News / Africa

Egypt Tackles Fuel Use to Stave Off Crisis

A worker directs vehicles queuing in line at a petrol station, Cairo, March 12, 2013.
A worker directs vehicles queuing in line at a petrol station, Cairo, March 12, 2013.
Reuters
Egypt will cut exports of natural gas and tell major industries to slow output this summer to avoid an energy crisis and stave off political unrest, chairman of the Egyptian General Petroleum Company (EGPC) told Reuters.
 
Tarek El-Barkatawy said Egypt was counting on top liquid natural gas (LNG) exporter Qatar to obtain additional gas volumes in summer, while encouraging factories to plan their annual maintenance for those months of peak demand. Cairo will also need to source more oil to meet seasonal driving demand.
 
A restructuring of its huge subsidy program will reduce smuggling by thieves who now siphon off a fifth of subsidized fuel to sell at profit, El-Barkatawy said. Under the new scheme, subsidies would be applied only at the retail stage, leaving fewer opportunities for theft in wholesale and shipping.
 
The new chairman of the main state oil company took the top job last week after incumbent Sherif Hadara became oil minister. Previously, El-Barkatawy was under-secretary at the oil ministry and has worked for foreign oil companies.
 
He arrives at a strained time in Egypt as the country has been struggling to buy fuel since the revolution that toppled President Hosni Mubarak in 2011. Egypt's economy has floundered with political uncertainty and the loss of tourism, culminating in a currency crisis.
 
Cairo now relies on large loans from friendly countries, notably Qatar, which allows it to buy diesel and gasoline on the open market. For crude oil, it has turned to Libya and Kuwait but the volume is still not enough to run its refineries at full capacity and meet summer demand.
 
"We know that demand is more than supply. We are relying on imports," the chairman said.
 
Hopes of Iraqi oil arriving in time for summer are dwindling. Back in March, Iraq's oil ministry said it was willing to supply 4 million barrels per month.
 
"It is static. It has not been agreed yet, I cannot say when it will be," El-Barkatawy said.
 
At the heart of the fuel problem is the subsidies, which account for around one fifth of Egypt's government spending, and could reach 120 billion Egyptian pounds ($17.4 billion) for the year ending in June as Egypt's fuel needs are forever rising.
 
Egypt produces its own energy but became a net oil importer in 2008 and is rapidly becoming a net importer of natural gas. The government pays for Egyptian drivers to buy fuel for as little as 15 U.S. cents for a liter of diesel.
 
Cairo's new leaders worry that cuts to subsidies would risk political and social unrest, but without cuts the International Monetary Fund will not agree to a $4.8 billion loan seen as necessary to keep the public finances afloat.
 
In addition, Egypt owes at least $5 billion to foreign oil producers, of which half is in arrears.
 
Gas Exports to drop further

Long petrol queues and some protests have become the norm since 2011 and major cities have lately been hit by occasional black outs. To survive the summer, Egypt plans to reduce natural gas exports, with Qatar filling its customers' needs through an LNG swap deal.
 
The first such swap is due to occur in a few weeks, El-Barkatawy said. That will allow Egyptian gas to be diverted to feed Egypt's own power plants, but even that will not be enough and Egypt will need to supplement it by burning fuel oil.
 
"We will convert some burners to run on fuel oil... Either from our system or through imports," he said.
 
Egyptian gas exports have fallen steadily in recent years.
 
Pipeline flows to Israel and to Jordan, Lebanon and Syria stopped last year while in LNG only the Idku export plant operated by BG Group is still working, and at reduced capacity. Exports from another LNG plant at Damietta stopped at the start of the year.
 
Longer term, El-Barkatawy said the country aims to boost production of oil to 1 million barrels per day and natural gas to 7.5 billion cubic feet per day in the next 3-5 years, both of which represent increases of about 35 percent.
 
Egypt will achieve these levels as existing concessions come online and through new technologies, unconventional resources and exploration in the Red Sea and the south, he said.
 
BP's offshore finds in the Mediterranean should add 1 billion cubic feet per day of gas, with some eight other concessions due to come online to reduce depletion.
 
Squeezing out the smuggler

El-Barkatawy does not see a significant decrease in subsidy costs immediately as more ground work must be done, notably removing the smuggler from the equation.
 
To target the middle men, Egypt plans to change the point at which the oil becomes priced at the subsidy level. At the moment, subsidies apply to the whole supply chain, which makes it possible to steal artificially cheap fuel in big quantities through large distribution networks and sell it at a profit at higher prices in Egypt or abroad.
 
EGPC hopes to deter smugglers by keeping the price at the high international level until the actual point of sale. Distributors will no longer have access to subsidized fuel.
 
"Once we deliver the diesel, the financial load will transfer to the gas station," El-Barkatawy said.
 
A new "smart card" system to track purchases of subsidized fuel, due to start next month, will also make it easier to fight theft.
 
"We will introduce the smart card soon and even apply it to the assembly points and gas stations and make sure that any diesel or gasoline unloaded from ships is accounted for when it goes onto trucks to the distributors and gas stations."
 
