Many are touting gas as the ‘amphibian fuel’ that will help transition from oil-based fuels to green energy.
But for some countries, there is also a more pressing reason – the cost.
Since 2016 to 2020, the North African country has been working on reducing its gasoline and diesel imports by 65%, according to official data. Gasoline remains the fuel of choice for car owners, while diesel, locally known as ‘solar’ is mostly used by trucks and buses.
Egypt hopes to close the gap on the estimated $1.5bn worth of imported fuel for 2020, by becoming self-sufficient within two years. Doing so would further narrow its trade balance deficit, which plunged 9% year on year to $42bn last year, amid the global pandemic-induced restrictions on imports and exports.
To begin with, Egypt has been boosting its refinery capacity — the largest in Africa — having increased its domestic production of gasoline by 13.6% over the past five years to reach 4.5mn tonnes and diesel production by 20.8% to hit 8.4tn. More refinery expansions worth over LE90bn ($5.7bn) are still underway.
Some of the key steps to lower fuel consumption include:
- Developing the national electricity grid in line with an eco-friendly strategy, which aims to see Egypt generate 20% of its power from renewable sources by 2022 and 42% by 2035.
- Expanding and developing nationwide road networks and Greater Cairo’s metro lines, to ease chronic traffic congestion in urban areas thereby contributing to lower fuel consumption.
But most significantly, the government is pushing to change the consumption patterns of motorists.
A $12bn IMF agreement Egypt signed in 2016 sparked the gradual removal of energy subsidies, leading to hikes in local fuel prices which today are tied to international markets. This has encouraged motorists to seek cheaper alternatives, primarily compressed natural gas (CNG).
Building on major gas discoveries in the last few years, including Egypt’s Zohr field in the Mediterranean Sea — with a capacity exceeding 3bn cubic feet per day — Cairo plans to drastically increase the use of its CNG, which costs half the price of gasoline and is considered to be a more environmentally friendly choice. In 2018, Egypt announced it had reached self-sufficiency for natural gas.
“If it [E70] is released next year, it will be the top-selling, mostly because” it will mark the introduction of EV (electric vehicles) taxis in Egypt, says Ahmed Zein, chair of Egyptian charging infrastructure provider ZeTech.
The petroleum ministry spokesperson Hamdy Abdel-Aziz tells The Africa Report that 350,000 vehicles run on CNG today, which is approximately 3% of Egypt’s licensed cars. The overwhelming majority of CNG vehicles in the country have been converted over the past three decades, an initiative that began in the mid-1990s.
Egypt is seeking to more than double the number of CNG vehicles to 800,000 by 2024, using two initiatives –already in place — which are expected to convert and replace conventional fuel vehicles. Both plans cover private cars, taxis and microbuses (a popular cheap means of transport).
- In the first initiative, sponsored by the Central Bank of Egypt and the petroleum ministry, motorists have access to LE15bn ($955m) worth of low-interest loans to equip their vehicles with dual-fuel engines. Abdel-Aziz said the plan is to convert 200,000 cars within the next three years.
- The second initiative covers seven governorates out of 27 and offers financial incentives for beneficiaries to replace traditional fuel vehicles — which are older than 20 years — with new ones that run on CNG.
The finance ministry has earmarked around LE7.1bn ($455m) of first phase subsidies to fund 10-25% of the cost of 250,000 new CNG cars.
Egypt has also been developing its infrastructure to accommodate the CNG expansion, with the number of stations providing compressed natural gas expected to quadruple by the end of this year, reaching 1,000, says Abdel-Aziz without disclosing further details.
The lack of CNG stations and maintenance centres across the country causes “the consumer not to have enough confidence to take his/her car and drive [from Cairo] to Sharm El-Sheikh or Marsa Allam” for instance, says Omar Balbaa, head of the automotive division at the Giza chamber of commerce. He says such services must be widespread to achieve the targeted CNG dominance.
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But Balbaa believes that drivers — whether of taxis, microbuses or ride-sharing services — will be the main users of CNG. “Those who would rather pay LE500 ($31.93) instead of LE1,000 ($63.86)” to cut costs and increase their profits, he says.
It is expected that all public transport buses which run on diesel will be replaced with new ones that either use gas or electricity, said Prime Minister Mostafa Madbouly two years ago.
Egypt is bracing itself for electric vehicles (EV), having offered prerequisites and incentives over the past few years to increase the current negligible number of EVs in the country.
Last September, for the first time, authorities set prices for each kilowatt-hour, allowing AC and DC charging stations for private car customers at a rate of LE89 ($5.68) and LE3.75 ($0.24) respectively for each kwh — a much cheaper rate than gasoline, of which one litre costs between LE6.50 ($0.42) to LE8.75 ($0.56).
Electric cars started to gain more visibility in Egypt after the ministry allowed importation of used electric cars — not older than three years — in March 2018, as a way to avoid astronomical price tags on new EVs.
“New EVs are very expensive [compared to conventional fuel cars], which is why we were looking to arrive at this decision with the government on used cars,” Ahmed Zein, chair of Egyptian charging infrastructure provider ZeTech, tells The Africa Report.
For now, the estimated number of electric vehicles in Egypt remains below 1.5K, says Zein. He, like other observers, believe domestic production would be the real impetus for the EV industry in the country.
In January, the state-run El-Nasr Automotive Manufacturing Company signed two deals with subsidiaries of Chinese carmaker, Dongfeng Motor Corporation, to revamp the El-Nasr factory and to domestically manufacture an electric sedan E70 which costs LE320,000 ($20,370), a competitive price in the Egyptian auto market.
In the first half of 2022, Egypt is poised to start co-producing 25,000 EVs annually; 14,000 of which will be taxis. The E70 production quota could potentially be ratcheted up in response to corresponding demand, says public enterprises minister Hesham Tawfik.
“If it [E70] is released next year, it will be the top-selling, mostly because” it will mark the introduction of EV taxis in Egypt, says Zein. “When that happens, it will push forward the whole market,” as Egyptian customers tend to trust any car model that is used as a taxi, deeming it a testament to high durability, he said.
Hydrogen the next step?
Based on numerous meetings with officials, Zein sees the third phase of fuel conversion in Egypt as hydrogen production. The government has already taken steps to tap into this amid a global interest in green hydrogen as a source of clean energy.
In November, Cairo formed a committee to devise a national strategy to explore opportunities in new hydrogen production technologies.
And last February, Egypt’s President Abdel Fattah al-Sisi met with the CEOs of three Belgian companies — DEME, Port of Antwerp and Fluxys — to discuss possible cooperation to produce green hydrogen for power generation.
With key shortcomings of hydrogen cars overcome in recent years, including safety, Zein believes the natural evolution of Egypt’s green energy strategy will be to localise the hydrogen industry, as is the case with natural gas and electricity. “They have decided to localise all three industries,” adds Zein.
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