News Analysis: Low oil price benefits Egypt as importer yet may affect foreign investments: experts

The declining crude oil price worldwide to gyrate in the range of 35 U.S. dollars per barrel is likely to benefit Egypt as a big oil importer yet it may affect foreign investments in the most populous Arab country, particularly those coming from oil-rich Gulf states, said Egyptian energy and economic experts.

Compared to more than 100 dollars per barrel in 2014, the price of a barrel of WTI crude oil stands Tuesday at 35.7 dollars and Brent crude oil at 37.69 dollars, while the Organization of Petroleum Exporting Countries (OPEC) said its most recent basket price stood at 33.33 dollars a barrel.

"The plummeting oil price is good for Egypt as it imports crude oil and other raw petroleum products. So, the low oil price helps the Egyptian general budget and saves the government more funds," said economist and international energy expert Ibrahim Zahran.

Zahran explained that Egypt used to spend 60 million dollars every month to import oil products before prices went down, noting the current prices save the country monthly about 30 million dollars for the same amount of oil imports.

"Investments of Gulf states in Egypt may be affected by the declining oil prices as these oil-exporting states now suffer large budget deficits that may lead them to reduce their investments abroad," the energy expert told Xinhua, illustrating that oil-rich Saudi Arabia started to resort to loans to support its general budgets.

Egypt has been privileged by the recent discovery of the largest natural gas field in the Mediterranean Sea in its offshore with a potential of 30 trillion cubic feet of gas, which was found by Italy's Eni firm last year that referred to it as "a historic discovery."

Some experts believe that the low oil prices may also affect the investments of foreign oil exploration companies as they might minimize their activities, not only in Egypt, due to the current discouraging prices compared to exploration costs.

"The low oil prices will make oil exploration and drilling companies reluctant to invest much in that sector whether in Egypt or elsewhere in the world," said Rashad Abdo, economics professor at Cairo University and also head of the Egyptian Forum for Economic and Strategic Studies.

He told Xinhua that the cost of investment in the oil field is so high while the revenues compared to the costs are relatively low for the time being, noting that "it may lead to pump more investments into the field of renewable energy which is cheaper and cleaner."

As for the impact of the current oil price on Egypt's general budget, Abdo pointed out that the whole thing is "positive" for Egypt, yet he sees the difference between formerly 40 dollars per barrel and 36 dollars now "would not make a big leap."

Over the past few years, leading Gulf states, including Saudi Arabia, the United Arab Emirates and Kuwait, supported Egypt with billions of dollars to maintain the country's stability amid political turmoil.

"The declining oil prices would shrink the revenues of the Gulf states and accordingly the Gulf economic aids to Egypt might be greatly affected," said Ehab al-Desouki, head of the Economy Department of Cairo-based Sadat Academy.

The economist explained that the current low oil prices are still in favor of Egypt "as it cuts down Egypt's bills for oil importation," but he does not believe like other experts that it would affect Gulf investments in Egypt.

Desouki described the impact of declining oil prices as "minor" when it comes to the investments of Gulf countries, arguing these oil-rich states have accumulated financial surplus and special "sovereignty funds" allocated for investing abroad.

"Part of these funds still could be invested in Egypt despite the low oil prices," he told Xinhua. Endit