GSPC ponders whether to exit 'expensive' Egypt

Vol 15, PW 13 (12 Jan 12) People & Policy

Egypt’s ancient pharaohs rarely hesitated to devote vast resources to monuments like the Giza pyramids, but then again they had slave labour.

Today, working in Egypt isn’t cheap, which is why anxious Gujarat chief minister Narendra Modi sent a top GSPC team dashing to the Arab republic earlier this week to assess the massive funding needs of its five exploration blocks there. “Modi wants to know categorically whether GSPC should carry on in Egypt or exit once Phase-I ends this March (at its North Hap’y, South Gulf of Suez, and South Diyur blocks),” says a senior Gandhinagar source.

“Going ahead could be immensely risky.” GSPC, he adds, will need to spend a massive Rs5000cr ($945m) if it chooses to carry on in Egypt.

Modi wants to know if any of GSPC’s blocks promise returns that make such expenditure worthwhile. On January 10, GSPC chairman AK Joti hurriedly caught a flight to Cairo to review the company’s work at the offshore 4180-sq km North Hap’y and 108-sq km South Gulf of Suez blocks, and its 37,678-sq km onshore South Diyur block.

Accompanying Joti were GSPC managing director Tapan Ray and Gujarat principal secretary (finance) MM Srivastava, also a GSPC board member. The team is expected to return to Gujarat on January 17 to submit a detailed report to Modi, who is undoubtedly concerned by GSPC’s staggering debt burden, which today stands at Rs12,863cr ($2.43bn).

If GSPC exits Egypt it will forfeit $350m in performance bank guarantees given to the Egyptian government at the time of bidding. If GSPC chooses to stay, Joti is likely to ask his Egyptian counterparts to take a lenient view of the company’s unfinished Phase-I minimum work programme.

After all, GSPC couldn’t have predicted the popular anti-government uprising that toppled former Egyptian president Hosni Mubarak in early 2011, delaying GSPC’s work.