The crisis of rising gas prices for factories in Egypt has returned to the facade again, coinciding with the worsening repercussions of the Corona virus pandemic, which cost the country about 130 billion pounds (one dollar equals 16 pounds) as a result of declining revenues, especially tax, which represents more than 75% of the state's revenues.
The Dutch OCI.NV Fertilizers and ADNOC groups, the largest natural gas consumer in Egypt, warned last week of the consequences of the lack of competitiveness of natural gas prices, and announced a reduction in the production of their factories to reduce the bleeding of losses The catastrophic exposure.
The two groups indicated that the decision to reduce production may be followed by a complete suspension of factories, and the threat of about 50 thousand workers, to not be able to face large losses, as the cost of gas alone exceeds 70% of the total cost of fertilizer production, whose exports exceed $ 1.2 billion annually, in addition to Other burdens.
Investors and experts considered that the Egyptian government's decision to reduce the price of gas for industries to 4.5 dollars per million thermal units last March to face the economic repercussions resulting from the Corona pandemic, is not sufficient compared to international prices (less than two dollars).
Sufficient, exporting and expensive
Ironically, Egypt turned again into a producer and exporter of natural gas in large quantities, which made it aspire to lead the region in the field of gas production and export thanks to exciting discoveries of large gas reserves, and achieved self-sufficiency in September 2018, and its production exceeded 7.2 billion feet per day.
Despite this, gas prices for factories in Egypt - which range between 4.5 and 6 dollars per million thermal units - exceed those of most countries in the world by more than 2.5 times the global gas prices, which led to the inability of many companies to compete in foreign markets.
In a previous report to Al-Jazeera Net last February, owners of factories that consumed energy heavily complained about the rise in gas prices, and they exerted parliamentary and press pressures on the Egyptian government to reduce their prices, but the opinions of experts and specialists were divided between supporters and opponents of those prices.
The Export Council of Chemical Industries then warned of the decline in its production capabilities by more than half, which resulted in the loss of imported foreign markets for their companies' products of fertilizers, iron, glass and others that depend on natural gas, whether in operation or production inputs.
Many orders to export fertilizer to a country like Brazil, one of the most importing fertilizers around the world, were canceled at the time due to the high price of gas in Egypt, as gas is the raw material in its industry as one of the main production components.
What is the relationship of Israel to the crisis?
Mustafa Mohamed Mustafa, Undersecretary of the Industry and Energy Committee and a former member of the board of directors of the Petroleum Gas Company, expected the continuation of the crisis and the closure of more fertilizer factories in Egypt, saying, "Gas prices should be reduced for factories in Egypt, especially those working in the field of fertilizers because it is the main component of production in it in order to compete in Both the domestic and external markets, otherwise we will see more closures. "
He explained in his speech to Al-Jazeera Net that the petrochemical and fertilizer industry relies heavily on gas as a raw material and intermediary for production, unlike other industries that may consume energy significantly, such as iron, steel and cement, but gas is not a vital component in its production.
The former Undersecretary of the Industry and Energy Committee did not rule out that the imported Israeli gas would have a major role in keeping prices high, noting that buying gas from Israel at high prices put the Egyptian government in an unenviable position, either its loss or the loss of factories and investors, but preferred the loss of the second party over What finally looks like.
Despite the surplus in production, Egypt and Israel signed a commercial contract to import Israeli gas, a controversial one, which is the largest between the two countries since the signing of the peace agreement in 1979 worth $ 19.5 billion from Israeli gas fields over 15 years, amid discretion over the price of gas in the contracts concluded .
At the time, the Egyptian Ministry of Petroleum described it as an important development that serves the economic interests of both countries, as this development will enable Israel to transfer quantities of its natural gas to Europe through the Egyptian LNG factories, within the framework of Egypt's growing role as a regional gas center.
Gas discrepancies in Egypt
On the implications of rising domestic gas prices, Professor of Economics at the American University of Oakland, Mustafa Shaheen, emphasized that ignoring international prices (gas prices) in Egypt producing gas after the huge discoveries in the waters of the Mediterranean and the northern delta, calls to ask the real reason behind this policy that harms the national industries in a way Large.
In his speech to Al-Jazeera Net, he pointed out that the problem is not a result of today, and we have warned of it, as many factories in Egypt warned months ago far from the continuing rise in gas prices on the ability of the Egyptian product to compete in global markets due to low gas prices and high final cost prices for some gas-related industries As heavily as fertilizers.
He went on to say that the Israeli gas that Egypt has been buying since the beginning of this year in a deal has been described as the largest between the two countries since the signing of the Camp David agreement in 1979 and is approaching the $ 20 billion barrier, which is a huge number indeed, that makes us not rule out the Egyptian government's involvement in an unfair agreement.