The government is working on a new natural gas pricing formula for industry, starting with energy-intensive sectors, three government sources told EnterpriseAM. The plan aims to gradually transition to a freemarket price aligned with global benchmarks as part of efforts to establish a liberalized natural gas market, attract foreign investment, and strengthen the competitiveness of local products by properly pricing key inputs, including energy.

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The details: The new pricing mechanism will be based on the average cost of domestic gas production, in addition to the contracted price of gas supplied through pipelines and imported cargoes, ± USD 1, the sources said.

Policy objective: Reducing subsidies and strengthening the EGPC’s financial position as an independent entity sits at the core of the plan, sources said, adding that ensuring fair pricing for high-quality local industrial output is a key target.

The policy will first be applied to fertilizer players, one of the sources told us.

ICYMI- The government raised natural gas supply prices for the industrial sector by 28%, or USD 1 per mn British thermal units (BTU), starting 15 September in a bid to balance local market needs and secure gas supplies for factories. We published an Inside Industry shortly after the decision came into effect looking at the impact of the price hike on various industries — check it out here.

The move will not undermine industrial localization efforts, according to our sources. Under the new pricing system, the state will grant strategic and priority industries energy incentives to support localization efforts. These incentives would be financed either by the public treasury or through cross-subsidization among products to allow the petroleum sector to grow and maintain balance, they added.

A monthly gas price review is being considered, the sources said. The review may keep prices as is, raise them, or lower them, giving industries a chance to benefit if global prices decline.

What do manufacturers think? A source in the petrochemicals sector called for fair gas pricing to ensure factories can meet both domestic commitments and export obligations.

REMEMBER- The government raised the tariff for transporting natural gas through the national grid a few months back.

IN OTHER ENERGY NEWS-

BP has added 80 mcf/d of natural gas to its output from its second RW5 well in the Raven natural gas field, according to a statement from the international energy player seen by EnterpriseAM. The addition from the North Alexandria concession brings the company’s combined output from its second development phase of its Raven natural gas field — which includes the RW4 well too — to about 140 mn cf/day since the beginning of the year.

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