Gas prices increase for cement factories

Ahmed Kotb , Thursday 13 Oct 2022

Natural gas prices for cement industries have increased and other fuel prices are expected to follow

Gas prices increase for cement factories
A decision on fuel prices is expected any time soon


Prime Minister Mustafa Madbouli has decided to increase the prices of the natural gas sold to Egypt’s cement factories by 109 per cent starting on Monday. According to the decision, the selling price of natural gas for cement factories increased from $5.75 per million British thermal units (BTU) to $12 million BTU.

The government had previously raised natural gas prices for steel, cement, petrochemicals, and fertiliser factories in October 2021 by $1.25 to reach $5.75 per million BTU and by $0.25 for other industries to $4.75 per million BTU.

Ahmed Al-Zeini, head of the Building Materials Division at the Cairo Chamber of Commerce, said that the decision will not affect the selling prices of cement during the coming period, especially since about 90 per cent of the factories use coal as a main source of fuel.

Only the Arish Cement Factory depends mainly on natural gas, and accordingly it is the only factory to be affected by this decision. Cement prices now range from LE1,24 to LE1,500 per ton.

According to Al-Zeini, the cost of energy represents from 50 to 60 per cent of the cost of the final product and cement factories in Egypt depend on coal, diesel, and natural gas for production.

Ahmed Sherine, head of the Cement Division at the Federation of Egyptian Industries, said in a telephone interview with the MBC Egypt channel that a decision had been taken 10 years ago to ban the use of natural gas in heavy industry, including at cement factories, and use coal as an alternative.

The production of natural gas in Egypt was then limited in comparison to the current period.

Sherine added that the Covid-19 pandemic has resulted in the increased prices of coal, and some cement factories were allowed to use small amounts of natural gas as a result.

He pointed out that there are 22 cement factories, of which only 10 are qualified to use natural gas. These can cover 10 to 15 per cent of their energy needs by using natural gas, he added.

Egypt’s average production of natural gas was about 6.7 billion cubic feet per day, and average domestic consumption was about 6.1 billion cubic feet per day during 2021-22, according to the Ministry of Petroleum.

According to the Natural Gas Holding Company (EGAS), work is underway to carry out 14 projects to develop gas fields, in addition to drilling 20 new natural gas wells, with a total initial production estimated at 1.2 billion cubic feet of natural gas per day at a total investment cost estimated at about $680 million.

In an attempt to reduce the volume of subsidies directed to the energy sector and petroleum materials, the prices of fuel are also expected to increase in the next few days.

The cabinet’s Fuel Pricing Committee has begun meeting to study the prices of petrol and diesel, given the international oil prices and the exchange rate of the pound against the US dollar.

The latter has been gaining value compared to the Egyptian pound over the last few weeks, and one dollar currently costs LE19.69. Brent Crude oil is currently being traded at slightly over $90 per barrel.

A decision last week by members of OPEC+, a group of countries that includes the largest global oil producer Saudi Arabia, to slash production by two million barrels per day is expected to lead to hikes in oil prices.

Last July, the Fuel Pricing Committee raised the prices of petroleum products in Egypt, those currently in effect, by between 50 piastres and LE1 per litre.

Prime Minister Mustafa Madbouli issued a decision to implement a quarterly automatic pricing mechanism for petroleum products in June 2019. It allows the price of the product to rise and fall, according mainly to the change in the costs of oil and exchange rates.

According to the pricing mechanism, fuel prices are only allowed to fall or rise by a maximum of 10 per cent of their current value every three months.

*A version of this article appears in print in the 13 October, 2022 edition of Al-Ahram Weekly.

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