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Egypt diverts gas from factories to power plants

Cairo, August 1, 2013

Egypt's state gas company Egas will cut back on the amount of gas it supplies to factories to keep electricity plants running instead during the peak summer months, Al Borsa newspaper reported on Wednesday.

The move signals that Egypt's energy woes remain unresolved despite an easing of fuel shortages in the four weeks since Egypt's military ousted its Islamist president, Mohamed Mursi.

The paper quoted an unnamed official at Egas as saying the company would divert about 3 million cu m per day of gas away from cement and fertiliser companies.

Daily consumption by power plants rose to 89 million cu m of gas and 17,000 tonnes of fuel oil from 85 million cu m of gas and 15,000 tonnes of fuel oil, he said.

Fuel shortages and power blackouts during the final months of Mursi's one-year presidency helped galvanise discontent with his rule that ultimately resulted in his downfall and detention.

The scarcity abated in the weeks after the military-installed government took power, leading some analysts to suggest that elements of the Egyptian state had been curtailing deliveries to undermine Mursi's rule.

Analysts have warned that the government could likewise risk discontent if industries are forced to lay off workers as they wind down production.

Egyptian industry has already been struggling from political instability that has dried up their access to foreign currency, reduced security around factories and made government officials reluctant to take even routine decisions.

Al Borsa quoted cement industry sources as saying that the cuts would give them an opportunity to perform maintenance and would not affect their annual output.

"In the short term this may be true, but it depends on when fuel levels will be returned to normal levels," Giorgio Bodo, chairman and CEO of Asec Cementm, told Reuters.

"The availability of energy, both electricity and fuel, is the biggest issue facing the industry," he said.

Representatives of Egas as well as of the fertiliser and gas industries declined comment on the reported gas cut.

The government has been increasing the price of energy it supplies to industry, part of a gradual government programme to remove energy subsidies to industry over four years. Energy subsidies to industry and other consumers eat up a fifth of all state spending.

Gas prices charged to brick and cement makers rose by at least 75 per cent after the government cut subsidies in February while their fuel oil prices rose by 50 per cent, industry sources said.

The previous government announced before its overthrow that energy subsidies would cost more than 120 billion Egyptian pounds ($17.23 billion) this financial year ending in June.

That helped push up the budget deficit to around 11.5 per cent of gross domestic product, from 8.2 per cent in 2011/2012. - Reuters




Tags: Egypt | Energy | Electricity | gas | EGAS | plant | factories |

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