By Nihal Mounir and Mohamed Adel
Egypt suffers from a crisis in the oil and electricity sectors, due to the decline in oil and gas production. Major technical disrepair in power plants means that they now work at a maximum capacity of 28%.
Daily News Egypt interviewed Khaled Abu Bakr, Executive Chairman of Taqa Arabia, affiliated to Qalaa Holdings, to learn of its plan to contribute to solving the country’s energy crisis.
What is the company’s investment plan for this year?
The company targets pumping investments of around EGP 600m-EGP 750m this year in the sectors of electricity, fuel stations, and delivering gas to houses. Taqa contributes through self-funded investments of EGP 250m this year, while the rest of funds will be through banks, and will be paid on a regular basis. The company’s investments in 2015 are divided into about EGP 375m to deliver natural gas to houses, and building about nine car fuel stations with a cost of EGP 80m, in addition to building power plants for over EGP 300m.
What are the most significant projects that Taqa is currently working on to generate electricity in cooperation with the oil sector?
It was agreed with a number of international oil companies working in Egypt to obtain amounts of natural gas, in addition to building a power plant in the operation field of the companies and use it in generating around 150MW, with investments of $150m. The gas that Taqa agreed to acquire is not pumped into the national network of gases; we will use it in generating in order to make use of it to contribute to finding positive solutions for the electricity crisis in Egypt.
The execution of the power plant will begin within the next three months. It is ready now in Europe and will be exported to Egypt and installed through eight months. It includes some old parts, in addition to new units, but all of them are with guarantees proving their high efficiency. The power plant consumes around 150m cubic metres of gas annually, in order to generate 150MW with prices exceeding $5.5 per one million thermal units. Taqa has industrial clients in urgent need of electricity in order to operate their factories that often stop working.
Are there contracts to provide energy to companies in the next years?
We have contracts to provide around 750MW for the upcoming eight years at a cost of $750m for a number of companies, the most significant of which are Al-Futtaim and Emaar, in addition to Taqa’s clients. Taqa realised that it should build plants and meet its clients’ demands since 2008.
Did the company participate in any tenders regarding generating electricity from new and renewable energies?
We participated in tenders in the Ministry of Electricity to build three new and renewable energy plants with a capacity of 150MW and a cost of $250m. The offer proposed by the company included building two solar energy plants, with 50MW power for each, and an estimated cost of $100m; they will be executed within 12 -16 months. The company offered to build a wind plant in the area of Zaafarana with a capacity of 50MW. It will take a year and a half to be executed. Participating in these tenders is an experience to learn, but we will come out to the free market to produce new and renewable energy and sell it directly to our clients.
How much is the company’s share in the plan of delivering gas in the next fiscal year (FY) 2015/2016?
Taqa targets delivering natural gas during 2015 to around 100,000 clients, with an average cost of EGP 250m. Taqa is participating in the Ministry of Petroleum’s plan regarding the delivery of natural gas to households this year, amounting to 800,000 clients. The company’s ability to support the Ministry of Petroleum and the Egyptian Natural Gas Holding Company (EGAS) is a result of the engineering designs sector and the procurement of natural gas for houses sector, in addition to the contracting companies affiliated to the company. The company is known for its ability to reach the different specialised contractors, in order to reach the different clients.
Does Taqa Arabia have plans to deliver natural gas to houses in the upcoming years?
The company targets delivering gas to around 600,000 clients through the next three fiscal years, with an average cost of EGP 1.5bn. The company’s five-year plan of delivering gas to houses targets around 150,000 clients, with an average cost of around EGP 375m. As for FY 2016/2017, the service will be delivered to 200,000 clients, with an average cost of EGP 500m. In FY 2017/2018, we target delivering gas to 250,000 clients, with a cost of EGP 625m.
What happened to the project of delivering compressed natural gas to the clients who are far away from the natural gas network?
The company now sees to deliver compressed natural gas (CNG) to tourist hotels and industrial buildings in remote areas, which are not linked to the gas network, through supplying them with huge gas cylinders, which can be replaced or refilled. Some of the hotel buildings the company contracted with are in the Red Sea governorate in the area of Soma Bay, in addition to industrial buildings.
The steel sector is one of the industrial sectors that the company works on supplying with CNG. Taqa Arabia and number of companies have asked the Ministry of Petroleum, two years ago, to acquire the licence of this business. The ministry formed a committee to study the requests and determine a price to calculate the shipping cost. This business is important for buildings that suffer from not being connected to the national has network, or are far away in remote areas where lines would not reach them. Egypt has a very strong industrial base, however, the energy crisis has a negative impact on these industries.
Concerning the construction of automotive fuel supply stations, what is the company’s plan?
