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Egypt gas price hike to save govt LE1 bn annually

Gas prices are set to quadruple for many consumers -- from LE0.1 to LE0.4 per cubic metre -- in a government move to reduce spending on subsidies

Ahram Online, Tuesday 22 Apr 2014
gas pipeline
Gas pipeline (Photo:Ahram)

Raising natural gas prices for households and small businesses is expected to save Egypt LE1 billion ($0.14 billion) per year, state news agency MENA reported.

A new pricing structure for natural gas was approved by the government on Sunday.

Consumption below 25 cubic metres of gas per month will now be charged at LE0.4 ($0.06) per cubic metre. Consumption between 25 and 50 cubic metres per month will cost LE1 ($0.14) per cubic metre, while consumption above 50 cubic metres per month will be charged at LE1.5 ($0.21) per cubic metre.

The new maximum price is triple the current limit, which was raised in July 2012 to LE0.5 ($0.07) from LE0.3 ($0.04) per cubic metre.

Since July 2012, the tariff for monthly consumption up to 30 cubic metres has been LE0.1 per cubic metre, while any extra consumption is charged at LE0.5, Ahram Online reported last year.

The decree, which takes effect in May, exempts subsidised bread producers from the price increases.

“The new decree raises gas prices to 20 percent of the international price for natural gas, as compared to 7 percent now,” Faisal Aboul-Ezz, Egypt Gas chairman, told privately-owned local news channel CBC extra on Monday.

Subsidised gas cylinders, used in many poor homes, contain around 15 cubic metres of gas at a cost of LE8 ($1.1), which means that each cubic metre costs LE0.55 ($0.08), Aboul-Ezz added.

“Prices should be adjusted on an annual basis to reach international price levels.”

The country's production of natural gas was 10 percent lower in January than a year earlier.

The government recently announced that it was preparing to import natural gas beginning in August. It is finalising a deal to buy a floating unit to re-gas a Liquid Natural Gas (LNG) unit based in the Red Sea port of Ain Sokhna.

The energy subsidies bill is expected to total near LE100 billion ($14.3 billion) in 2013/14, compared to LE120 billion ($17.2 billion) in the previous fiscal year.

In its attempts to cut the energy subsidies bill, the government plans to start restructuring energy subsidies as of July, coinciding with the coming fiscal year 2014/15, Prime Minister Ibrahim Mahlab told Al-Ahram this week.

He said the government would make a bigger push to distribute smart cards for fuel, part of a programme to cut costs for the heavily subsidised commodity by reducing so-called "leakages," smuggling and the selling of gasoline on the black market.

The smart card system aims to curb the smuggling of subsidised fuel and thus help to rationalise state subsidies for petroleum products, which cost LE50 billion ($7.1 billion) in the first eight months of the fiscal year 2013/14.

This month, two million fuel smart cards were issued and are now ready for use in petrol stations nationwide, and 4.5 million more cards are expected in the programme’s second phase.

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