As Egypt struggles with its chronic energy problems, the ministers of electricity and industry stated this week that the country was heading towards using coal as an alternative energy source to generate electricity and operate its cement factories. According to Minister of Electricity Ahmed Imam, the Higher Committee for Energy had asked the Ministry of Environmental Affairs to study the environmental impacts of using coal to run electricity plants and cement factories. At the same time, Minister of Trade and Industry Mounir Fakhri Abdel-Nour said that his ministry was taking steps to use coal to fuel a number of factories, including cement plants. He said that the use of coal would save around 450 million cubic metres of natural gas per day. For some time now, industries characterised by intensive energy consumption, such as cement, ceramics, fertilisers and steel, have been facing damaging shortages of natural gas, threatening them with paralysis. Several companies have already complained that they have not been able to work at full capacity because of the gas shortages. Some of these industries have been looking into the idea of changing to a new source of energy instead of natural gas, such as coal. Some cement companies, such as Lafarge and the Suez Cement Company, have complained of the shortages in the gas supply that have negatively impacted their productivity, causing a decline in production over the past couple of years. The country's total consumption of natural gas is about 5.2 billion cubic feet per day, the electricity sector's share accounting for 60 per cent and the industrial sector's quota being around 33 per cent. This year alone, energy shortages have cost the cement industry in Egypt a loss of some 20 per cent (3.7 metric tonnes) in production capacity. Suez Cement, Egypt's biggest cement maker by market value, has said that shortages of fuel had forced it to cut production by as much as 30 per cent in 2013. The investment needed to substitute natural gas or mazut (heavy duty fuel oil) with coal ranges from $6-8 million/Mt, while converting to refuse-derived fuel, another alternative fuel, costs around $8-12 million/Mt, according to cement manufacturers in Egypt. But to change to coal, the manufacturers would first need to obtain the permission of the Ministry of Environmental Affairs, a process they now hope to complete as rapidly as possible. Mohamed Said, external relations manager at Suez Cement, said that the cement industry needed a clear plan and timetable to begin the process of transition from natural gas to coal, especially since more than 82 per cent of world cement plants already rely on coal as a source of energy. “This plan needs to start quickly, so that factories won't run into a crisis, especially since the state is unable to provide the industry with its need for gas,” Said said. Energy expert Ibrahim Zahran said that in order to solve the natural gas shortages, Egypt would have to halt all gas exports to Turkey, Spain and Jordan and to amend the export contracts and pricing system. He said that the contracts signed by Egypt had “exceptional circumstances” clauses that allowed the country to terminate the contracts as a result of an energy crisis. “To plug the gap Egypt has to seize the gas exports right away,” Zahran said, adding that there were people in government who were keen on continuing the exports because of the commissions they earned. Zahran said that one third of Egyptian natural gas is exported at low prices according to long-term contracts signed in the era of deposed former president Hosni Mubarak. If Egypt managed to revise its export prices, he estimated that the country could add LE15 billion annually to its revenues. International companies looking for gas in Egypt currently give the country its share of the production for free , he said, while Egypt uses this to cover local demand at subsidised prices it also imports some natural gas to cover for the extra demand. However, most of the natural gas it imports was at much higher prices, Zahran said. Egypt owes about $6 billion to the foreign companies working on oil and gas projects in the country. On 1 September, Sherif Ismail, minister of petroleum, said the government was preparing a debt repayment programme. Zahran said the issue of energy in Egypt was controversial and stressed the importance of finding solutions to the problem, especially as the energy subsidies in the state budget had reached about LE128 billion in the fiscal year 2012/13. But importing coal as an energy alternative won't be an easy decision. The biggest negative impact of using coal instead of natural gas to fuel cement plants is the increase in CO2 emissions, and the environmental authorities strictly monitor the quantity of such emissions resulting from the use of coal. In order to use coal, factories will need to make adjustments to production lines such that they will be capable of using coal. Said said that the process of switching to coal would be long and costly, but that it was necessary if the industry was to have a more suitable and constant supply of energy. “We have to face reality. We need to find other options to substitute for natural gas,” he said. At the Suez Cement factory in Helwan, waste products are now being burned to provide energy. “We need to find an immediate alternative,” Said said. Zahran agreed that importing coal and using it in some industries, such as cement, steel and ceramics, was an inevitable choice. However, switching to coal would not be practical for other industries, such as fertilisers, in which natural gas is an essential ingredient of the manufacturing process, he said. These industries would lose their competitive advantages if they started using coal.
