LONDON: 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, the chairman of the Egyptian General Petroleum Company (EGPC) said.
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 programme will reduce smuggling by thieves who now siphon off a fifth of subsidised 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 allow it to buy diesel and petrol 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 four 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 GDP and could reach 120bn Egyptian pounds ($17.4bn) 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 US cents for a litre 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 $4.8bn.
Reuters
