April 2007
Issue 4
Assessing the impact of removing energy subsidies on energy intensive industries in Egypt page 14 Cement seal units eliminates the inter-zonal communication page 16
PVSS II Best fit SCADA system for the oil and gas industry page 17
Published by Egypt Oil and Gas S.A.E Enduring to explore by taking it offshore Demand for maritime service companies has increased recently, this feature explores why and the measures taken to meet this rising demand
24 pages
Protecting the environment, securing the future Eng. Ashraf Sabet talked about PESCo’s ambitions and current activities
page 8
Sharing the oil cake? While some regard the new Iraqi oil law as oil on troubled waters, others consider it a squander of the world’s third largest reserves
page 12
page 13
Subsidies have become the keyword to an ongoing controversy in the Egyptian energy sector. Arguments swinging between keeping and lifting oil and gas subsidies have raised concerns about the negative effects of “inefficiency” in implementing the subsidization system; its threats endangering the future of energy reserves and its state of being an economic burden on the government. Egypt Oil & Gas Newspaper examines the different perspectives of this debate By Yomna Bassiouni Subsidies: The Facts ACCORDING to the Shura Council’s Financial and Economic Affairs Committee report, the subsidies allocated to petroleum products have increased from nearly LE290 million in 1970 to more than LE40 billion at present. Egypt’s Minister of Petroleum Eng. Sameh Fahmy revealed in an interview in Al-Ahram Newspaper that the bill of subsiding petroleum products costs around LE44 billion annually ($7.4 billion). Meanwhile, the total revenue of exports counts for $10 billion. However, the bill of subsidies has been increasing and the Ministry of Petroleum had to request the interference of the People’s Assembly to decide whether to keep the subsidies or cut them down. Fahmy pointed out that subsidies are not just directed to the lower income bracket, some of the wealthy people benefit from subsidies as well. “We need to face this problem clearly regardless its negative effect on the ministry’s image,” Fahmy said. Last May, the Shura Council approved an amendment of LE20 billion in the 2005/2006 budget aimed at
subsidizing petroleum products and natural gas. In the session, the Minister of Finance Youssef Boutros Ghali stated “three urgent reasons” behind this additional budgetary allocation. The first reason lies in the dramatic increase in oil prices worldwide. Secondly, this rise has consequently led to an increase in the price of petroleum products, which the government buys from oil companies operating in Egypt. Thirdly, the local consumption of both petroleum products and natural gas has increased. “The government’s strident efforts to raise growth rates to more than seven percent have resulted in a large increase in the consumption of these products,” Ghali said.
The Debate However, the increasing subsidies’ budget draws more economic problems as it is a temporary solution to monetary problems. Ghali said that in Africa, governments “usually bear only 10% of the price of petroleum products while the government in Egypt bears around 75%,” which represents a huge economic burden. For instance, the
approved subsidies’ increase will result in an additional deficit of LE5 billion to the state budget. Continued on page 19
ENPPI and Petroleas de Venezuela Sociedad Anonima (PDVSA) signed a $4 million contract to train a group of Venezuelan workers in different petroleum fields. ENPPI will be responsible for organizing an integrated training course for 70 engineers from PDVSA in the fields of operations engineering, electricity, mechanics, pipelines, controlling, construction and civil operations, supplying operations and supervising projects. Eng. Fakhry Eid, ENPPI’s Chairman said that the training activity is part of the integrated activity offered by ENPPI in the petroleum engineering design domain for workers in Egyptian petroleum companies and some Arab countries. Petroleum industry workers from Syria, Libya and Sudan have benefited from these trainings; 293 Arab trainees were trained through 99 training courses in various specializations. w
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