INTERVIEW: Neutralizing Energy Prices – Economy – Al-Ahram Weekly
According to Hossam Awadallah, chairman of the House of Representatives Energy Committee, the recent government decision to increase the price of natural gas for certain industries in Egypt is the result of unusual circumstances in the global economy.
In an interview with Al-Ahram Weekly, Awadallah said the government-set price hike suited different industries, whether they used gas as a source of fuel or as a component of production. This would not lead to a major price increase, he said, adding that “prices will only increase by 1 to 1.5%”.
The government has raised the price of natural gas for iron and steel plants, as well as for cement, fertilizers, petrochemicals and other industries, from $ 0.25 to $ 1.25 per million. British thermal units (MMBtu). Manufacturers of cement, iron and steel, fertilizer and petrochemicals will receive gas at $ 5.57 per MMBtu, or according to the pricing formula of their contracts. Meanwhile, the price for all other industrial activities is set at $ 4.75 per MMBtu.
In March 2020, the government reduced the price of natural gas for the industrial sector to $ 4.5 per MMBtu in an effort to increase exports and help the sector cope with the impact of the Covid pandemic -19. Before the reduction, cement factories paid $ 6 per MMBtu, while metal and ceramic manufacturers paid $ 5.5.
At the start of this week, the price of natural gas on stock markets around the world fell from $ 5.782 per MMBtu to $ 5.559. Before the decision to increase prices in Egypt, which took effect on November 1, factories demanded a reduction in the cost of energy, including natural gas, from $ 4.5 per MMBtu to between 3.5 and 4 $ the MMBtu.
Awadallah explained that the price of gas in Egypt does not depend on rising costs of imports and transportation, but rather on rising costs of extraction and services. Gas drilling could cost more than $ 200,000 a day, he said.
Egypt predicts that natural gas production in the country will reach 7.2 billion cubic feet (bcf) per day this year, up 9% from the 6.6 billion cubic feet reported last year in a press release from the Ministry of Petroleum. In 2019-2020, Egyptian natural gas production reached 6.55 billion cubic feet per day.
Egypt has experienced a gas production boom in recent years, thanks to the Zohr field in the Mediterranean Sea and new discoveries north of Alexandria and the Nile Delta. “Oil discoveries in Egypt continue and the price of gas is set according to a pricing formula that takes into account the ebb and flow of global demand and not how much you own or find out,” Awadallah said.
It is planned to invest $ 1.4 billion in the oil sector during the current fiscal year, according to figures from the Ministry of Planning. Awadallah said his committee would review a dozen oil deals, whether new or combined with others, to get the most out of the Egyptian economy by partnering with international oil companies.
He admitted that there had so far been no discussion of the evolution of the price of electricity supplied to factories by the Ministry of Electricity. The House of Representatives is at the start of its new session, but Electricity Minister Mohamed Shaker will soon be invited to discuss the matter, he said.
Awadallah said the recent price hike would not impact the government’s goal of increasing exports and the competitiveness of Egyptian products in world markets due to rising energy prices in the world. The country wants to reach 100 billion dollars of exports in the next five years. Egyptian exports in the first half of 2021 increased 22% to $ 17.7 billion, compared to $ 14.55 billion during the same period in 2020.
The higher global price of natural gas will also not impact the country’s strategy to expand gas services to residential areas or convert cars to natural gas, Awadallah said. This strategy aims to reduce foreign currency spending on various petroleum fuels, including gasoline, and replace them with natural gas.
The Oil Ministry plans to expand natural gas services to 1.2 billion residential units, according to Awadallah. He added that the presidential initiative for a decent life aims to expand natural gas services to all corners of the country.
* A print version of this article appears in the November 4, 2021 edition of Al-Ahram Weekly