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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

America's Most Exotic Presidential Pets

From alligators to bears, the White House has been home to some unusual presidential pets over the years More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs