Newsgroup: it.politica.internazionale
Titolo: Egypt's energy quagmire could sink Sisi

Egypt's energy quagmire could sink Sisi
BY MAGGIE FICK
CAIRO Tue Feb 18, 2014 5:29am EST
 
(Reuters) - Egypt's army chief, Field Marshal Abdel Fattah al-Sisi, won 
vast popularity by crushing the Muslim Brotherhood, but even a man seen 
by his followers as invincible may be unable to fix the mess in the 
politically sensitive energy sector.
 
Sisi, who toppled Islamist leader Mohamed Mursi in July and promised to 
bring calm to Egypt, is expected soon to stage a triumphal run for the 
presidency in elections due within months.
 
His first big challenge is likely to be power cuts and fuel shortages - 
the same issues that plagued Mursi and helped spur mass protests that 
enabled the army to oust him.
 
"Sisi is still very popular, but he realizes that Egyptians can go to 
Tahrir Square tomorrow if his administration is seen as not being as 
efficient as promised," said Justin Dargin, a Middle East energy expert 
at the University of Oxford.
 
Cairo's Tahrir was the hub of protests that ended three decades of 
one-man rule by President Hosni Mubarak in 2011.
 
To many Egyptians, Sisi is all-powerful, but industry experts, foreign 
oil and gas companies and Western diplomats doubt he can take bold steps 
to tackle Egypt's energy nightmare.
 
Successive governments have failed to develop a sound strategy to tap 
major natural gas reserves even as an exploding population boosted 
demand for the fuel.
 
Egyptian gas exports began in the mid-2000s, but more than halved from 
2008 to 2012. They have now slowed to a trickle, contributing to a 
global decline in liquefied natural gas (LNG) supplies.
 
Production from maturing gas fields is declining. The government 
forecast this month that consumption will outstrip output for the first 
time in the fiscal years starting in July.
 
The army-installed government is in a bind.
 
Gulf Arab donors have propped it up with aid that includes $4 billion in 
oil products from Saudi Arabia, Kuwait and the United Arab Emirates, but 
their diesel is not compatible with Egypt's gas-based power plants and 
big factories.
 
NOWHERE TO TURN
 
Qatar bailed out Egypt with extra gas during Mursi's rule, but his 
ouster badly soured ties with Cairo. Like its predecessor, the interim 
government has failed to secure a means of importing LNG directly, so 
Egypt has nowhere to turn for gas.
 
A tender for a floating LNG import terminal has been pending since 
October. Even if it was in place, experts say nothing can match the 
favorable swap deal Qatar gave Egypt last year.
 
"We have enough installed capacity but the problem is with fuel," said 
Aktham Abouelela, spokesman for the Electricity Ministry. "It is not 
good for power plants to run on diesel."
 
Egypt's energy troubles are rooted in fuel subsidies that cost the 
government $15 billion a year, a fifth of the state budget. The money 
keeps pump prices well below market values, giving Egyptians no 
incentive to curb their consumption.
 
The subsidies, in place since the era of socialist President Gamal Abdel 
Nasser five decades ago, drains foreign currency that could instead be 
used to pay off debts to foreign energy companies and improve payment 
terms to encourage investment.
 
Ask any Egyptian minister about the subsidies, and he will say they must 
be reformed. But fuel, along with food, is a powderkeg issue in the most 
populous Arab state. In 1977, a cut in bread subsidies ignited riots 
against President Anwar Sadat.
 
People power has helped topple two presidents since 2011.
 
Like others, Sisi may take stop-gap measures to get through the hot 
summer months, when demand for fuel soars - although outages are now 
occurring even in winter. Fearful of public anger over blackouts, the 
government will probably reduce gas feedstock to energy-intensive cement 
and steel factories.
 
"The situation is one of duress, of survival," said Dargin, predicting 
Sisi will maintain the costly status quo even if it means breaking 
international commitments.
 
Companies forced to cut output in periods of peak electricity use in 
recent years will "have to consider if it's even profitable to stay in 
Egypt for the long term", he said.
 
Industry experts also predict that Sisi will keep breaking contracts 
with foreign companies such as BG and diverting gas promised for export 
to satisfy domestic demand.
 
BG's problems in Egypt have affected its LNG unit so much that it issued 
a profit warning last month. Blaming political turmoil in Egypt, BG cut 
production forecasts for the year and served "force majeure" notices to 
affected buyers and lenders. (ID:nL5N0L10FU)
 
SUPPLY SHORTAGES
 
Since the beginning of this year, Egypt has been diverting the maximum 
amount of natural gas produced by BG and its Malaysian partner Petronas 
based on pipeline capacity constraints, said Martijn Murphy of Wood 
Mackenzie.
 
"The government priority will be on guaranteeing power generation, which 
accounts for the bulk of supply, so it will try and minimize shortfalls 
to this sector," said Murphy.
 
"Industry is likely to bear the brunt of supply shortages."
 
Companies will not press ahead with new development unless they get 
guarantees on future export volumes.
 
Egyptians expect miracles from Sisi. Foreign companies will look for 
signs he is willing to reform the energy sector.
 
The stakes are high.
 
If Egypt can't persuade companies to exploit its gas reserves, it will 
be forced to spend more hard currency on energy imports, creating the 
same dilemma it faces with wheat.
 
Egypt is the world's biggest importer of wheat because inefficiency and 
corruption undermine farming along the Nile.
 
Oil Minister Sherif Ismail hopes Egypt can satisfy its ever-growing 
energy demand from own resources, but acknowledges the government will 
have to resort to imports.
 
Until Egypt deals with issues obstructing gas output by foreign firms, 
it "will have to cover all its energy needs with imports, either gas or 
crude oil", he told Reuters last week.
 
Doing so while keeping prices artificially low domestically will doom 
attempts to improve Egypt's finances. Although foreign reserves have 
been boosted by Gulf aid, they are only half pre-2011 levels, limiting 
the government's scope to buy fuel.
 
Energy imports would also send a discouraging signal to foreign 
companies, which are becoming increasingly reconciled to the prospect of 
LNG exports halting entirely this summer, said Peter Hutton, an analyst 
with RBC Capital Markets in London.
 
He said Egypt was locked in a vicious circle given its inability to 
import LNG. "If you can't get gas in, some tough choices will have to be 
made. The easiest is not to export."
-- 
Namib
.....
Sherif of Wazan: Great Raisuli, we have lost everything. All is drifting 
on the wind as you said. We have lost everything.
Raisuli: Sherif, is there not one thing in your life that is worth 
losing everything for?
[they both begin to laugh]

 CAIRO Tue Feb 18, 2014 5:29am EST
 
qualcuno pensa che sia ora del 'raccolto'...