|
ELECTRICITY DYNAMICS
NATURAL GAS FUELS DRIVE TO INCREASE CAPACITY
BY LOUIS M. WASSER
Faced with a steadily growing demand for power, Egypt is working to dramatically expand electricity generation in the coming years. The government is pursuing a number of avenues to boost generation capacity, including increasing the emphasis on renewable energy sources and working to jumpstart a nuclear program. While an expanded emphasis on alternative energy sources is expected, fossil fuels – especially natural gas – will continue to play a large role in power generation.
Demand for electricity rose by an average of about 7 percent a year during the past five years, according to Aktham Abouelella, spokesperson for the Ministry of Electricity & Energy.
In terms of electricity, as demand has increased, steps have been taken to increase installed capacity – which currently stands at about 25,000 megawatts. Moving forward, Egypt’s electricity generation capacity will be further expanded.
“Egypt is increasing power generation capacity because it anticipates strong demand growth,” says Simon Kitchen, senior economist at regional investment bank EFG-Hermes.
The government has laid out a plan to increase generating capacity that covers the better part of the next two decades. In the short term, for the five-year plan covering FY 2007-08 through FY 2011-12, 9,200 megawatts of installed capacity will be added to Egypt’s network, requiring about LE 80 billion in investment, according to Abouelella, who notes that more than 4,000 megawatts have already been added. For the FY 2012-13 through FY 2016-17 period, the plan is to add 10,450 megawatts, but that amount could increase.
The overall goal is to expand installed capacity by a total of 58,000 megawatts over the course of four consecutive five-fiscal-year periods that began with FY 2007-08 through FY 2011-12. This 58,000 figure may not represent a net increase, however, since some older generation plants might have to be taken offline.
Egypt’s electricity generation sector relies on fossil fuels, but an increased emphasis is being placed on alternative energies. Last month, Minister of Electricity and Energy Hassan Youness announced that Egypt is planning to construct four nuclear reactors by 2025, international press reported. The government also has declared the ambitious goal of producing 20 percent of Egypt’s electricity with renewable sources by 2020.
While the government is giving increased attention to alternative energy sources including nuclear power and wind, the vast majority of Egypt’s power-generation capability will continue to be based on fossil fuels. As demand for electricity has grown, so has the use of fossil fuels for power generation.
Natural gas is the primary fuel source for thermal power generation in Egypt, and the most recent Egyptian Electricity Holding Company annual report notes that the policy is to replace liquid fuels with natural gas.
Although Egypt’s production of natural gas outpaces domestic consumption – natural gas production was estimated at 4.002 million tons and domestic consumption 2.786 million tons during December, according to a bulletin published last month by the Cabinet Information & Decision Support Center (IDSC) – other fuel sources continue to be used to generate electricity. According to the holding company’s annual report covering FY 2007-08, natural gas accounted for 82 percent of the fuel used in thermal plants connected to the gas grid and 79.3 percent of power plants’ total fuel consumption.
Aktham believes that demand for natural gas for use in electricity generation will continue to increase as additional capacity is brought online.
At the moment, electricity generation accounts for the majority of natural gas consumed domestically. In December, for example, electricity generation accounted for an estimated 54.9 percent of domestic gas consumption, according to the IDSC bulletin.
Although production continues to outpace domestic consumption, Egypt’s overall demand for gas has risen dramatically in recent years. “Basically, when there is economic growth, there tends to be more demand for natural gas,” explains Tarek Selim, associate professor of economics at the American University in Cairo. GDP growth fell to 4.7 percent last fiscal year with the global economic crisis in full swing, dropping from more than 7 percent the previous fiscal year.
Domestic demand for gas has risen sharply in recent years. While Egypt consumed only 11.52 million tons of natural gas in FY 1998-99, over the course of a decade consumption nearly tripled, reaching 31.26 million tons in FY 2008-09, according to government statistics.
In moving forward, demand for gas for electricity production will have to be weighed against other domestic needs, as well as export obligations.
While Egypt is a significant exporter of natural gas – exports of natural gas and its derivatives generated an estimated $234.4 million in December, for example, according to the March IDSC bulletin – in June 2008, the government reportedly instituted a moratorium on new gas export contracts until 2010. This decision seems to have pertained solely to the government’s share of natural gas production.
Reham El Desoki, senior economist at regional investment bank Beltone Financial, attributes the government’s decision to “the increase in local demand for natural gas beyond the levels that they expected a few years ago.” She says the government underestimated natural gas use while overcommitting to gas exports.
Selim contends there is enough natural gas to both meet domestic needs and export. “To be frank, I think there is enough to go around. I just think that a correct tradeoff has to be done in terms of domestic distribution versus exports,” he says. There should be a focus on using natural gas locally, he says, and utilizing oil for exports – although he does think some natural gas also should be exported.
El Desoki argues that the government is strongly focused on increasing domestic gas supplies and doesn’t expect the moratorium on new export contracts to be lifted in the near future. “At this point, any increase in gas availability would most likely go to local consumption,” she says.
Submit
your comment
Top
|
