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Egypt to double natural gas prices for homes and businesses

CAIRO: Egypt plans to double the price of natural gas piped into some homes and businesses from next month, but the move will trim its huge fuel subsidy bill only slightly because few premises are connected to the gas network.

Energy prices in Egypt are among the lowest in the world, and the cash-strapped government spends more than a fifth of its budget on keeping them down. Although successive governments have called for reform, none have dared push through big price rises for fear of stoking public unrest.

According to a government decree issued late Sunday, residential and commercial users of less than 25 cubic meters of gas per month will pay 0.40 Egyptian pounds ($0.06) per cubic meter from May.

The Oil Ministry’s website shows the current price of gas for households at 0.20 Egyptian pounds ($0.03) per cubic meter, or about $0.80 per million British thermal units (mmbtu).

State newspaper Al-Ahram reported that the current price is 0.10 Egyptian pounds per cubic meter for consumers that use less than 30 cubic meters a month.

No officials from the ministry could be reached Monday, a public holiday in Egypt, to confirm the current price.

The price hike, announced in the country’s official gazette, does not apply to the electricity generation sector, which is the largest consumer of gas in Egypt.

State news agency MENA quoted an unidentified Oil Ministry source as saying that the move would increase state revenues by 800 million to 1 billion Egyptian pounds ($114.5-$143.1 million), “which will be used to finance projects that deliver natural gas to homes and expansion [of the grid].”

The decree also says that bakeries, which produce the staple food of most Egyptians, will not have to pay any higher price.

The price hike therefore only affects a small number of citizens whose homes have been connected to the gas network. Most poor Egyptians use cylinders of butane for cooking.

Egypt raised the price of the cylinders last year for the first time in two decades ahead of talks with the International Monetary Fund on a $4.8 billion loan.

Talks later broke down, and some analysts said the price hikes were regressive, as they cut fuel subsidies for poorer Egyptians.

The government last year began a World Bank-backed plan to link 800,000 households a year to the gas grid in a bid to get consumers to use less state-subsidized butane.

Artificially low prices for electricity, for butane and for transport fuel at filling stations provide little incentive for Egyptians to curb consumption, despite a fuel supply crisis that frequently causes blackouts.

Under the new pricing structure, those who consume 25 to 50 cubic meters per month will pay 1 Egyptian pound per cubic meter over 25. Those consuming over 50 cubic meters will pay a top rate of 1.5 Egyptian pounds, or around $6 per mmbtu for each cubic meter over 50.

By contrast, U.S. householders paid an average of $0.36 per cubic meter of gas, or around $9.60 per mmbtu, last year, according to U.S. Energy Information Administration data.

Government officials and industry experts say the wasteful subsidy system is at the root of a range of problems in Egypt’s chaotic energy sector.

Egypt, facing the worst energy crunch in years, is scrambling to secure fuel supplies for the summer to avoid power cuts.

Officials privately admit that campaigns to urge Egyptians to curb their consumption will have no effect while energy prices remain low.

 
A version of this article appeared in the print edition of The Daily Star on April 23, 2014, on page 5.

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Summary

Egypt plans to double the price of natural gas piped into some homes and businesses from next month, but the move will trim its huge fuel subsidy bill only slightly because few premises are connected to the gas network.

According to a government decree issued late Sunday, residential and commercial users of less than 25 cubic meters of gas per month will pay 0.40 Egyptian pounds ($0.06) per cubic meter from May.

The Oil Ministry's website shows the current price of gas for households at 0.20 Egyptian pounds ($0.03) per cubic meter, or about $0.80 per million British thermal units (mmbtu).

State newspaper Al-Ahram reported that the current price is 0.10 Egyptian pounds per cubic meter for consumers that use less than 30 cubic meters a month.


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