News / Middle East

No Quick Fix in Sight for Egypt's Energy Chaos

People argue at a petrol station during a fuel shortage in Cairo, June 26, 2013.
People argue at a petrol station during a fuel shortage in Cairo, June 26, 2013.
TEXT SIZE - +
Reuters
— None of the new ministers to be appointed by Egypt's military-backed leaders faces an easy task, but perhaps special sympathy should be reserved for the brave soul who takes on the energy ministry.

Long lines at fuel stations and power cuts were among the main grievances of protesters who prompted the army to overthrow the elected president last week.

The lines have since shortened a little, though they remain, and few will easily give up on the 1.85 Egyptian pounds [$0.26] a liter gasoline, which along with other energy subsidies, eats up one-fifth of the state budget.

Even with the economy on life support since the revolution of 2011, a growing population has kept energy demand increasing so that it now outstrips the production of oil and gas from fields in the Western Desert, Nile Delta and offshore.

Yet the state of flux in government and state-owned firms since the fall of Hosni Mubarak has thwarted projects intended to tackle the problems. And the jailing of Mubarak's veteran energy minister over a gas export deal has sent a chill through the ranks of officialdom, discouraging initiative.

Vicious cycle

Beyond the immediate problems that energy chaos poses for Egypt and those working there - including big oil companies that figure Cairo owes them more than $5 billion - the disarray plays a major part in holding back investment in a range of industries that Egypt badly needs to create jobs and prosperity.

Failure to correct it could prolong a vicious cycle of unrest and insecurity. The omens of the immediate past are poor.

Both the military authority that replaced Mubarak and Mohamed Morsi, the Muslim Brotherhood member elected president a year ago, pressed international firms to sell oil and gas on credit as foreign reserves dwindled.

As a result, these firms stalled their exploration and drilling projects. Talk of cutting fuel subsidies costing $15 billion a year has gone nowhere. Imports from friendly Arab states remain on a hand-to-mouth basis, some of them gifts, while Egypt remains unable to import liquefied natural gas (LNG) for lack of equipment.

“It's a total mess,” said an industry source involved in one of Egypt's most important energy infrastructure projects. “It seems like no one is making decisions.”

Terminal Problems

A $250-million project to install a floating terminal to import LNG was launched last year. It should have been finished. Egypt can export LNG, but it cannot import it without the terminal.

The misadventures of the import terminal reflect a broader story of mismanagement in the energy sector, according to industry experts. Two initial tenders for work were issued by state gas firm EGAS. These later were canceled after confusion over terms. Now state oil company EGPC has taken over the process.

An EGPC official said the tender it issued had closed on June 24. The official could neither say what the result of the bidding was, however, nor say when it would be available.

Egypt must act quickly to charter a floating terminal, of which there are only two now available globally. And even if a tender is awarded immediately, it would probably not be ready to import for a year. That will leave Egypt buying more expensive fuel oil as a stop gap.

Some in the industry think the new administration, backed by the army, can get the LNG project moving - though the military made little notable progress in the energy sector during the 17 months they were running the country before Morsi took office.

Egypt became a net oil importer in 2008. Its population is growing at more than 2 percent a year and now stands at 84 million. It also is moving rapidly to become a net importer of natural gas after years of being a large exporter via ventures with oil majors, such as BG, GDF Suez and Eni.

“Starting from 2004-2005, a lot of heavy industry was built-like cement, steel factories, which the country needs,” said Mohamed Shoeib, ex-chairman at EGAS and currently managing director at private equity firm Citadel Capital.

With average gas demand rising about 8 percent annually, though, reforms were held up by paralysis in decision-making.

Reforms lacking

Large projects, such as BP's massive offshore West Nile Delta fields, have been delayed and output goals have been pushed back.

Last year, Sameh Fahmy, Mubarak's oil minister for 11 years until the revolution, was convicted along with other senior officials who were sentenced to up to 15 years in jail for their roles in selling gas to Israel too cheaply.

“People are afraid of being taken to court,” said Shoeib. “It's a problem when a decision must be made.”

Strains were on show earlier this year at EGPC, when a new round of staff changes and dismissals was announced by the Muslim Brotherhood-led government. A diplomat who was present saw angry officials bang on the chairman's door.

With a new cabinet expected next week, there is sure to be a purge.

The overthrow of the Muslim Brotherhood has opened the way for aid this week from Saudi Arabia, Kuwait and the United Arab Emirates, some of it in the form of fuel cargoes.

A flurry of energy deals signed by the Muslim Brotherhood during the past year with its closest allies and friendly states - such as Qatar, Libya and Iraq - all were stalled for months as the sides struggled to agree on final terms.

You May Like

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid