Cash-strapped Egypt is close to finalizing an agreement to import 600,000 barrels of crude from OPEC-member Libya in May on credit, in a move that could offer relief from fuel shortages that have recently afflicted the Egyptian economy, officials from the two countries said Thursday.
Cash-strapped
Egypt
is
close to finalizing an agreement to import 600,000 barrels of crude from
OPEC-member
Libya
in
May on credit, in a move that could offer relief from fuel shortages that have
recently afflicted the Egyptian economy, officials from the two countries said
Thursday.
"Negotiations are going well, and we are in the final stages of reaching
an agreement with
Libya
to
receive 600,000 barrels of oil, most likely via
Alexandria
port," an Egyptian official told Dow Jones Newswires. "
Egypt
will likely
pay international prices for the oil on credit of up to 90 days and
Libya
has
told us it can up the amount of oil later to 1 million barrels per day."
A Libyan official familiar with the matter confirmed talks to sell oil to
Egypt
were
at an advanced stage--with a shipment of 600,000 barrels next month as an
option--and the length of the credit was the main point to be finalized. The
official confirmed the sale would be at international prices and it could take
another one or two months before any delivery takes place. Last month, Libyan
Deputy Oil Minister Omar Shakmak said the North African country was in talks to
supply 1 million barrels of oil a month to
Egypt
on
credit, which could meet about 5% of Egyptian oil needs.
The move comes as
Egypt
has
been facing a slowdown in oil and gas exploration activities over the past
couple of years as a result of the continuing unrest since the ousting of
former President Hosni Mubarak. The country has been paying hefty premiums for
its crude supplies due to the weaker Egyptian pound and difficulties in
securing letters of credit for its transactions, while a shortage of
state-subsidized diesel has already paralyzed transportation in many parts of
the country.
The Libyan deal also follows a promise from
Cairo
to
hand over a prominent supporter of former dictator Moammar Gadhafi to
Tripoli
,
prompting allegations from Libyan activists that the North African nation is
using its oil wealth to gain political leverage.
The civil unrest has also led to a risky economic mix of dwindling
foreign-exchange reserves, declining tourism revenue and costly price
subsidies, economists said. To prop up the Egyptian currency, the central bank
has gone through nearly two-thirds of its foreign-currency reserves, pushing
the country to the brink of a liquidity crisis.
Egypt
is in
the throes of trying to secure a $4.8 billion loan from the International
Monetary Fund, a move viewed as critical to rescuing its economy and mending
its reputation as a place to do business.
People close to the talks say the IMF wants to see
Egypt
reduce its subsidy spending as part of a reform plan for the loan. But any
subsidy changes will probably only further enrage the legions of poor who rely
daily on cheap fuel, making the already uncomfortable summer months all that
more unbearable.
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