Egypt’s power grid comes of age as Canadian gold miner Centamin seeks access

By David Whitehouse

Posted on Thursday, 24 November 2022 09:42
Egyptian power cuts have become a thing of the past. REUTERS/Amr Abdallah Dalsh

Canada and London-listed Centamin, which operates Egypt’s only gold mine, is in discussions with the government to connect to the national grid and cut its reliance on diesel power.

The government is “very keen” to add the company as a national grid user and the aim is for Centamin’s Sukari mine in the country’s south-east to be fully connected by the end of 2023 or early 2024, CEO Martin Horgan tells The Africa Report. The initial proposal being discussed is for 30MW-50MW of grid power to be supplied.

Egypt has made “astonishing” progress in power generation since rolling blackouts of 2014, meaning the national grid now has excess capacity, Horgan says. The country built about 3,500 km of high-voltage power lines between 2014 and 2020, and a distribution line now runs within 20 km of Sukari.

Horgan says he’s confident on Egypt’s ability to maintain its expanded grid. The country’s large oil and gas industries have served to  create a high level of engineering expertise, he says. “I don’t doubt that they have the capacity” to ensure maintenance. Still, the company will retain its diesel-generating capability as a back-up.

Industrial grid tariffs are cheaper than diesel fuel, which has been made more expensive by higher crude oil prices.

  • Centamin’s fuel costs in the first half of the year jumped 34% from the second half of 2021.
  • The company aims to achieve an overall $150m of cost cuts between 2020 and the end of 2023.

Solar plant

Centamin has also started operating its own solar plant at Sukari, which may be able to meet about 25% of the mine’s power needs. The plant means an average reduction in diesel consumption of 22m litres a year, and an annual cost saving of $20m at current diesel prices. The plan, once grid access is achieved, is for a roughly 60-40 split between solar power and the grid during the daytime, with 100% grid use overnight.

The company in November announced plans to expand the Sukari underground mine to produce 1.5m tonnes of ore per year, an increase of 31%. The expansion will cost $25m-$35m, and Horgan says the new rate of production will be reached in the second half of 2024.

The Sukari mine began producing in 2009 and is now slightly over halfway through its life. The mine is currently expected to operate until 2033, though Horgan says further exploration could extend its life by a year.

  • That creates the need for further discoveries, and Centamin is exploring in Egypt’s eastern desert.

Egypt’s renewables targets

The Egyptian grid uses natural gas and renewables including hydro, solar and wind. The country’s Red Sea winds are ideal for wind power, while solar generation is favoured by land availability, with the population of 104m people heavily concentrated on about 5% of the land mass.

The country’s power supply in the early 2010s was hobbled by an ageing generation fleet, with a third of thermal generation capacity over 20 years old. Capacity was increased by around 28.5 GW between  2015 and 2021, though most of that is from non-renewable sources. Researchers led by Salma I. Salah at the University of London have calculated that as of early 2022, only 12% of generated electricity comes from renewable sources, behind the government’s 2022 target of 20%.

The country aims to generate 42% of its energy through renewable sources by 2035. Some have questioned whether that goal is realistic. Research from Tarek El-Shennawy, a power engineering manager at the Alexandria National Refining & Petrochemicals Co., points to the high capital cost of solar projects.

  • The Benban solar park with 1.5 GW installed capacity costs about $4b.
  • Discoveries of natural gas in Egypt together with the commissioning of the El-Dabaa nuclear power plant scheduled for 2027 will reduce the appeal of renewable power capacity, he writes.

Bottom line

Egypt’s strengthened grid improves energy security for industrial customers, but renewables use so far is mostly promise rather than delivery.

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