Egypt Pivots to Fuel Oil for Power Plants Amid Soaring Natural Gas Prices

Egypt is strategically increasing its reliance on fuel oil to power its electricity plants, moving away from natural gas due to escalating global prices. An official source within the petroleum sector confirmed this shift, noting that while natural gas has been the primary fuel, the current global price of approximately US$ 28 per million British thermal units (BTU) for natural gas is prompting a greater adoption of fuel oil. Currently, fuel oil constitutes 10 percent of the fuel mix for these power plants. The plants are designed to operate on either fuel source. Despite fuel oil being less efficient, its significant cost advantage over natural gas makes it the more economical choice under present market conditions. The source further explained that while efficiency typically dips in the summer, fuel oil becomes more effective as winter approaches. Concurrently, there has been a noticeable decrease in natural gas demand, with consumption falling by nearly 14 percent compared to the summer season.

Medhat Youssef, former Vice Chairman of the Egyptian General Petroleum Corporation, highlighted the substantial increase in global petroleum product prices, attributing it to the ongoing crisis. He stated that the cost of one million BTUs of fuel oil is around $16.10, in stark contrast to natural gas, which costs approximately $30 per million BTUs, inclusive of transportation. Youssef pointed out that substituting fuel oil for natural gas offers a cost saving of about 50 percent. He advocated for boosting fuel oil supply by prioritizing crude oil imports and enhancing domestic production over importing finished fuel oil at a higher price. Youssef noted that a ton of fuel oil currently costs about $600, while crude oil is priced at approximately $109 per barrel. He emphasized that importing crude oil for domestic refining would enable the production of fuel oil, diesel, naphtha, and other valuable products, thereby reducing the overall cost of importing petroleum products, which is particularly beneficial given their rising global prices.