Egypt says to complete $1.5 bln payment to oil firms this week

* Payment of 1st tranche consistent with government timeline

* $1.2 bln to be paid in US dollars, rest in Egyptian pounds

* Repayment key to restoring investor confidence

CAIRO, Dec 23 (Reuters) - Egypt will complete payment this week of $1.5 billion of the $6.3 billion it says it owes oil firms, a state executive said on Monday, in line with a plan aimed at restoring confidence in an economy hit by nearly three years of political turmoil.

"Today we are reimbursing $1 billion to the foreign partners and the rest during this week," the chairman of state-run Egyptian General Petroleum Corporation (EGPC), Tarek El Molla, told Reuters by telephone.

Approval of the $1.5 billion payment was announced by the government on Dec. 4. The government said the next day it would repay a further $3 billion in monthly instalments until the end of 2017, hoping this will encourage needed investment in the energy sector.

Molla said $1.2 billion of the initial tranche is being paid in U.S. dollars and the remaining $300 million in Egyptian pounds, as officials had indicated.

He said the government was working on a plan for full repayment of the $6.3 billion it says it owes.

Molla had previously told Reuters that "satisfying" foreign partners was essential to the government's strategy of encouraging foreign oil companies in the country to increase exploration and production in exchange for a more rapid repayment of the money it owes them.

Financial disclosures by firms including BP (LSE: BP.L - news) , BG Group (LSE: BG.L - news) , Edison SpA (Milan: EDNR.MI - news) , TransGlobe Energy, Eni (Berlin: ENI.BE - news) and Dana Gas show Egypt owed them more than $5.2 billion at the end of 2012. Industry sources have indicated the total sum owed is likely to be much higher.

Egypt has been delaying payments to firms because political upheaval since the overthrow of President Hosni Mubarak in 2011 has battered its economy, frightening away tourists and investors, and cutting into tax revenues.

Some of the debts were incurred before the 2011 revolt.

Authorities have repeatedly promised to repay arrears since the army toppled then-President Mohamed Mursi on July 3 and after oil-producing Gulf Arab states, which fiercely opposed his Muslim Brotherhood, promised financial support to Egypt.

In the week after the army takeover, Saudi Arabia, Kuwait and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans, and oil products.