No permanent solution offered to Egypt's energy crisis
Marwa Hussein, Ahram Hebdo, Thursday 21 Nov 2013
A shortage of cooking gas cylinders persists, revealing the lack of a long-term plan on the part of the government to address Egypt's energy woes

It's noon, in front of a large depot of cooking gas cylinders in the popular district of Al-Zawiya Al-Hamra (East of Cairo). Long queues of citizens coming to fill their cylinders with liquefied petroleum gas(LPG) are closely monitored by police.

The same scene could be witnessed in front of hundreds of depots all over Egypt during the last two weeks, resulting sometimes in fierce fighting. The most serious fight occurred in Alexandria last week and ended with five wounded. No deaths havebeen recorded.

"I am a taxi driver and I have three children to feed. I spent my working day in the queue and did not earn a penny," complained Mahmoud, one of hundreds waiting for their turn in front of the depot in Al-Zawiya. "I'm here since two hours," added another in the middle of the queue.

The conversation was interrupted by the preludes of a fight between two women over a cylinder. According to employees at the depots, the number of gas cylinders they receive per day increased from an average of 8000 at the beginning of the crisis to about 12,000. However, the crisis persists.

"The problem is not in Cairo. The majority of people here are from the governorate of Qalyoubiya," said Badr Abdel-Baqi, from the supply investigation unit of the interior ministry. Not finding their needs in their neighbourhoods or nearby governorates of Cairo, citizens go far to fetch the cylinders. "We rent a car and pay LE5 each to come here. It costs us more money, but we have no choice," says a villager.

The government has blamed the shortage on storms that prevented vessels carrying LPG from docking in Egyptian ports.However, last winter, similar storms occurred without causing shortages.

Ossama Kamel, former petroleum minister, attributed the "success" last year to the establishment of a coupon system according to which each family receives two gas cylinders per month. But the system was never really implemented and its impact was limited.

At the Ministry of Supply, responsible for the distribution of cylinders, the explanation offered is more political.

"At the time Bassem Ouda, a coddled member of the Muslim Brotherhood, was minister of supply he was allocated additional funds for butane at the expense of diesel and gasoline to forge his success story," advanced Mahmoud Diab, current spokesman of the ministry.

The propaganda that accompanied Ouda's achievements was spectacular. The media presented the young minister as managing in a short time to make considerable achievements in the distribution of gas cylinders, bread and increased wheat cultivation, although the latter is in the domain of the Ministry of Agriculture.

The overall performance of the government was less than satisfactory with crises reaching record levels in diesel, gasoline and electricity. Allowing more financial resources to meet the demand for LPG without taking into account other energy needs cannot offer a sustainable solution.

Energy crises, including LPG shortages, became familiar in Egypt since 2007 but no government has announced a clear strategy to overcome the greater problems, either in production, importation or storage. All blame the black market.

Currently, Egypt imports 50 percent of its consumption of LPG, which stands at roughly 4.5 million tonnes per annum. "The remaining 50 percent is locally produced in refineries, or from deposits of natural gas ," said Hamdi Abdel- Aziz, spokesman for the Ministry of Petroleum .

According to Abdel- Aziz, Egypt cannot increase its local production and has thus no other choice but importing. In addition, he explains, it is difficult to increase storage capacity because it requires major infrastructure work in ports. In short, for the petroleum ministry, there is not much to be done.

However, one solution would be to expand the network of natural gas to replace LPG. It will take time. Only 5.5 million of 19 million households are connected to the gas grid. The government plan is to expand the network to the tune of 700,000 households per year.

Other efforts went up in smoke. As decisions concerning LPG are the responsibility of two ministries, they sometimes get lost in-between. The petroleum ministry is responsible for production, imports and storage, while the supply ministry is concerned with distribution and market supervision.

In October, the supply minister announced the adoption of a plan for the winter to increase imports in advance and avoid shortages. But "the petroleumministry has not worked on its implementation," the spokesman of the supply ministry says.

The black market: cause or consequence?

At each shortage of petroleum products, whether gasoline, diesel or gas cylinders, the government points to the black market. But is it the chicken or is it the egg? Is it the black market that creates scarcity, or it is a consequence of shortages and the application of the law of supply and demand?

On the black market a gas cylinder is sold between LE30 ($4.6) and LE45 ($6.5) against LE8 (a little bit more than $1) officially. "Some are lining up to get a cylinder to sell on the black market," said Badr Abdel-Baqi, after chasing a woman out of the queue.

"I can recognise them because I've been working here since four years. She came yesterday and again this morning," he said.

"We are responsible for distribution and market control, but the real problem is the decline in LPG supply. It is the responsibility of the petroleum ministry," said a source at the supply ministry on condition of anonymity.

A tough law did not stop the black market from expanding, even with sanctions ranging from suspending a depot's permit, to fines reaching up to LE20,000 ($2850) and jail sentences that can range from six months to five years. According to the supply ministry, 1,200 complaints were filed since the start of the crisis.

In front of the Zawiya depot, small trucks loaded with gas cylinders file out of the door. "These are the trucks of the new graduates, each of which has the right to sell 60 gas cylinders per day," says Abdel-Halim Madbouli, a depot worker, referring to a scheme that started some years before revolution, employing fresh graduates in the supply sector.

According toMadbouli, the graduates get the cylinder at LE6 and sell it to the consumer at LE10.

"This was done through procurement offices or NGOs like the Muslim Brotherhood before the revolution, and development associations now," adds Madbouli.

Haj Mahmoud, former owner of a depot, says that this method opens the door wide for corruption.

"Employees at depots sell the cylinder to the graduates at LE15 ($2) who sell it later at a higher price on the black market," he says.

One of the graduates on site approaches us quietly. "If we do not accept high prices, they will not let us work," he whispered.

Putting an end to the black market may have its root in fighting corruption within the government itself.

Despite rising prices of gas cylinders from LE2.75 to LE8, the government estimates that the subsidy per cylinder is LE70 ($10).