Stuck at sea, BP's LNG shipment highlights Egypt's payment struggle

By Oleg Vukmanovic and Sarah McFarlane

MILAN/LONDON (Reuters) - BP's diversion of a tanker of liquefied natural gas (LNG) away from Egypt due to payment issues is the first sign that the country's currency crisis could be jeopardising its energy supplies, traders said.

Earlier this month the tanker British Sapphire was diverted to Brazil rather than discharging in Egypt, with the delivery of the LNG cargo for Egypt delayed up until October, traders said.

BP declined to comment. Egypt's state-owned EGAS was not available to comment.

Egypt has been struggling to pay for U.S. dollar-priced oil products and LNG due to an acute foreign currency crisis, worsened by the Russian airliner disaster in October, which hit tourism revenue.

Last year Egypt became a major market for LNG shippers such as BP and Europe's elite commodity merchants after the startup of two import terminals, but a payment freeze for deliveries until March has resulted in a $400-$500 million bill so far, trade sources say.

It is an unwelcome addition to Egypt's already growing arrears to foreign oil companies involved in producing oil and gas in the country, up at $3 billion at the end of December.

In BP's case this has begun to translate into deliveries being pushed back nine months into the future in the latest case, a source said, raising the prospect of patchy supplies to Egypt's energy-intensive industries and power plants.

BP's British Sapphire arrived outside the country's Ain Sokhna import terminal on Dec. 24 and proceeded to spend the next fortnight circling offshore before on Jan. 7 the vessel's destination changed.

It is currently en route to Brazil, shipping data shows.

"The British Sapphire was redirected because (BP's) previous cargo was not paid for," a trader said.

Egypt's LNG suppliers include Shell, Gas Natural, Trafigura, Vitol, EDF Trading, PetroChina and Noble.

Gas shipments should continue uninterrupted from trade houses after Egypt promised to repay LNG debts by dipping into multi-billion dollar cash infusions by the World Bank, China and other institutions expected in coming months, the sources said.

But uncertainty remains over what proportion of Chinese, World Bank and other aid will go towards the petroleum sector.

Forthcoming Saudi oil aid should also free Egypt's hand to dedicate its replenished U.S. dollar reserves to repaying gas debts since purchases of oil on the open market will be minimized, one LNG trader said.

In a bid to ride out its cash crunch, last month Egypt proposed to extend payment terms for LNG to 90 days after the date of unloading, from 15 days previously.

(Additional reporting by Eric Knecht in Cairo, editing by David Evans)