* Energy prices in Egypt among cheapest in world
* Price hike only affects users connected to gas grid
* Most citizens not connected to grid
* Fuel subsidies to blame for energy sector woes
(Adds oil ministry comment from state news agency report)
By Maggie Fick
CAIRO, April 21 Egypt plans to double the price
of natural gas piped into some homes and businesses from next
month, but the move will trim its huge fuel subsidy bill only
slightly because few premises are connected to the gas network.
Energy prices in Egypt are among the lowest in the world,
and the cash-strapped government spends more than a fifth of its
budget on keeping them down. Although successive governments
have called for reform, none have dared push through big price
rises for fear of stoking public unrest.
According to a government decree issued late on Sunday,
residential and commercial users of less than 25 cubic metres of
gas per month will pay 0.40 Egyptian pounds ($0.06) per cubic
metre from May.
The Oil Ministry's website shows the current price of gas
for households at 0.20 Egyptian pounds ($0.03) per cubic metre,
or about $0.80 per million British thermal units (mmbtu).
State newspaper Al-Ahram reported that the current price is
0.10 Egyptian pounds ($0.01) per cubic metre for consumers that
use less than 30 cubic metres a month.
No officials from the ministry could be reached on Monday, a
public holiday in Egypt, to confirm the current price.
The price hike, announced in the country's official gazette,
does not apply to the electricity generation sector, which is
the largest consumer of gas in Egypt.
State news agency MENA quoted an unidentified Oil Ministry
source as saying that the move would increase state revenues by
800 million to 1 billion Egyptian pounds ($114.5-$143.1
million), "which will be used to finance projects that deliver
natural gas to homes and expansion (of the grid)".
The decree also says that bakeries, which produce the staple
food of most Egyptians, will not have to pay any higher price.
The price hike therefore only affects a small number of
citizens whose homes have been connected to the gas network.
Most poor Egyptians use cylinders of butane for cooking.
Egypt raised the price of the cylinders last year for the
first time in two decades ahead of talks with the International
Monetary Fund on a $4.8 billion loan.
Talks later broke down, and some analysts said the price
hikes were regressive, as they cut fuel subsidies for poorer
The government last year began a World Bank-backed plan to
link 800,000 households a year to the gas grid in a bid to get
consumers to use less state-subsidised butane.
Artificially low prices for electricity, for butane and for
transport fuel at filling stations provide little incentive for
Egyptians to curb consumption, despite a fuel supply crisis that
frequently causes blackouts.
Under the new pricing structure, those who consume 25 to 50
cubic metres per month will pay 1 Egyptian pound ($0.14) per
cubic metre over 25. Those consuming over 50 cubic metres will
pay a top rate of 1.5 Egyptian pounds ($0.21), or around $6 per
mmbtu for each cubic metre over 50.
By contrast, U.S. householders paid an average of $0.36 per
cubic metre of gas, or around $9.60/mmbtu, last year, according
to U.S. Energy Information Administration data.
Government officials and industry experts says the wasteful
subsidy system is at the root of a range of problems in Egypt's
chaotic energy sector.
Egypt, facing the worst energy crunch in years, is
scrambling to secure adequate fuel supplies for the summer to
avoid popular anger over power cuts.
Officials privately admit that campaigns to urge Egyptians
to curb their consumption will have no effect while energy
prices remain low.
($1 = 6.9902 Egyptian Pounds)
(With reporting by Daniel Fineren in Dubai; editing by Jane