Egypt to stay on Track with Energy Strategy Aiming to step up Debt Settlement

Egypt’s President Abdel Fattah al-Sisi said that the country would continue with an ambitious energy strategy including wind and solar to help accelerate payment of debts to foreign oil and gas firms and meet rising domestic power demand.

In the opening address of the World Future Energy Summit (WFES) in Abu Dhabi yesterday, Mr al-Sisi said Egypt would add exploration wells, expand refineries and maintain its renewable energy 2020 vision.

About 4,300 megawatts of renewable energy projects are set to come online over the next five years to help diversify Egypt’s power mix and plans related to renewables made before the 2011 revolution are still on track, Mr al-Sisi said.

“We are limited in traditional forms of energy so we have to explore renewables,” Mr al-Sisi said. “The strategy also includes turning Egypt into a hub for energy trade to make use of its geographic location that sits in the middle of major energy producers and consumers.”

He called on the private sector to help provide the huge investment required. he country’s plans include boosting clean energy sources to 20 per cent of the total by 2020, up from 12 per cent. That amounts to 12,000 megawatts of capacity. The plan also covers use of coal and nuclear energy, Mr al-Sisi said.

Egypt has 82 million people, with natural gas and diesel used to power homes and industry.

The El Sisi-led government in September introduced a solar feed-in tariff (FiT), a financial mechanism to help certain technologies become more cost-competitive. The new solar FiT is set at 14 US cents per kilowatt hour (kWh) on projects ranging from 20 to 50MW.

Solar energy will comprise 2300MW of Egypt’s future renewables output — the remainder is wind — and the process to select pre-qualified companies is already under way.

“It is ambitious. They made a quick decision,” said Laurent Longuet, managing director of SunPower Middle East, which is one of the firms interested in landing a renewables project in Egypt.

Other companies lining up include Abu Dhabi’s Masdar and Acwa Power from Saudi Arabia.

The Acwa Power chief executive Paddy Padmanthan said that it was currently looking at utility scale projects and was in discussions with several companies.

“We think Egypt is an important market and we’ve always been very interested in it,” he said.

Egypt has placed a limit on projects, so companies are only able to grab — at most — 50MW each. Mr Longuet said reaching financial close for projects of that size typically takes at least six months.

The Egyptian government is trying to increase the country’s power generation capacity after facing the worst energy crisis in its history.

“We seek to reform and diversify our sources of energy by adopting policies on rationalisation and overcome gap between needs and supplies,” Mr al-Sisi said.

Last year the country’s power sector accounted for 68.7 per cent of natural gas consumption, an increase from 59.6 per cent in 2013, according to the Egyptian state-run Information and Decision Support Centre.

The government spent 45 billion Egyptian pounds (Dh23.04bn) on energy subsidies in the first six months of the fiscal year that began in July. The subsidies have helped turn Egypt from a net energy exporter into a net importer over the past few years. Fuel subsidies were scaled back in July to ease the burden on a swelling budget deficit, raising prices of mainstream fuel products by up to 78 per cent.

Egypt has an estimated refining capacity of 704,000 barrels per day, according to the US energy information administration. The North African country is expected to add 96,000 bpd this year as a new refinery comes online.

Sharjah-based Dana Gas is planning a new drilling programme in Egypt to get under way this quarter including 20 new development wells over the next seven years.

Dana Gas is owed around $160 million in overdue payments from the Egyptian government for energy products.

Source: Reuters