Mohamed Abdullah - Cairo
The owners of energy-intensive factories (gas and electricity) are exerting parliamentary and media pressure on the Egyptian government to reduce their prices to increase the production capacity of their factories, which operate at less than 60% of their capacity, and give them the ability to compete in foreign markets.
This rise in prices comes, despite the authority's announcement that Egypt has achieved self-sufficiency in natural gas since September 2018 (due to the discovery of the Dahr field in the year 2015), which saved its reserves about $ 2.5 billion annually, and its daily production of natural gas reached 6.6 billion feet Cube during the same month, according to the State Information Service.
In statements to Al Jazeera Net, experts expected that the Egyptian government will comply with internal pressure to reduce gas prices, in addition to the presence of external pressures represented in the decline in gas prices globally with an increase in supply, at a time when others demanded not to submit to these pressures and support industries in other aspects.
"The global forecasts for LNG export prices do not exceed 3.5 dollars for one million thermal units in 2020, which means that the Egyptian government will not be able to export at higher prices than that. Therefore, it should review the prices of selling gas to the local industry," Reuters quoted analysts as saying.
In turn, the Chamber of Engineering Industries at the Federation of Industries confirmed that the energy prices in Egypt are relatively high compared to the competing countries, which led to the reluctance of investors to enter the Egyptian market, demanding that they be reduced to save the industry.
| The Egyptian government provides gas to factory owners at a price higher than the international price (European News Agency) |
Big losses
The Chemical Industry Export Council says that "factories get gas prices at $ 5.5 per million thermal units compared to $ 3 in global markets, which results in the loss of external markets that import products such as fertilizers."
The Chairman of the Export Council for Chemical Industries Khaled Abu Al-Makarem revealed in press statements that industries such as iron, glass and fertilizers face a crisis in operation and export, and suffer from high local gas prices, calling for the need to reduce them according to international prices.
Abu Al-Makarem confirmed the abolition of many fertilizer export orders to countries such as Brazil, one of the most importing fertilizers around the world, due to the high price of gas in Egypt, where gas is the raw material in its industry as one of the main components of production.
The Egyptian parliament entered the crisis line. The head of the Parliament’s Industry Committee called on MP Mohamed Farag Amer to take into account the electricity prices for the industrial sector and investors so that the Egyptian industry can compete, whether in the local or external market, warning of the damages resulting from the power outages, which cost these factories huge sums. Due to some units being damaged.
The Egyptian government refuses to reduce energy prices, as the Ministry of Electricity says that reducing the price of electricity directed to factories by 10 piasters per kilowatt will cost the electricity sector from 6 to 10 billion pounds, and has no choice but to move within narrow limits to achieve the demands of manufacturers.
| Chamber of Engineering Industries: The high energy prices contributed to the reluctance of investors to enter the Egyptian market (Al-Jazirah) |
In turn, the president of the Association of Liquefied Gas Investors, Chairman of the Energy Committee of the Federation of Industries, Mohamed Saad El Din, demanded not to comply with the demands of reducing gas prices, saying, "Those who say that global gas prices are cheaper to go to them and import the quantities they want, especially since the field of importing gas is available to everyone."
He said in statements to Al Jazeera Net that "the government wants to support industries, but not at the expense of the cost of production, and any product or commodity must be purchased at its cost", noting that when importing gas at the prices that manufacturers talk about, it will cost them more than the current local price.
He believed that the encouragement of industries should be for exports and not for energy prices, pointing out that there are multiple forms of support and not necessarily energy support, such as export subsidies obtained by exporters in exchange for their exports, so support should be linked to export, but reducing gas prices to an industry without industry will cause confusion and confusion.
As for the head of the General Division for Petroleum Products at the Egyptian Chamber of Commerce, Hossam Arafat, he called for work to achieve internal sufficiency of fertilizers before searching for exports, stressing that some (did not name them) demand to reduce energy prices to increase exports at the expense of the shortage in the local market.
In his speech to Al Jazeera Net, he demanded that the competition for the price of gas be not suspended, indicating that there are elements of production in Egypt cheaper than anywhere in the world such as labor, in addition to the fact that the cost of energy does not constitute anything between 15% and 25% of the cost.
But he expected the Egyptian government to acquiesce in demands for price cuts, saying, "The automatic pricing committee for petroleum products is supposed to convene to consider re-pricing next March, which is automatic pricing every three months, and I expect the government to respond to the pressure exerted by factory owners and interests."