Egypt may have leaned too heavily on recently discovered natural gas supplies
CAIRO: According to the findings of the latest report conducted by the Petroleum Economist and the Statistical Review of World Energy, Egypt’s domestic consumption of natural gas is the highest in the African continent.
While the government and private sector corporations in the oil and gas industry have been raving about the export potential of abundant natural gas in the country, which was to be linked to economic growth, the sharp rise in domestic consumption of natural gas has been eating away at the country’s percentage of exportation. At this rate, domestic consumption could easily thwart the government’s ambitious strategy to use the exportation of natural gas to strengthen the national economy.
According to the Petroleum Economist’s findings, the production of natural gas in Egypt reached 33 billion cubic meters (bcm) annually, of which 79 percent goes toward domestic consumption and a mere 21 percent goes to exports.
In comparison, other African countries studied by the report export over double the amount used for domestic consumption. Libya exports 90 percent of its natural gas production (12 bcm) while domestically consuming only 10 percent. Nigeria exports 85 percent of its 22 bcm production and only uses 15 percent domestically. Algeria, second to Egypt in terms of domestic consumption, exports 71 percent of its 91 bcm production and 29 percent goes to domestic consumption. While Egypt produces more gas than its African counterparts, the ratio of exports to domestic consumption of natural gas is too high for comfort.
Moreover, the ratio of export to domestic consumption has thrown the strategic plan created by Minister of Petroleum Sameh Fahmy out the window. The minister, with the assistance of the private sector and various government entities, previously stated that natural gas production would be split into thirds, each going toward a certain use. One third would go to exportation, one third to domestic consumption and the remaining third would be allotted for future reserves.
However, with the statistics being as they are at the present time, more than half of production goes solely to domestic consumption. In fact, according to the findings of the two associations, Egypt’s domestic consumption amounted to 39 percent of total African natural gas consumption.
While many experts blame the over 72 million that make up Egypt’s population for the high numbers in domestic consumption, the study has found that in actuality, the country’s domestic consumption has only shot up within the last few years.
This rapid rise coincides with Egypt’s discovery and tapping of the large amount of natural gas in the country. Almost like striking gold, natural gas became the platform on which the government could leverage itself in order to increase foreign direct investments (FDI), thereby injecting wealth into the country. Unfortunately, at the same time, the government, showing a lack of forethought, decided that with the scarcity of oil and sky-high oil prices, natural gas should replace oil in domestic use when appropriate.
As a result, natural gas was used for electricity, the trade and transportation industry, household needs, and especially as a source for heat. According to the study, currently, 92 percent of natural gas domestic consumption is used for electricity. Furthermore, 11 companies are now connecting and distributing natural gas to more than 2.5 million households.
At the same time, five companies are presently using natural gas to fuel cars and as a result, 72,000 cars in Egypt pump natural gas into their vehicles at any of the 100 gas stations that sell natural gas.
Furthermore, bakers and trade shops are becoming increasingly reliant on natural gas rather than oil to make their livings.
Compounding the festering problem, with the government’s encouragement of FDI, more and more big projects have started popping up all around Egypt, many in the petrochemical industry, which heavily relies on the use of natural gas. These projects, while sizeable in investments, began to drain the natural gas that was currently available.
To accommodate investors while filling the country’s growing domestic quota, less of the natural gas started going to exportation.
According to the two associations, the global consumption of natural gas reached approximately 2,819 bcm in 2005, up 2 percent from last year. From a study of continents, North America was the biggest global consumer of natural gas, reaching 26.8 percent of global consumption. Next down the list is Russia, which consumed 22.7 percent of global consumption, followed by Europe, consuming 19 percent of the total.
In terms of commodity production, the association found that the biggest global producer was Russia, producing 28.4 percent of world production. On the heels of Russia was North America (the biggest global consumer), producing 26 percent of total production, followed by Asia Pacific, with 13 percent of total global production, Europe, with 10.6 percent, followed by the Middle East, producing 10.4 percent of worldwide natural gas production.