By Mohamed Adel
The Egyptian Natural Gas Holding Company (EGAS) has implemented a new price formula for natural gas for Egyptian Fertilisers and Arab Palestinian Investment Company (APIC), setting a minimum of $2 per 1m British Thermal Unit (BTU) starting January, up from its previous $1.25 rate.
EGAS signed an agreement with the companies using two pricing methods. The first sets the price at $2 per 1m BTUs, despite a consumption rate of 60% for contract manufacturers, which will continue to rise for many of them.
The second method links the price of gas to the international price per ton of urea and ammonia and is applied directly to the manufacturer, according to the official.
Under the government of former prime minister Hesham Qandil, fertiliser companies began a study on a price equation linked to urea, but the project stopped after negotiations to remove former president Mohamed Morsi began.
Energy-intensive fertiliser manufacturers receive around 510m cubic feet of gas per day at an average of $3 per 1m BTUs, and their final product is exported at international prices.
APIC’s contractual quota for ammonia production reached 65m cubic feet of gas per day at a maximum of $1.25 per 1m BTUs before last January.
Egyptian Fertilisers received 45m cubic feet of gas per day for urea production at $1.5 per 1m BTUs before the price change, the EGAS official said.
A previous proposal was put forward under the Qandil government to raise the price of gas on energy-intensive manufacturers from $3 to $12 over the course of three years, though fertiliser companies objected to the proposal.
The Egyptian market currently needs around 9m tons of fertiliser every year. Public sector companies Abu Qir and Delta for Fertilisers produce around 7m tons, and private sector companies supply the remainder to the Ministry of Agriculture through specific agreements including preferential pricing.