Power cuts to resume until at least 2Q 2024: The government is expecting to resume rolling blackouts until the end of 1Q 2024 as pressure on our electricity network continues amid the need to boost liquefied natural gas exports, three industry sources told Enterprise.

The good news is that we could see shorter power cuts a month from now. The government is working to reduce power cuts to just one hour, down from the current two hours, after January, our sources told us.

AND- Power cuts will be limited to the hours between 11am and 5pm effective today, the cabinet said in a statement yesterday. This came in response to requests from MPs and citizens to reduce the length of power outages, especially during the midyear exam season, the statement said, adding that new blackout schedules will be published soon.

ALSO- The Electricity Ministry has hiked electricity prices for private and commercial uses by 16-26%, effective this month. The move is part of a bigger plan to completely phase out electricity subsidies by 2025.

Refresher: The ministry began reducing the electrical load in late July to ration the consumption of natural gas production. The power cuts were originally blamed on summer heat waves, but after temperatures have fallen, officials noted that the one-hour cut saves the country some USD 300 mn per month. Our gas supply was dealt another blow in October when Chevron halted shipments of Israeli gas from its Tamar field due to the ongoing war in Gaza.

There are two main reasons why we’re continuing to see power cuts: #1- Electricity consumption has gone up. Our electricity consumption was up some 4.4k MW last year in comparison to the year before due to higher temperatures, our source said. That, coupled with contractual obligations for exports, has added pressure on our gas supply.

So how much fuel do we actually need? The Electricity Ministry needs to secure around 135 mn cubic meters of gas and 10k tons of mazut a day to support current consumption, an official told Asharq Business in July.

Could this let up soon? One unnamed source familiar with the situation told Al Arabiya recently that consumption could fall to 6 bn cf/d in January, down from 7 bn cf/d in the summer months.

#2- Resuming LNG exports = more FX: A large chunk of our gas production goes towards exports, an important FX source, making exports a “priority” for the government, our source told us. The government is looking to reach a target of 1.2 mn tons in LNG exports a month during the winter months, the source added.

REMEMBER- Egypt is set to resume LNG exports this month after half a year with virtually no gas leaving our shores. The government hopes to export as much as 1 bn cubic feet of gas per day from the beginning of this year, according to the official. Egypt is now importing 800 mn cubic feet of Israeli gas per day after Chevron restarted production at the Tamar gas field and reopened the EMG pipeline between Egypt and Israel.

How much were we exporting before? Egypt has exported just 3.38 mn metric tons of LNG towards the end of 2023, down from 7.1 mn tons during the whole of 2022. The country has the capacity to export more than 12 mn tons a year via its two liquefaction plants at Damietta and Idku.

We’ve tried several things — and they haven’t worked: The government recently restored daylight saving time and in 2022 began rationing the use of electricity in moves designed to reduce power consumption. Despite rationing electricity, spending on water and street lighting rose to EGP 2.8 bn in 1Q 2023, compared to just EGP 821 mn the year before, according to a Finance Ministry report seen by Enterprise. This can be attributed to an increase in costs on the back of FX swings, one source said.

One solution we’ve been looking at is ramping up mazut imports — but it’s not sustainable: We’re currently importing more mazut to meet domestic needs, though our source says this is a “temporary” solution. Mazut is a less clean alternative to natural gas that allows us to save more gas for export, but it has side effects both on grid efficiency and on the environment.

Liberalization of the grid is also on the table: Private-sector players have long been asking for the ability to use the state’s electricity grid to transmit electricity to their end clients. The European Bank for Reconstruction and Development (EBRD) is working to advise the Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egyptera) on opening up the market.

A limited number of private producers currently sell their surplus electricity, with some 170 licenses currently active, our source said. There is no clear regulatory framework governing this practice though, the source explained.

Your top infrastructure stories for the week:

  • A 10-GW solar project could be in the works: China Electric Power Equipment and Technology has signed an MoU with the Madbouly government to begin studies to develop a 10-GW solar project.
  • Madinet Masr closed EGP 7 bn worth of contracts in 2023, including a EGP 1.7 bn MoU with local construction company El Hazek to construct the final stage of Madinet Masr’s Taj City project and the company’s new HQ.
  • Tameer secures 956 mn for New Cairo project: Real estate developer Tameer has landed an EGP 956 mn loan from Banque du Caire for its business park project Urban Business Lane in New Cairo.
Tags: