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Egypt in energy crisis as presidential election draws near

CAIRO: Rolling blackouts have already been hitting neighborhoods of Cairo daily throughout the winter, when electricity usage is lower. Now summer’s heat is coming, and Egypt’s crippling energy crisis is threatening to mount, creating an immediate political liability for the new president to be elected this month. The government is scrambling to reduce the impact.

Once an exporter of natural gas, Egypt has increased imports of substitute fuels, including more expensive, dirtier-burning mazut, to make up for shortages of natural gas and keep power stations running. Last week, the Cabinet took the unpopular step of raising prices for home use of natural gas, used in cooking, in some cases quadrupling the price, to chip away at the giant subsidies the government pays for energy and to cut down on consumption.

Also, the government last month approved the import of coal for the first time to help power the struggling concrete industry, raising protests from the environment minister.

For months, Cairo neighborhoods have seen blackouts every day lasting an hour or two, leaving streets dark and forcing businesses to shut down. Battery-powered emergency lamps have become a popular item for sale by street peddlers.

Mohammad Ahmad, owner of a laundry in Cairo’s middle class district of Dokki, said work shutdowns forced by daily outages for the past year have hurt his bottom line.

“Sometimes, in the case of machines, when the electricity goes off, we can’t open the door, and the dry-cleaning chemicals ruin the clothes,” he said.

Blackouts eased the past week with the increased import of mazut, but like others, Ahmad is not optimistic about this summer.

“We’ll try and finish our work early in the day before the electricity goes out,” he said.

The crisis is the culmination of factors building for years, which dramatically worsened in the turmoil since the 2011 uprising that ousted autocrat Hosni Mubarak.

Egypt’s major gas fields, most over 10 years old, are maxing out. New ones won’t start producing for years. Oil and gas companies, which extract natural gas through partnerships with the Petroleum Ministry, have balked at new investments amid three years of instability. They have been further discouraged by the government’s insolvency: The ministry owes at least $4.5 billion to international oil and gas companies.

Egypt’s natural gas production has been declining for years. Production in January was down 10 percent from January 2013, according to the most recent government figures. Electricity consumption increases roughly 7 percent annually.

At the same time, the government is struggling to pay for energy subsidies that last year ate up a fifth of the budget. Reforming subsidies remains the most difficult issue for the near future. Millions in the impoverished nation rely on the low energy prices, so changing the system is potentially explosive.

Former army chief Gen. Abdel-Fattah al-Sisi, who is seen as virtually assured of winning presidential elections in late May, has signaled he intends to enact reforms. But the question is whether his image as Egypt’s hero will translate into political capital needed to reduce subsidies.

More immediately, Sisi and the government will face the task of keeping blackouts to a minimum. For the moment, the only stop-gap measure is to import expensive mazut and diesel as a backup fuel for power stations, which normally run on natural gas.

 
A version of this article appeared in the print edition of The Daily Star on May 03, 2014, on page 4.
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Summary

Rolling blackouts have already been hitting neighborhoods of Cairo daily throughout the winter, when electricity usage is lower. Now summer's heat is coming, and Egypt's crippling energy crisis is threatening to mount, creating an immediate political liability for the new president to be elected this month.

Once an exporter of natural gas, Egypt has increased imports of substitute fuels, including more expensive, dirtier-burning mazut, to make up for shortages of natural gas and keep power stations running. Last week, the Cabinet took the unpopular step of raising prices for home use of natural gas, used in cooking, in some cases quadrupling the price, to chip away at the giant subsidies the government pays for energy and to cut down on consumption.

At the same time, the government is struggling to pay for energy subsidies that last year ate up a fifth of the budget.


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