive in transferring profits to the companies’ home countries, does not create many jobs and does not put money into people’s hands as wages or services, and the citizen needs labour-intensive sectors to feel the difference. Ramadan warns against the citizen imagining that the repayment means a reduction in the state’s debt, since these are overdue dues that are not counted within the external debt, which is approaching $164 billion.
Hussein describes prioritising the repayment of the petroleum arrears at this time as “a smart and wise decision” taken by a government working “with the logic of taking from one point in favour of another point” amid the difficulty of importing, but it is a decision that “lacks a great deal of transparency”: “We do not know any details about any contracts with foreign companies since the Mubarak era.” The companies are giants and have accountants and negotiators better than those of many countries, and the absence of popular and parliamentary oversight of the contracts leaves questions unanswered: “Why do I borrow? What are the conditions? Was this volume of debt unavoidable?” Following the same logic, Madbouly announced, alongside the announcement of the clearance, the signing of agreements for the Gabal El-Zeit wind farm, with a capacity of 580 megawatts and a direct return of about $420 million to be channelled to the Ministry of Finance to reduce public debt.
Hussein says that the petroleum sector is one of the least transparent sectors, that since the 2016 agreement the Fund has set the strengthening of transparency and oversight of the corporation as a condition, without follow-up, and that the information in the corporation’s budgets shrinks every year while large gaps appear between the announced plan and actual implementation. The file is still on the Fund’s table: its report issued in August 2026 says that the corporation remains heavily indebted and that the interest on its large debts weighs on it despite the clearance, and requests a report on the progress of its sustainability plan by the end of September, alongside quarterly financial reports on it. Hussein believes 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 not available so far, “and therefore performance cannot be judged, whether good or bad”.
By the end of September two things fall due together: the meeting of the pricing committee and the corporation’s report to the Fund. The first decides what the citizen pays at the pump, and the second says whether the corporation, which paid $6.1 billion in two years, is able to keep the arrears from piling up on it again.
