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

    Russian-Backed Offensive in Syria Pushes War to Tipping Point

    As threat to Aleppo and rebel forces grows, US plan to negotiate becomes less and less appealing for Syrian government, says one military analyst

    IS Runs Timber Smuggling Business in Afghanistan, Officials Say

    Government turning blind eye to smuggling, according to tribal leaders; Afghanistan's forest cover dropped by 50 percent in three decades, experts say

    Video White House Seeks $1.8 Billion to Combat Zika

    Obama administration says funding would 'support essential strategies to combat the virus' such as rapidly expanding mosquito control programs, accelerating vaccine research

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    'No Means No' Program Targets Sexual Violence in Kenyai
    X
    February 08, 2016 4:30 PM
    The organizers of an initiative to reduce and stop rape in the informal settlements around Kenya's capital say their program is having marked success. Girls are taking self-defense classes while the boys are learning how to protect the girls and respect them. Lenny Ruvaga reports from Nairobi.
    Video

    Video 'No Means No' Program Targets Sexual Violence in Kenya

    The organizers of an initiative to reduce and stop rape in the informal settlements around Kenya's capital say their program is having marked success. Girls are taking self-defense classes while the boys are learning how to protect the girls and respect them. Lenny Ruvaga reports from Nairobi.
    Video

    Video New Hampshire Voters Are Independent, Mindful of History

    Once every four years, the northeastern state of New Hampshire becomes the center of the U.S. political universe with its first-in-the-nation presidential primary. What's unusual about New Hampshire is how seriously the voters take their role and the responsibility of being among the first to weigh in on the candidates.
    Video

    Video Chocolate Lovers Get a Sweet History Lesson

    Observed in many countries around the world, Valentine’s Day is sometimes celebrated with chocolate festivals. But at a festival near Washington, the visitors experience a bit more than a sugar rush. They go on a sweet journey through history. VOA’s June Soh takes us to the festival.
    Video

    Video 'Smart' Bandages Could Heal Wounds More Quickly

    Simple bandages are usually seen as the first line of attack in healing small to moderate wounds and burns. But scientists say new synthetic materials with embedded microsensors could turn bandages into a much more valuable tool for emergency physicians. VOA’s George Putic reports.
    Video

    Video Bhutanese Refugees in New Hampshire Closely Watching Primary Election

    They fled their country and lived in refugee camps in neighboring Nepal for decades before being resettled in the northeastern U.S. state of New Hampshire -- now the focus of the U.S. presidential contest. VOA correspondent Aru Pande spoke with members of the Bhutanese community, including new American citizens, about the campaign and the strong anti-immigrant rhetoric of some of the candidates.
    Video

    Video Researchers Use 3-D Printer to Produce Transplantable Body Parts

    Human organ transplants have become fairly common around the world in the past few decades. Researchers at various universities are coordinating their efforts to find solutions -- including teams at the University of Pennsylvania and Rice University in Houston that are experimenting with a 3-D printer -- to make blood vessels and other structures for implant. As VOA’s Greg Flakus reports from Houston, they are also using these artificial body parts to seek ways of defeating cancerous tumors.
    Video

    Video Helping the Blind 'See' Great Art

    There are 285 million blind and visually impaired people in the world who are unable to enjoy visual art at a museum. One New York photographer is trying to fix this situation by making tangible copies of the world’s masterpieces. VOA correspondent Victoria Kupchinetsky was there as visually impaired people got a feel for great art. Joy Wagner narrates her report.
    Video

    Video Sanders, Clinton Battle for Young Democratic Vote

    Despite a narrow loss to former Secretary of State Hillary Clinton in last week's Iowa Democratic caucuses, Vermont Senator Bernie Sanders secured more than 80 percent of the vote among those between the ages of 18 and 29. VOA correspondent Aru Pande talks to Democrats in New Hampshire about who they are leaning towards and why in this week's primary.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.