Egypt moves on energy reform from the ground up

This week, the World Bank announced the approval of a $500 million loan to Egypt to assist in a program that would allow households to switch from costly liquified petroleum gas – or propane – for home use to a link to a more affordable national gas grid. Meant to allow more access to affordable gas options instead of heavily subsidized propane, the Egypt Household Natural Gas Connection Project is expected to save the government $301.5m annually in subsidies, according to The World Bank.

While only a fraction of the planned $6 billion reduction in the country’s energy subsidy bill, the new program is part of a wide ranging effort to finally address the country’s energy crisis. The region’s most populous country – at 85 million – has long faced challenges in meeting domestic demand; however, the energy environment has worsened in recent years as local gas production has fallen amid political and economic uncertainty.

Once a natural gas exporter to countries across the world, Egypt has been forced to reserve its reduced output for domestic demand and increasingly seek costly imports. The country’s energy sector has racked up $6 billion in debt to foreign energy firms like the United Kingdom’s BG Group, an amount the government has had difficulty paying down. Over the last two years, Cairo has sought out new, more dependable import options, though political and stability obstacles remain. Earlier this week, Egypt held talks with Algeria to import “five cargoes containing 145,000 cubic meters of LNG each before the end of the year”, though the price offered by Algiers remains higher than hoped for.