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Property of Kareem El-Hini
“Egyptian Energy Market Dynamics” Sample Slides
((
Property of Kareem El-Hini
Sector Coverage
Natural
GasFuel
(Oil)Power Africa
Property of Kareem El-Hini
Natural Gas Sector Overview
Natural
GasFuel
(Oil)Power Africa
Property of Kareem El-Hini
Egyptian Gas Sector Trends
100
120
140
160
180
200
220
240
260
280
Egypt
MENA
World
14% 59% 61% 69% 73%
0%
20%
40%
60%
80%
100%
1990 2006 2011 2016 2021
Oil Share Natural Gas Share
Looking forward, Egypt’s expected growth in natural gas consumption over the coming decade is 4.2% CAGR, compared to World CAGR of 1.7%
8.4%
6.6%
2.7%
Natural gas replacing oil as main fuel source… …caused significant growth in gas consumption
The government is driving to substitute as much refined oil products with natural gas.Additionally, Egypt’s historical natural gas production and consumption growth rates arethe highest compared to the region and the World…
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Local Production Does Not Satisfy Growing Energy Demand
Egypt’s Annual Production of Crude
Oil & Natural Gas
45.7
58%
33.0
42%
47.1
59%
73.2 26.1
Split of Production with Foreign Partner
Egypt’s Consumption Egypt’s Deficit
Total value of Egypt’s local oil and gas market, valued at International
Prices*, is roughly USD 40 bn
Natural GasCrude Oil
Units = Millions of tons of oil equivalent
Total Egypt Share78.7 MTOE
* Crude Oil = 100/BBL, Natural Gas = 10 USD/MMBTU
38% of consumption
21.5
65%
11.6
35% 25.6
55%
20.1
45%
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Importation and Subsidy of Oil Products
Imports 2013(% of local
consumption)
Overview
Diesel Gasoline LPG Fuel Oil
In 2013, consumption of petroleum products in Egypt was covered X% by importation, amounting to roughly USD X bn but there is still more than a X% shortage in the market which will require additional importation
costing USD X bn. Total subsidy of fuel products, excluding natural gas, was EGP X bn
X Mtons(40%)
Represents 19% of energy consumption
but 48% of the subsidy bill. The transportation
sector accounts for 35% of consumption
X Mtons(21%)
Due to the rapidly increasing number
of licensed vehicles, Egypt transitioned
from net exporter to net importer of
gasoline
X Mtons(51%)
Being consumed mainly by
households (315 million cylinders per annum). Cylinders
are sold at EGP 8 but cost EGP 105
X Mtons(10%)
The shortage of fuel has lead to many
factories halting or reducing production
Subsidy 2013 (% of subsidy)
EGP X bn(48%)
EGP X bn(13%)
EGP X bn(14%)
EGP X bn(14%)
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Fuel (Oil) Sector Overview
Natural
GasFuel
(Oil)Power Africa
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Egyptian Fuel Marketing Sector Trends
0
50
100
150
200
250
300
DistillateFuels
Gasoline
4.7%
7.8%
Market is growing rapidly due to a major increase in licensed vehicles during the previous 5 years, at CAGR of9.3%, reaching 6.6 million licensed vehicles in 2012.
Egypt’s consumption of distillate fuels over the last 10 years grew at CAGR of 4.7% compared to World CAGR of2.5%. In the same period, Egypt consumption of gasoline grew at CAGR of 7.8% versus World CAGR of 2.3%.
Although the increase in fuel prices is expected to slowdown demand in the short term, in the long term this sector is expected to witness considerable growth due to low motor vehicles penetration rate in
Egypt, being 4.5% vs. world rate of 17%, in addition to high population growth (forecast at 1.5% p.a.) and expansion of urbanized areas in Egypt
4,240 4,687
5,137 5,814
6,279 6,607
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2007 2008 2009 2010 2011 2012
…has led to a large jump in fuel consumption (000’s BPD)Fast growth in licensed vehicles (000’s) …
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Disparity Between Local and International Prices
1998 2003 2008 2013
Brent Crude 8.2 8.2 61.0 67.3
Gasoline 80 26.5 16.7 32.4 26.1
Gasoline 92 29.4 18.5 34.3 27.6
Diesel 11.8 7.4 20.4 16.4
USD/EGP 3.40 5.4 5.4 6.7
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
USD
/ E
GP
USD
Cen
ts p
er L
iter
Brent Crude Gasoline 80 Gasoline 92 Diesel USD/EGP
Evolution of Brent crude price vs. local market prices of petroleum products (USD Cents per Liter)
While the price of Brent crude has increased by over 700% since 1998, local prices of petroleum products have increased in the range of 75% to
175%. Accordingly, the local pump price of diesel is just 17% of US pump price while local
gasoline price is 33% of US pump price
Local pump prices vs. US pump prices excluding taxes (2013)
1626
92
77
0
20
40
60
80
100
Diesel Gasoline
USD
Ce
nts
pe
r Li
ter
Local Pump Price US Pump Price
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Power Sector Overview
Natural
GasFuel
(Oil)Power Africa
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Egyptian Power Sector Challenges
Egypt is facing a serious challenge to increase power supply to keep up with booming power demand…
GW:Current
estimated deficit
4
% CAGR :Expected power demand growth over the coming
decade
5GW:
New generation capacity
planned by 2017 to satisfy
demand
13
Up to 2017 power generation, will require investments amounting to EGP XX bn, with EGP XX bn planned to originate from the private sector.
