Egypt : Democracy and the Energy Patterns

Need:

To understand the effect of the a new and more democratic government on the energy consumption
patterns of a country.

Objectives:

To understand how Egypt’s energy consumption gets affected when it changes from autocracy to
democracy.

A Crisis in the happening

It’s been nearly 2 weeks since the protests in Egypt erupted leading to the stepping down of the higher
leadership of the country and the negotiations to start off for a new and more democracy oriented
government. This is the first time that the Mubarak led government (NDP), has agreed to talk with the
other parties in the region including the Muslim Brotherhood. We are clearly getting signals of a new
form of government being formed in Egypt that will replace the current NDP. One of the major
questions that need to be answered now is that, if this transition takes place, how will the energy
consumption patterns of the country be affected?

Egypt’s Economy:

When we talk of the kind of changes that can happen in Egypt’s energy sector, we need to keep in mind
that Egypt is already a democracy but it has not been practiced in the nation with due consideration.
They already have a parliament where the bill’s get passed and decisions are taken. Egypt is an economy
with a GDP of $500.9 billion and a GDP growth rate of 5% as registered in 2010 [1]. The population of the
country has nearly doubled from 44 million in 1980 to the current 84 million levels [2]. The government
has been keeping pace with these developments, but all these developments have not happened in a
continuous manner, most of the development happened in the period between 2004 to 2008. After
decades of minor improvement, the reforms started happening only with the advent of the reformist
cabinet that took office in 2004.

Egypt’s Energy Sector:

Today the energy sector in Egypt is nearly self-sufficient with it being able to meet most of its energy
needs through its own production. Nearly 99% of the country is electrified and it is one of the members
of OPEC. According to a data from the CIA world fact book, Egypt produces 118.4 billion kwh but its
consumption is only 104.1 billion kwh. Similarly in case of oil, the net consumption is 683000bbl/day
whereas its production is 680500bbl/day and it is a net exporter of natural gas. So when we look at the
energy scenario in the country there is not much probability of any change happening, as they already
have a well developed Infrastructure and energy sector. There have also been various other
1) https://www.cia.gov/library/publications/the-world-factbook/geos/eg.html
2) http://www.economist.com/node/16564172
developments that are underway in the Egyptian power sector.  A new Egyptian electricity law setting
out the framework for a more liberalized power sector was in 2009 being debated by parliament in
Egypt. So far, the Egyptian power business is based on the single-buyer model, with the EETC (Egyptian
Electricity Transmission Company) purchasing the output from all of the country's generating companies
and selling it on to high and medium-voltage users and distributors. The new legislation will make the
Sector more liberalized and multiple buyers and multiple seller models will get implemented in the
region. All these are indicators that show a potential high growth pattern that can happen in the times
to come.

Comparison with Similar Sized Economies and Conclusion:

3306
3500
3000
2500
2000
1500
1000 500.9
278.1 351.2
500 3.3 5.3 6.8 6.7
0
Germany Egypt Vietnam Philippines

GDP PPP(Billion $) GDP Growth rate (%)

Electricity
Electricity(Billion Kwh) Production Electricity(Billion Kwh) Consumption

593.4
547.3

118.4 104.1 86.9 74.5 56.57 48.96

Germany Egypt Vietnam Philippines

 Oil
Oil (bbl/day) Production Oil (bbl/day) Consumption
2437000

680500 683000
338400 302000 313000
156800
25290

Germany Egypt Vietnam Philippines

Natural Gas
Natural Gas (Billion cu m) Production Natural Gas (Billion cu m) Consumption
94.57

62.7

42.5

15.29
7.9 8.1
2.94 2.94
Germany Egypt Vietnam Philippines

Source for Graphs and Data: CIA World Fact-book

Comparing countries with similar population using the graphs above, we can see that Egypt can be
considered as a highly developing economy and is also a self sustaining one when it comes to its energy
sector. Compared to Germany, its energy sector is far more self sustaining. Egypt has also recorded a
higher growth rate in the recent years. But with the new legislation being developed and the Egyptian
electricity market getting liberalized, we would see an increase in the investment in the sector. Many
private companies will start investing. This would in turn give the people the power to choose, thus
leading to higher consumptions and development. But by and large, the change is not going to be much.
It will take some time for the country to get stabilized and higher developments to start happening and
the energy patterns changing.

Egypt due to its lack of clouds and the angle and intensity of sunlight, especially in Egypt’s south, are
especially propitious for solar power, heavy demand close to empty deserts is for large solar
installations. But that is not it, Egypt also happens to own some of the world’s choicest spots for wind
turbines. Two large wind farms on the Gulf of Suez already generate 500MW. In today’s world when all
countries are looking for new and renewable sources of energy and sources of energy to tap into, Egypt
can be a major investment paradise. The Egyptian solar and wind energy scene may witness a lot of
foreign investment. Even though foreign investment has been welcome in the region before as well but
there were many bureaucratic barriers being faced by the investors in the country, which hindered the
investments. With a new and more democratic form of government in place, these are bound to be
removed. With the changes in Leadership, we may witness the Egyptian energy market getting more
liberalized and more investment being welcomed into the sector, so that with time and the support
from the new government, Egypt may transform into a new and big exporter of Electricity to other
countries in the near future.

References:

Article: In the past 20 years, Egypt has made "great strides" in political and democratic reform

Written by: Sameh Shoukry

Date o publication: Sunday, January 30th, 2011 in an interview on ABC's "This Week with Christiane
Amanpour."
Link: http://www.politifact.com/truth-o-meter/statements/2011/jan/31/sameh-shoukry/egyptian-
ambassador-claims-egypt-has-made-great-st/

Article: A favored spot: Egypt is making the most of its natural advantages

Date of Publication: Jul 15th 2010

http://www.economist.com/node/16564172

Article: Egypt - The Power Sector

Publication: APS Review Downstream Trends 

Date: Monday, January 4 2010 

http://www.allbusiness.com/energy-utilities/utilities-industry-electric-powerity/13685536-1.html

Article: Energy

Source: U.S. Library of Congress

http://countrystudies.us/egypt/91.htm

Muslim Brotherhood

Source: IPT News   

 Date of Publication: Feb 6, 2011

http://www.investigativeproject.org/2567/muslim-brotherhood-joins-egypt-negotiations

Article: Egypt

http://www.eia.doe.gov/cabs/Egypt/Background.html

African Development Bank: Egypt

http://www.afdb.org/en/countries/north-africa/egypt/#

Talks fail to end Egypt protests

Source: Al Jazeera and agencies

http://english.aljazeera.net/news/middleeast/2011/02/20112764216497806.html

Egypt - Foreign investment

http://www.nationsencyclopedia.com/Africa/Egypt-FOREIGN-INVESTMENT.html