Egypt’s government on Monday proposed a draft law to the parliament which would open up the country’s natural gas sector to private investors. According to the proposed draft law the private sector would be able to participate in all activities in the natural gas sector including shipping, distribution, sale, and marketing.
Moreover the draft law recommends the establishment of a new regulatory body to supervise the liberalisation of the Egyptian natural gas sector. The new regulatory body would be responsible for the granting of any required investment licenses as well as preventing any monopolies.
This draft law is a new step in the government’s effort to liberalise the Egyptian economy, following the economic reform programme adopted by the government, which has been approved by the IMF. The government says their reform programme will lead to a liberalised free market, by achieving a flexible foreign currency exchange rate, cutting fuel subsidies, and the privatisation of the public sector.
According to Anastassios Gentzoglanis, a professor of economics at the Université de Sherbrooke, liberalising the Egyptian gas market will be the first step towards transforming the sector’s efficiency and competitiveness. Adding that the independency of the new gas regulator is essential, as well as assuring the investors that there won’t be a risk of policy reversal, which in turn will provide incentives for further investments within the gas sector.
On the other hand the liberalisation of Egypt’s oil and gas sector started in the 1990’s, with the introduction of the first private local distribution companies (LDC). However, the extent of embedded subsidies and the monopoly, held by the Egyptian Natural Gas Holding Company, of upstream supply to the LDCs, means the market is still currently far from liberalised, according to the Independent Chemical Information Service.