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Egypt in strong position to raise gas price to Israel: Minister of Petroleum

Subsidies are the target of new Egyptian minister of petroleum’s agenda, due to popular support; Israel gas subsidies are on the negotiation table but local subsidies are untouched

Ahram Online, Monday 21 Mar 2011
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Egypt is in a strong position to raise gas price to all importers, Minister of Petroleum, Abdallah Ghurab stated on Monday in a press conference.

Ghurab revealed that Egypt is negotiating with Jordan and Israel to raise export prices. Currently, they receive a generous below-market discount on gas from Egypt, which Egyptians resent, particularly with regard to Israel.

"Public opinion and pressure supports the difficult negotiations we are leading now with Israel" stated Ghurab. The minister declined, however, to unveil the current price of Egyptian exported gas.

He did promise to bow to public opinion by changing the price of gas and announcing shortly an index price. "This will affect our contracts with other importers," he nailed the point.

Egypt exports 4 per cent of their gas to Israel, according to figures released in the press conference by the head of petrol authority, who was appointed ten days ago.

Regarding local subsidies, the minister of petroleum vows to keep the price of gas barrels untouched at LE3, but says, grudgingly "...I find it strange that consumers pay LE15 a barrel to a private trader but refuse to allow the government to raise its original price by [even] one pound."

Ghurab calculates that the energy subsidy bill, which is currently budgeted at LE72bn will rise by LE10bn to LE82bn, due to a hike in international oil prices.

Egypt produces 700 thousand barrels a day and 6.3m cubic metres of natural gas. "If all of this was sold at market price the government would be rich," he says. Nevertheless, subsidies will remain untouched "because this is a sovereign decision," rather than economic one.

Energy subsidies in Egypt are criticised as it benefits the rich more than the poor.

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Shafe3
22-03-2011 02:03am
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Natural Gas
We need a national policy to switch all vehicles in the country to natural gas, as well as all public transport to electric/natural gas. We are burning gas at the expense of the economy. Let's export the 700K of barrels and bring in some drastically needed cash. Further, we need to invest heavily in wind/solar and think over our Nuclear ambitions. The entire country can be powered by solar panels.
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Jim Roy
21-03-2011 07:57pm
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gas price
Abdallah Ghurab is correct to first fix the gas export price. It is best that the price be based on an index that is a blend of international prices at market centers. An oil index can be use for natural gas. Abdallah Ghurab is not correct to say that the subsidy on internal sales of gasoline will not be touched. Egypt price for gasoline(US$0.48/l) and diesel (US$0.32/l) were below world cost of crude in November 2010. The cost of the subsidy is a drain on the Treasury. Once the new government considers its budget, the benefit of the fuel subsidy to the people of Egypt will need to be compared to the benefit of using this money for other budget priorities. For example, the money used for the subsidy could be used to subsidize public transport or to build roads. (If the subsidy is changed, then the change should be gradual, so that people have time to adjust)
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