Taqa Arabia is planning to open nine stations for petroleum services under the trademark “TAQA” during the current year. After achieving this step, oil service stations owned by the company will reach 45 stations, with average investments of EGP 5m to EGP 8m for each station. Two stations were inaugurated: one of them is located on the Autostrad road, and the other is in Kafr Tamay, an area in El-Senbellawein City in Daqahleya governorate. Within the upcoming three months, the inauguration of four new stations will be celebrated.
Petroleum station services belonging to TAQA are located throughout 19 national governorates. The company works through the dealer system. In other words, one of the investors buys the land, and then the company trains the employees, and afterwards they work as per the quality standard set by Taqa. Taqa’s strategy is establishing its branches in the zones that are not targeted by the international oil companies, like Upper Egypt, the Delta governorates and villages, rural areas and bus stations.
Taqa is the only company that provides petroleum services for cars that work with gasoline and natural gas. On the other hand, another two companies are helping us with the gas supplement to our stations, and one of them is Gastech. Taqa Arabia works in independent gas stations under the trademark of Master Gas. Sometimes international oil services stations support the company to provide gas services for cars, for example Exxon Mobil. Gas services that are provided by Taqa to its clients are not considered a source for revenues; on the contrary, they are provided out of the social responsibility that we feel towards citizens.
What about the petition presented by the private sector companies concerning raising the cost of gas home delivery?
First of all we have a defected illegal system for the natural gas bill collection. EGAS allows gas delivery companies that belong to it to add EGP 6 on each month bill, and, on the other hand, the private sector only adds EGP 2.75. EGAS allowed the private sector working in gas home delivery to add EGP 1.75 on the monthly bill. It was then when all private sector companies demanded equality with the government according to the constitution. After the private sector companies working in home gas delivery issued complaints for three years, EGAS increased the value added on the bill up to EGP 2.75, although it was not stated in the laws for consumer protection and competition.
Due to the price increase of the imported materials after the dollar increase, gas home delivery companies also asked for increasing the delivery cost from EGP 2,500 to EGP 3,000. Gas delivery costs have been fixed at EGP 2,500 for clients since 2003, when the dollar was equal to almost EGP 3.8, while now its value amounted to EGP 7.63. 60% of the gas home delivery cost was spent on buying materials, the majority of which are exported. Actually, when it comes to gas home delivery, Taqa is losing because of the fixed price of EGP 2,500 per customer.
Does Taqa Arabia investigate its ability to increase its stock for petroleum materials?
Yes, it does, through establishing new reservoirs or purchasing actual established fields. The company will then need an additional stock capacity estimated at 20m litre of different oil products, starting from one and a half years up to three years. Three years ago, Taqa Arabia acquired a field located in the Suez governorate from Exxon Mobil; this field was renewed according to international standards. The field’s stock capacity is 14m litre consumed in eight days in order to reserve solar and gasoline, whether 92% or 80% gas. This quantity is for Taqa’s stations and other companies that compete with us in the market. The cost of purchasing and renewing this field started from EGP 55m up to EGP 60m. Concerning the oil substances’ distribution system, the main source for acquiring reservoirs is the laboratories owned by the Ministry of Petroleum.
Are there any negotiations with Taqa Arabia for importing natural gas?
More than five years ago, Taqa came up with the idea of importing liquefied gas shipments; we proposed this to the government so that we could import gas and sell it to our clients. EGAS launched a bid that we participated in, but unfortunately it was settled in favour of some other companies. Despite producing around 50bn cubic metres of natural gas annually, this does not fulfil Egypt’s actual needs. I believe that it does not matter if we import gas from Israel, as long as the state did not decide on paralysing the economic and commercial deals.
Will the fleet responsible for transporting substances increase in the next period?
I expect a 25% annual increase concerning Taqa’s fleet. There is a direct relation between developing the fleet and increasing the number of petroleum service stations.
How much is the actual capital for Taqa Arabia?
The paid capital is around EGP 1.35bn.
Can you give us an idea about Taqa’s fields?
Taqa establishes and operates the infrastructure of the energy sector; it distributes and redistributes the electric energy and markets for oil products through four subsidiaries: TAQA Gas, TAQA Power, TAQA EPC and TAQA Oil Marketing. These companies present the four principal fields for Taqa, which are gas, electricity, marketing products and establishments.
Can you give us some details about the floating electric station in Egypt?
The final permissions are still being received from political entities. Agreements were made to supply a floating electric station with energy amounting to 200MW, with more than $180m in investments in order to locate this station in one of the Egyptian ports as well as linking its production with the transportation network to be able to transmit energy to the company’s clients. The company will import the needed fuel for this station after opening the import market and liberating the fuel market. A contract is taking place to buy the floating station, and it will be supplied by a company in Asia. We are now studying which port the station will be located in, in order to connect it with the national network for electricity. The floating station will be functioning within almost four months of finalising the contracts and permissions with the different entities.