Data accumulated from smart cards will eventually help the government reduce the subsidy bill without spurring protests and hurting industry, he said.
 
"So by doing this, it will improve our credit level and will be one step in the right direction to secure the IMF loan."

You May Like

Video In Ukraine's Nikishino, No House Untouched by Fighting

Ninety percent of homes in one small village were damaged or destroyed as government forces failed to stop a rebel advance More

Pakistan’s 'Last Self-Declared Jew' Attacked, Detained

Argument about the rights of non-Muslims in Pakistan allegedly results in mob beating well-known Jewish Pakistani More

Turkey Cracks Down on Political Dissent — Again

People daring to engage in political dissent ahead of upcoming general elections could find themselves in jail More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
In Their Own Words: Citizens of Kobanii
X
Mahmoud Bali
March 06, 2015 8:43 PM
Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Their Own Words: Citizens of Kobani

Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Ukraine's Nikishino, No House Untouched by Fighting

In the village of Nikishino, in eastern Ukraine, recent fighting has brought utter devastation. Ninety percent of the houses are damaged or destroyed after government forces tried and failed to stop rebels advancing on the strategically important town of Debaltseve nearby. Patrick Wells reports for VOA from Nikishino.
Video

Video Crime Scenes Re-Created in 3-D Visualization

Police and prosecutors sometimes resort to re-creations of crime scenes in order to better understand the interaction of all participants in complicated cases. A Swiss institute says advanced virtual reality technology can be used for quality re-creations of events at the moment of the crime. VOA’s George Putic reports.
Video

Video Sierra Leone Ebola Orphans Face Another Crisis

There's growing concern about the future of an orphanage run by a British charity in Sierra Leone, after a staff member and his wife died this week from Ebola. The Saint George Foundation Orphanage in Freetown is now in quarantine, with more than 20 children and seven staff in lock-down. The BBC has agreed to share Ebola-related material with Voice of America because of the difficulties faced by media organizations reporting the crisis. Clive Myrie reports from Sierra Leone.
Video

Video Growing Concerns Over Whether Myanmar’s Next Elections Will Be Fair

Myanmar has scheduled national elections for November that are also expected to include a landmark referendum on the country's constitution. But there are growing concerns over whether the government is taking the necessary steps to prepare for a free and fair vote. VOA Correspondent Steve Herman was recently in Myanmar and files this report from our Southeast Asia bureau in Bangkok.
Video

Video Nigeria’s Ogonis Divided Over Resuming Oil Production

More than two decades ago, Nigeria’s Ogoni people forced Shell oil company to cease drilling on their land, saying it was polluting the environment. Now, some Ogonis say it’s time for the oil to flow once again. Chris Stein reports from Kegbara Dere, Nigeria.
Video

Video Fuel Shortages in Nigeria Threaten Election Campaigns

Nigeria is suffering a gas shortage as the falling oil price has affected the country’s ability to import and distribute refined fuels. Coming just weeks before scheduled March 28 elections, the shortage could have a big impact on the campaign, as Henry Ridgwell reports for VOA.
Video

Video Report: Human Rights in Annexed Crimea Deteriorating

A new report by Freedom House and the Atlantic Council of the United States says the human rights situation in Crimea has deteriorated since the peninsula was annexed by Russia in March of last year. The report says the new authorities in Crimea are discriminating against minorities, suppressing freedom of expression, and forcing residents to assume Russian citizenship or leave. Zlatica Hoke has more.
Video

Video 50 Years Later African-Americans See New Voting Rights Battles Ahead

Thousands of people will gather to mark the 50th anniversary of a historic civil rights march on March 7th in Selma, Alabama. In 1965, dozens of people were seriously injured during the event known as “Bloody Sunday,” after police attacked African-American demonstrators demanding voting rights. VOA’s Chris Simkins introduces us to some civil rights pioneers who are still fighting for voting rights in Alabama more than 50 years later.
Video

Video Craft Brewers Taking Hold in US Beer Market

Since the 1950’s, the U.S. beer industry has been dominated by a handful of huge breweries. But in recent years, the rapid rise of small craft breweries has changed the American market and, arguably, the way people drink beer. VOA’s Jeff Custer reports.
Video

Video Video Claims to Show Shia Forces in Iraq Executing Sunni Boy

A graphic mobile phone video is spreading on the Internet, claiming to show Iraqi forces or Shia militia executing a handcuffed Sunni boy. Experts have yet to verify the video, but already Islamic State followers are publicizing it across social media, playing on deep-rooted sectarian fears. VOA’s Jeff Seldin reports.
Video

Video Ukrainian Authorities Struggle to Secure a Divided Mariupol

Since last month's cease-fire went into effect, shelling around the port city of Mariupol has decreased, but it is thought pro-Russian separatists remain poised to attack. For the city’s authorities, a major challenge is gaining the trust of residents, while at the same time rooting out informants who are passing sensitive information to the rebels. Patrick Wells reports for VOA.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More