Insinuations that Egypt could import natural gas highlight the need to review how limited resources are managed, says Sherine Nasr Minister of Petroleum and Mineral Resources Sameh Fahmi announced this week that the ministry is studying suggestions made by the Energy Committee at the National Democratic Party to import natural gas from neighbouring countries. "All technical and economic aspects of the proposal are now being studied thoroughly by experts from the ministry before a final decision is taken," Fahmi was quoted as saying during a press conference that was held earlier this week to discuss -- among other things -- the performance of the petroleum sector during the past six months, the sector's plan for 2009/10, and prospects for importing natural gas from abroad. As is always the case, announcements by the Ministry of Petroleum often provoke more questions than for which they provide answers. Although Fahmi did not openly suggest that Egypt has the intention to buy gas, he nevertheless left the door open to different interpretations. Fahmi cited Turkey and Iran as good examples of gas import/export hubs in the region. Fahmi underlined that Egypt could make use of declining gas prices, which dropped to $1.8 per million British thermal units (Btu) during last year. Accordingly, oil experts welcomed proposals to import natural gas under one condition; namely, that gas would be purchased at the same price announced by the minister. "I am positive about the move only if Egypt buys gas at the same price it sells it or less. Otherwise, it is not economically viable to import gas at a higher value," said Ramadan Abul-Ela, professor of petroleum engineering at Alexandria University and former member of the People's Assembly who strongly doubts that gas prices could drop as low as the minister claims. Abul-Ela argued that gas prices could hover around $9 to $11 per million Btu. "In best case scenarios, it can come down to $5.5 per million Btu, but never less." During the press conference, Fahmi underlined that the ministry plans to extend natural gas to some 600,000 residential houses in different governorates during the year as part of a more comprehensive policy aimed at replacing cooking cylinders with natural gas in many areas across the country. In the meantime, the ministry is studying the possibility of transmitting liquefied natural gas via mobile units to remote areas such as Marsa Matrouh and Al-Wadi Al-Gedid governorates, as well as extending gas to tourist areas in Sharm El-Sheikh and North Sinai. Notably, natural gas has already made its way to Upper Egypt through the gigantic Upper Egypt Gas Pipeline that transmits gas to some 13,000 houses in six different governorates, including Minya, Assiut, Sohag, Qena and Luxor before it reaches the residential areas west of Aswan and further to the Egyptian Chemical Industries (KIMA) factory. But the question remains, does Egypt have enough natural gas resources to extensively switch to that type of energy for residential and industrial purposes while, in the meantime, it continues to afford for long-term gas export agreements with a number of foreign countries, including France, Spain and Israel? "I guess not," says Abul-Ela. "The volume of Egypt's production of natural gas is a mystery. No one knows for sure the total volume of that production," he says, explaining that it is not enough to announce figures but the ministry should be more specific about declaring the timeframe during which a certain production should be used for a certain purpose, be it local or for export. According to the ministry's reports, Egypt's proven reserves are estimated at 76 trillion cubic feet (tcf), which stands for one per cent of the total natural gas reserves worldwide, compared to Qatar, Iran and the former Soviet Union at 980 tcf, 1100 tcf and 2400 tcf respectively. "Obviously, Egypt is not a natural gas rich country," says Abul-Ela, adding that the foreign partners' share, which is estimated at 40 to 50 per cent of production, should not be overlooked. "This means that Egypt's gas reserves do not exceed 42 tcf." Theoretically, the political leadership in Egypt specifies one-third of the production for export, one-third for local consumption, and one-third to be left for coming generations to exploit. But Abul-Ela argues that Egypt's production can hardly cover long-term export agreements while allowing for massive expansions for residential and industrial purposes. "Natural gas export agreements are always shrouded in obscurity and we often know of the volume and the price from the importing country," comments Abul-Ela, who adds that unless high-potential discoveries that would add to Egypt's reserves are made, "I do not think Egypt will be able to come up with its future plans, and would have to re-evaluate its policy for exploiting the limited natural gas resources it has." The electricity sector is considered the largest consumer of natural gas followed by the industrial sector. According to Mahmoud Latif, chairman of the Egptian Natural Gas Holding Company (EGAS), the electricity sector consumes almost 60 per cent of the company's production, which translates into 19 million tons. Further, there have been demands to increase the amount of natural gas delivered to the electricity sector so that it could reach the present five year target plan aiming at increasing electricity output by 11,000 megawatts, which poses a fresh challenge to the oil sector.
