New Egyptian Petroleum Ministerï¿½s Challenges Include Power Cuts
UsamaKamal, appointed Egyptian Minister of Petroleum and Mineral Resources on 1 August, faces a challenging start to his tenure with the country rocked by a series of power outages in recent weeks. Mr Kamal previously ran state petrochemicals firm Egyptian Petrochemicals Holding (Echem), where he was highly regarded. Analysts note that given the fact that the petrochemicals industry relies on gas feedstock, Mr Kamalï¿½s petrochemicals experience gives him direct experience of Egyptï¿½s ongoing gas shortages ï¿½ one of the most pressing problems facing the countryï¿½s energy sector.
Power cuts (and related cuts to water supplies) have recently occurred on a daily basis, including in Cairo, and are not just affecting home owners but also industry. Supplies of gas and fuel oil to power stations have failed to keep pace with air conditioning-related peak summer electricity demand, which cheap subsidized fuel has done little to temper. Egyptian state TV on 22 July quoted a senior official at the countryï¿½s state power supplier as saying electricity shortages would ï¿½disappearï¿½ when two new power plants ï¿½ at West Damietta and Alexandria ï¿½ started up in early August.ï¿½
The Egyptian authorities are looking to rein in soaring energy demand with a 27% cut to fuel subsidies in the countryï¿½s latest budget (see page 4). Outside observers, including BG CEO Frank Chapman, one of Egyptï¿½s key gas producers, consider it a ï¿½no-brainerï¿½ that the country needs to slash in subsidies (see page 18). However, with the now ruling Islamists having previously criticized the former military-backed governmentï¿½s subsidy cutting plans it is not certain that much-needed reform will be fully implemented.
The IMF has indicated that cuts to energy subsidies are part of reforms it considers essential for the final sanctioning of a long-mooted and desperately needed $3.2bn loan facility. The Washington-based organization has made this contingent on broad-based political support for economic reforms, which helps to explain the preponderance of technocrats in Prime Minister Hisham Kandilï¿½s freshly chosen cabinet. Several key ministers ï¿½ including those for finance, foreign affairs and defense ï¿½ retained their posts from the previous government, although some Islamists were also appointed. However, with the military and elected authorities continuing to jostle for power, it remains unclear to what extent the recently appointed ministers will actually call the shots.
Other issues in Mr Kamalï¿½s ï¿½in trayï¿½ include two yet-to-be-awarded bid rounds (MEES, 4 June), the tearing up of a deal to supply Israel with gas and the related jailing of former oil minister Sameh Fahmy (MEES, 9 July), as well as foreign investorsï¿½ disquiet over payment delays (MEES, 2 July). Also of pressing concern is a problem that Mr Kamal dealt with directly during his time at Echem ï¿½ efforts to resolve the protests which have left the Misr Oil Processing Companyï¿½s (MOPCOï¿½s) Damietta fertilizer plant shut since last year as well as halting work on on the plantï¿½s $1.8bn expansion (MEES, 21 May).
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