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MENAFN - The Peninsula - 11/02/2014

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(MENAFN - The Peninsula) Egypt will need to import an additional 1bn worth of petroleum products and secure significant natural gas supplies as it scrambles to meet energy needs for the summer, Oil Minister Sherif Ismail has told Reuters.

One government after another has struggled to cope with energy crunches, and Ismail said this coming season would be no exception. Failure to find a solution could frustrate Egyptians, who rioted in the past over long lines at gas pumps just before the army toppled Islamist president Mohamed Mursi.

Political turmoil since a popular uprising ousted autocrat Hosni Mubarak in 2011 has paralysed decision making. Disarray in the energy sector will take time to fix, even after a new government replaces the army-backed interim administration. "Of course there are needs," said Ismail, adding that efforts to import badly needed natural gas may not succeed.

"The intention is to (make available) liquefied natural gas (LNG) and (to get) LNG facilities in operation before the summer ...It is our prime concern and intention to solve this problem if not for this year by 100 percent then at least for the years yet to come."

Egypt in October tendered for a floating terminal needed to import LNG. An official said at the time that the government wanted the terminal in place by April, before temperatures rise and consumption spikes.

The tender has not yet been awarded, and experts say that time has run out for a terminal to be delivered and installed before the summer. Ismail said the alternatives to importing LNG include shifting to using more expensive fuel oil and encouraging Egyptians to conserve energy during peak hours.

These steps may not suffice. Analysts say about 75 percent of electricity production in Egypt is dependent on gas, not fuel oil.

Saudi Arabia, Kuwait and the UAE extended an economic lifeline to Egypt after the army ousted Mursi after mass protests against his rule.

Egypt has said it has received 4bn in fuel products from Gulf nations since Mursi's ouster. Ismail said Egypt would require more imports for the summer. "The first estimate...is that we will need to import petroleum products of around 250m per month during the four summer months," Ismail said in an interview.

The growing population of 85 million has kept energy demand steadily rising so that it now outstrips the production of oil and gas from fields in the Western Desert, Nile Delta and offshore.

Compounding the problems, the government fell into heavy debt to foreign energy firms which Egypt needs to help it exploit gas reserves that could enable the country to end power cuts and bolster export income.

Instead, surging demand has caused Egypt to divert high levels of gas produced by foreign companies such as BG Group and promised to them for export.

Ismail said that "the gap between production and consumption" is caused mainly by the fact that Egypt has not developed its available reserves.

SUBSIDY BURDEN

Egypt's energy troubles weigh heavily on the economy. Talk of cutting fuel subsidies costing 15 billion a year has produced limited results. Successive governments have feared that raising energy prices could trigger unrest in a country where street protests have helped remove two presidents in three years.

Ismail, an engineer who held senior posts at several state-run energy firms before his appointment as minister last July, says the interim government will take the first steps in a reform programme that would see subsidies cut by 25 to 30 percent in five to six years.

A smart card system for fuel purchases by drivers launched during Mursi's year in office should be operational within three months, he said.


 






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