Apache cuts Egypt stake as private investment dwindles

Since sinking its first oil well in Egypt’s Western Desert in 1994, Houston’s Apache Corp. has locked up exploration rights for nearly 10 million acres and become the largest U.S. investor in the country — a corporate symbol of America’s stake in Egypt’s success.

Last week, amid what company executives said was uncertainty about the country and a shareholder call to “validate” its presence there, Apache announced it would sell a third of its Egyptian operation to China’s Sinopec and invest the $3.1 billion payment elsewhere.

The sale, Apache said, was part of a broader shuffling of its business, not solely a decision to divest from Egypt, where it will continue to manage the joint venture with Sinopec and maintain a 9,000-person workforce.

But it’s also a sign of the difficulties ahead as Egypt tries to heal its deeply divided society, a process considered critical to U.S. interests in the region. Facing a collapse of new foreign investment, growing debt and a multitude of economic constraints, the decisions made by companies like Apache in coming months could prove critical to whether the existing military government or any successor is able to improve conditions, generate jobs and succeed where ousted president Mohamed Morsi failed.

Business officials acknowledge it will be difficult to undo the damage of the past year’s turmoil and revive the country’s ability to grow on its own. According to World Bank data, foreign firms made $11 billion in long-term investments in Egypt in 2007. In 2011, they pulled half a billion dollars out. The data reflect net flows of foreign direct investment — money used to purchases a share in a business that the investor intends to hold, not purchases of stocks, bonds or other portfolio investments that are less stable.