Businessmen are cautiously eyeing some of the government's recent economic decisions, Sherine Nasr listens in It was no surprise that energy and related issues, such as the latest oil price hikes, depleting resources and how to best manage them, occupied the first session of the sixth annual conference of Egyptian Junior Businessmen Association (EJB) held in Cairo last week. While discussions were mostly heated, the most controversial were Egypt's gas exports to Israel. Over the past few weeks, the Egyptian press has stirred an uproar against the sale, with the government being criticised for not showing a definite response to public outcry. Eventually, pressure compelled the government to take action: "The government decided to negotiate new prices for gas exports with gas-import countries," announced Prime Minister Ahmed Nazif during the conference. "We've successfully done this with Spain and France, and I cannot see why Egypt should not do the same with Israel." Altogether, businessmen disapprove of a lopsided deal. "From a business point of view, if I possess a piece of land the value of which is magnified every day, I will not sell it," contended liberal-thinking business magnet Naguib Sawiris. "The same thing applies to gas." Sawiris added that gas is an indispensable component in the fertiliser industry, and instability there very negatively affects agriculture at large, "which consequently reflects passively on the end consumer." Sources at the Ministry of Petroleum indicated that the price adjustment of many of the gas export agreements will contribute some LE18 billion to the state's budget in the coming few years. A pipeline to transport Egyptian gas to Israel has already been constructed, but gas has not yet officially been pumped through it. Pressed on the fact that it is ridiculously long- term contract that will be valid for the next 15 to 20 years, Nazif explained that all gas export contracts are long-standing. He added that it costs a lot to build a gas pipeline, so it's not economically viable to accrue this expense and only sell gas for a few years. A good deal of the hue and cry is because the sale price of gas to Israel is absurdly low. Although the government is discreet about the exact terms of the deal, leaked information set the price between 70 cents and $1.5 British thermal unit (Btu) in case brunt oil is $35 per barrel (pb). The export price to Israel is, thus, very marginal, to say the least, particularly if compared to the international price for exporting gas which ranges between $6 Btu to $11 Btu in some contracts. Nevertheless, Nazif argued that it is hard to draw parallels between export prices to different countries. "It mainly depends on the proximity of the export country to the import country," he revealed. The EJB gathering also discussed the government's recent package of measures to finance a 30 per cent social raise, including an increase in tariffs for energy-intensive factories operating in free zones. Participants described the move as a change in policy, but Nazif preferred to refer to it as an overdue modification of a distortion. "There is no change in policy," he defended. "We will stick to our obligations towards factories established in free zones." The prime minister explained that the decision will apply to only 39 energy-intensive factories, out of 1,400. "These factories have made gigantic profits thanks to the cheap price at which they bought energy," he explained. "They cannot continue to have energy at a subsidised price." Nazif added that the priority in the future will be given to labour- intensive industries with products especially designed for exporting. According to Minister of Foreign Trade and Industry Rachid Mohamed Rachid, Egypt adopted a comprehensive energy strategy in 2007 based on five pillars. These are promoting the use of renewable energy; pumping more investment to accelerate oil and gas inspection as well as exploration activities; promoting energy efficiency techniques; finding proper tools to manage ever-growing energy subsidies; and finally, turning Egypt into an international hub for energy exchange. "The government is wholeheartedly committed to implementing these measures," declared Rachid. As a matter of fact, rapidly increasing oil prices are adding an extra burden on the government's budget. The LE1 billion energy subsidy in 2000 jumped to LE48 billion in 2007, and further to LE62 billion this year. "With spiralling international oil prices, it won't be long before that subsidy breaks the LE100 billion mark," commented Rachid. He added that to continue selling energy at subsidised prices is unlikely to encourage factories to apply strict energy-efficient measures. Minister of Electricity Hassan Younes believes that securing energy supplies tops the list of priorities for all countries. "Worldwide, the investment cost for securing electricity demands between 2008 and 2030 is estimated at $30 trillion," disclosed Younes, adding that Egypt's foremost challenge in the coming phase will be to provide enough electricity for an ever-growing demand. While traditional energy sources in Egypt are predicted to be depleting within 25 years, more attention has been given to promoting renewable energies as an alternative. "By 2020, 20 per cent of the country's energy demands will be covered by renewable energies," noted Younes, assuring that the potential for wind and solar energy in Egypt is tremendous. Egypt's Wind Atlas, for example, indicates that the Gulf of Suez area enjoys phenomenal wide speeds; at Zaafarana on the Red Sea coast speeds are estimated at 10.5 metres per second, which can produce twice as much energy as a turbine located in Europe. In the meantime, all-year-round sunny weather with endless stretches of desert constitute a potentially perfect hub for solar energy. "A major solar energy station will be completed by 2010," revealed Younis. In fact, Egypt has been chosen by an international consulting bureau to be the host country of the regional centre for renewable energy for North Africa and the Middle East. "This centre will focus on promoting renewable energy technologies through direct contact with research centres in Europe," stated the minister of electricity. "It will also take part in formulating policies related to renewable energy, and will provide technical training of new cadres in the field of renewables."
