* Payment to oil companies could come within weeks -minister
* Will also repay up to $580 mln owed to contractors
* Conversion of $2 bln in Qatari bonds still not resolved
By Patrick Werr
CAIRO, Sept 15 (Reuters) - Egypt wants to encourage foreignoil companies in the country to increase exploration andproduction in exchange for a more rapid repayment of $6 billionit owes them, its finance minister said on Sunday.
The government also plans to repay 2.5 billion to 4.0billion Egyptian pounds ($363 million to $580 million) inarrears owed to local contractors by around mid-October, AhmedGalal said in an interview.
Egypt has been struggling to meet soaring energy billscaused by high subsidies on fuel products for its 85 millionpopulation.
The government's ability to pay oil companies andcontractors was hit after the popular uprising that oustedpresident Hosni Mubarak in early 2011 frightened away touristsand investors, cutting into tax revenue.
"Right now the rescheduling of the debts is under review inexchange for the companies investing in drilling and exploringfor oil and increasing production and such things. And that isbeneficial to both parties," Galal said.
"What is on the table is the scheduling of these debts in away that gives the companies an amount of liquidity that allowsthem to invest and discover to benefit production."
Galal said he had been meeting regularly with the oilminister and governor of the central bank to work out where themoney will come from and tie the payments to a long-termprogramme to encourage alternative energy and a strategy to getsubsidies under control.
This could involve an eventual restructuring of Egypt'sentire oil sector, he said, although payments to foreign oilcompanies would begin soon. "We are talking about weeks," hesaid.
TIGHT FINANCES
Energy subsidies cost the government an estimated 120billion pounds in the fiscal year that ended on June 30, YasserSobhi, deputy director of the ministry's macro-fiscal policyunit said on Sunday.
This should fall to 100 billion pounds this year, assuming asmart card system to ration fuel is put in place as planned inthe coming weeks, Sobhi said.
On Thursday, al-Masry al-Youm newspaper quoted PrimeMinister Hazem el-Beblawi as saying he hoped the companies couldbe encouraged to invest $15 billion within two years.
Financial disclosures by firms including BP PLC, BGGroup, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the endof 2012.
Dana Gas, owed $230 million by Egypt in overduepayments for gas supplies, said it was in active dialogue withthe government over the debts.
The finance minister also said on Sunday a deal to convert$2 billion Qatar deposited with Egypt's central bank into bondshad still not been sealed. Qatar sent Egypt $3 billion in May ofwhich it converted $1 billion into three-year bonds.
A central bank official said on Sept. 4 Egypt was preparedto repay the $2 billion within days if negotiations to convertthe funds into bonds did not succeed. The Egyptian newspaperYoum 7 reported last week that Qatar had agreed to the deal.
On July 1, Egypt converted the $1 billion into three-yearbonds at 3.5 percent interest and in May it converted another$2.5 billion of Qatari loans into 18-month bonds at 4.25 percentinterest. The bonds were listed on the Irish stock exchange.
Saudi Arabia, Kuwait and the United Arab Emirates pledgedEgypt a combined $12 billion in grants and interest-free loans.