It looks like fertilizer manufacturers won't be the only ones that could soon see gas prices rise in tandem with their export values. The government is mulling a flexible, phased pricing structure for natural gas across several sectors, aiming to cushion the state from rising energy import bills while maintaining viable margins for the industrial sector, three government officials tell EnterpriseAM.

REMEMBER- A government decision is in the works to price natural gas sent to fertilizer producers based on fluctuations in the international going rate for fertilizers, Chemical and Fertilizers Export Council Chairman Khaled Abu Al Makarem told us earlier this week. Sharing the expense is intended to strike a balance between production costs and export returns, as Egyptian export prices have risen by around USD 125 per ton to USD 610-625.

Why this matters: While an immediate reaction to the war on Iran, the shift to a flexible, market-linked pricing model could signal the start of a much larger — and permanent — industry change. For decades, fixed energy subsidies have been the basis on which Egyptian industry has operated and planned for the future.

But this won’t apply to all sectors, with the food industry and other producers of essential goods likely to have their gas bill remain the same. With inflation for many of these goods already rising, the state seems willing to shoulder the increased energy costs to try to keep inflation in check and production at sufficient levels. The ceramics sector is also likely to see prices remain the same due to a growing inventory backlog — at least until there’s greater clarity in the market.

AND- Some energy-intensive sectors are set to have fixed increases of around USD 1 per mmbtu, including cement and iron and steel production. Cement producers may also be pushed to raise their use of alternative fuels from 10% to somewhere between 20-25%, we’re told.

BY THE NUMBERS- The industrial sector consumes around 2.1 bcf/d, with energy-intensive industries accounting for roughly 40% of total industrial gas demand.

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