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VIEWPOINT

The new power generation

Gandle sales must have decreased dramatically since the 1980s. Back then, blackouts provided frequent interludes of peace and quiet that, from a working person’s point of view, were not always romantic. Today, one of Egypt’s attractions for investors is its well-developed infrastructure, due to a fourfold expansion of electricity, road, phone, water, gas and wastewater networks in the last 20 years.

Egypt is the biggest energy-producing country in the Middle East, thanks in part to Maher Abaza and Electricity Minister Ali El-Saidi. But our energy use has also tripled in the last 20 years, and the task of efficiently meeting consumer needs is becoming more demanding. The government has brought the private sector in on the action, and it is responsible for producing 2,000 megawatts of the 15,000-megawatt capacity that keeps us going.

The business community has watched with interest the restructuring process that began in July with the transformation of the Egyptian Electricity Authority into a holding company. The new Egyptian Electricity Holding Company includes seven electricity companies, each with power stations and distribution lines. Further plans include separating production from distribution, so that distribution companies covering some portions of the grid can be offered for sale. Additionally, with eight BOOT projects for generating stations coming up for bid, we’re looking at a very new shape for the power sector.

The $239 million link with Jordan completed in October 1998 marked the beginning of a synergetic five-country interconnection between Egypt, Jordan, Syria, Turkey and Iraq. Egypt also activated a link to Libya’s electricity grid in 1999. Countries sharing reserve margins will not require as many generating stations, so exchanges mean economy for all nations involved.

Egypt gets 20 percent of its power from the Aswan Dam, 53 percent from gas-fired steam plants and 26 percent from combined-cycle plants. Gas wealth, in fact, is what makes Egypt’s electricity some of the least expensive in the world. So while electricity linkages seem largely advantageous, export schemes for gas are not so clear.

Although the government has worked for several years to redirect local consumption from oil to gas, rapid expansion in exploration and extraction is outrunning Egypt’s ability to use its gas output domestically. But there’s still a long way to go.

The number of households linked to the gas grid is expected to increase from the current 1 million to 3 million by 2005, and vehicular use could reach deeper into the public and private transport networks. Meanwhile, all of Egypt’s new power-generation capacity is primarily gas-driven, but industry is growing and urbanization expanding with population growth. Clearly, the very promising Delta gas fields will grow in importance, and local distribution networks must expand to absorb the capacity.

The arrangements between the government and gas companies are currently on a "take or pay" basis, requiring hard currency either way. Without adequate distribution or export facilities, Egypt ends up "importing" its own gas. To relieve this economic paradox, export projects are now a priority.

Yet the question of finding a stable outlet for gas exports must take into consideration farsighted projections for domestic consumption. Trade deficits make export policies attractive in the short term, but we must also recognize our own, growing needs. For now, Egypt is looking outwards, negotiating with Turkey, Israel and Jordan, with the aim of exporting gas within the next two to three years.

As Egypt restructures its power sector so that the private sector plays an increasingly important role, decisions regarding the future use of natural gas resources must be carefully considered. As we know from the 1980s, you just can’t run a factory – or a household for that matter – on candlepower.

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