Egypt launches tender for 96 LNG cargoes

Trade sources said it is the biggest mid-term LNG buy tender ever issued

Egypt launched the world’s biggest tender for liquefied natural gas (LNG) on Sunday as officials from top energy companies and trading houses converged on Cairo undeterred by new rules forcing them to wait even longer to get paid.

After months of speculation and delay, state-run Egypt Natural Gas Holding (EGAS) released tender documents on Sunday bidding to secure 96 LNG shipments in 2017 and 2018, participants in the tender told Reuters.

An additional 12 optional cargoes were included in the tender, which EGAS may decide not to award, they said.

It is the biggest mid-term LNG buy tender ever issued, trade sources said.

Egypt, a major importer of commodities from wheat to diesel, helped buoy global gas markets last year after emerging as the fastest-growing new LNG consumer. Egyptian authorities seized sugar stocks at Edita Food Industries, one of the country’s largest food producers, on Saturday, a move that may force the company to suspend its operations, Edita’s chairman told Reuters.

At supermarkets across the country sugar has all but vanished, prompting media talk of a crisis and pushing the state to rapidly increase imports despite an acute dollar shortage and soaring global prices of the sweetener.

The government has blamed the crisis on local factories and profiteering traders hoarding stocks to push up prices.

A supply ministry official told Reuters that 2,000 tonnes of sugar stocks were confiscated after Edita was unable to show original invoices for quantities held at its Beni Suef factory.

Edita, which holds local ownership of international brands Twinkies, HoHos and Tiger Tail in Egypt, Libya, Jordan and Palestine, denied it had hoarded sugar.

Chairman Hani Berzi said security forces had raided one of Edit’s four factories in Beni Suef, which contains the company’s main sugar stocks, interrupting operations.

“If it’s (the confiscation) going to continue, the rest of the company will stop,” Berzi said, adding foreign investors were “very concerned” about the raid.

Egypt annually imports about one million tonnes of sugar, but an acute shortage of dollars in Egypt has cut the flow of sugar imported by private traders, leaving the market short in recent months as the government scrambles to fill the gap.

Once an LNG exporter, Egypt turned into a net gas importer just as global spot prices plunged.

Commodity trade houses, led by Switzerland-based Trafigura, vied to supply Egypt as the country looks to buy until new gas finds can be developed offshore.

Worsening credit profile

But Egypt’s worsening credit profile has tempered initial enthusiasm as suppliers fret over payment difficulties given the country’s sinking economy and shortage of US dollars.

Under the latest tender terms, LNG suppliers may have to wait as long as six months after delivery to get paid, according to two sources with knowledge of the matter.

At a meeting with energy suppliers this month Egypt discussed extending payment deadlines to as much as 120 and 180 days after delivery to give itself more breathing room, the sources said. “I know that the 180-day payment terms were something agreed in Cairo a couple of weeks ago across all products and is a sign of the current situation in Egypt,” one trading source said.

LNG shippers previously got paid 90 days after delivery.