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Thursday, December 20, 2012

Egypt's economy is royally screwed

From Egypt Independent:
Egypt has announced that it has changed from a gas-exporting to a gas importing country based on a decision issued by the Petroleum Minister that went into effect on 17 December.

According to the ministerial order, the Egyptian Natural Gas Holding Company would either import the gas itself from international markets or via contracting companies. The gas would be transferred via national networks with necessary approvals.

Petroleum expert Medhat Youssef said the decision was “unprecedented,” especially as Egypt would import gas from international companies in Qatar, not the Qatari government. The import price is expected to reach US$14 per 1 million thermal units, whereas the government sells gas to factories for no more than $4.

The Egyptian government exports gas to Jordan at $5.50 per one million units, while Qatar exports it at more than $9, Youssef said, arguing that Egypt administers its petroleum supply poorly and should reconsider prices.
Egypt's economy is already in the toilet, and yet it still subsidizes private factory energy by as much as 70%? And it will import gas to be able to export it to Jordan at a huge loss?

The free market might help a little. Just a thought.
Importing gas at international prices would affect industries such as cement and fertilizer production.

Meanwhile, Hany Suleiman, former Petroleum Ministry deputy for gas affairs, said gas production in Egypt does not meet demands, referring to expectations that the deficit would reach 3.7 billion cubic feet by 2018.

Daily consumption, according to Suleiman, will double by the fiscal year 2014/2015 reaching 25 million cubic feet, compared to around 12 million cubic feet in 2011/2012.

Importing gas requires infrastructure and facilities that would cost around $600 million to develop.
Egypt could be negotiating with Israel to import natural gas from the Mediterranean gas fields (Tamar is almost online, Leviathan expected in a few years). After all, it seems unlikely that Jewish terrorists would bomb the pipeline repeatedly as Islamists did when Egypt was exporting gas to Israel.

But Egypt would rather destroy itself than allow Israel to help.

Which is, when you think of it, pretty much the reason why the Arab world is doomed.