% Loss:Transmission and
distribution losses (roughly
5-7% in efficient systems)
11EGP bn:
Amount of subsidy borne
directly by Ministry of Electricity
23
Generation Challenges Distribution Challenges
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Fast growing electricity demand (GWh) …
Between 2008 and 2013, electricity consumption increased from 109,090 GWh to 144,081 GWh at CAGR of 5.7%,Per capita consumption increased from 1,650 KWh to 1,910 KWh.
Booming demand has led to significant pressure on the country’s infrastructure.
Egyptian Power Sector Trends
… Served by underdeveloped infrastructure (MW)
The government has been trying to shift most of the new industrial and mega real estate projects to seek their own power supply given that the already strained national
network is being outpaced by growing demand.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2008 2009 2010 2011 2012 2013
Consumption Production
0
5,000
10,000
15,000
20,000
25,000
30,000
2008 2009 2010 2011 2012 2013
Peak Load Installed Capacity
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Need to Diversify Sources of Generation
World Power Generation Mix
Egypt Power Generation Mix
91% 9%
Oil and Gas
Hydro /RenewableEnergy
27%
16%
13%41%
3%
Oil and Gas
Hydro
Nuclear
Coal
Other
Egyptian power generation is largely reliant on oil and gas, with a small contribution from hydroelectric sources, generating 91% of power from oil and gas compared to 27% for the rest of the world. This exposes the country to supply shocks and volatile oil and gas prices.
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Market Changes Promoting IPP Sector
New Electricity Law Under
Development
A Transitional Market Plan has been drafted by the Egyptian Electricity Regulator. The plan entails significant deregulation and the creation of a competitive electricity market where electricity activities are fully unbundled.
Transmission Wheeling
Regulation
Independent power producers have the right to transmit electricity across the national grid, through a wheeling agreement with EETC.
Energy Intensive Users Eligibility for Bilateral Contracts
As a first step towards deregulation, the government has announced that energy intensive users will not be supplied with electricity from the national grid. Egypt’s Investment Development Authority followed suit by granting licenses to new factories which require the factories to source electricity needs independently.
Low Government Funds with High
Growing Demand
Government is planning to add 13 GW of generation capacity by 2017, with an investment cost of roughly EGP XX bn. The government has stated that most of the investment will come from the private sector.
Steps have already been taken towards market deregulation
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Egyptian Renewable Power Sector
Proximity to EU Markets for Future
Connection
The Euro and Mediterranean Regions are working towards interconnection of their power markets for improved energy security and sustainability. The foundations of Egypt-Europe interconnection already exist, as Egypt is connected to Spain via Libya-Tunisia-Algeria-Morocco, and is connected to Turkey via Jordan-Syria.
Massive Potential for Renewable
Energy
Unmatched intensity of solar radiation ranges from 2,000-2,600 KWh/m2,
with operating hours reaching 2,400 hours compared to 1,900 maximum in
Spain and Greece.
The Gulf of Suez area has one of the highest, consistent wind speeds in the
world at 10 m/s and maximum operating hours of 4,000 per year,
comparable to the best coastal locations in Northern Europe.
Ernst & Young ranked Egypt 29th worldwide in its renewable energy index. Egypt Wind Atlas (Average Wind Speed)
Egypt Annual Average of Solar Radiation
Aggressive Renewable
Energy Expansion
Plan
The government has created a plan to reach 20% of generated electricitythrough renewable sources, with 12% generated from wind power (7,200MW). Additionally, the Egyptian Cabinet approved, in July 2012, a plan toinstall about 3,500 MW by 2027 of solar capacity with private investmentshare to be 67% of total investment.
The contribution of renewable energy to Egypt’s mix is likely to exceed national targets for the following reasons: need to diversify the energy mix to reduce exposure to supply and price shocks, strong support
from development banks, and the short lead time for PV projects (9-12 months)
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Egyptian Solar Energy Plan
• In July 2012, the Egyptian Cabinet approved a plan to install about 3,500 MW by 2027 ofsolar capacity (2,800 MW Concentrated Solar Power + 700 MW Photovoltaic) with privateinvestment share to be 67% of total investment.
• This represents roughly 12% of Egypt’s total existing generation capacity of 29,000 MW.
• The table below represents NREA’s plan to achieve the target figure.
120 300
480 720
1,010 1,320
1,650
1,980
2,310
2,640
3,070
3,500
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
'16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27
Cumulative Added Solar Capacity (MW)
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Africa Overview
Natural
GasFuel
(Oil)Power Africa
Property of Kareem El-Hini
Africa Overview
Over the past decade, six of the world’s ten fastest growing economies were in Africa.
The region median age is 20, compared with 30 in Asia and 40 in Europe.
60% of population lacks access to electricity (600 million people)
FDI has grown in the last 10 years from USD 20 bn to USD 75 bn
Population doubled in 25 years and is expected to grow from 1 billion in 2013 to 1.3 billion in 2030, at CAGR of 1.3%, compared to world CAGR of 0.6%
Sub-Sahara GDP is forecasted to grow from USD 2.2 tn in 2013 to USD 3.2 tn in 2016 at a CAGR of 7.5%well above the World’s and MENA’s CAGR that are both forecasted to grow at CAGR of 5.7%.
Africa Energy Market Overview
Rapid expansion in the population of Africa, which is expected to persist going forward as well as strong GDP growth and several major recent discoveries of oil and gas reserves, ensure that Africa has all the right parameters for a major boom in its energy markets in the near and long term…
5 Year Population Growth Forecast (%)
GDP Growth Forecast (%)
0%
5%
10%
15%
2005 2010 2015 2020 2025 2030
Africa
Rest ofWorld
0%
1%
2%
3%
4%
5%
6%
7%
2012 2013 2014 2015 2016 2017 2018
World
MENA
Sub -SaharanAfrica
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Africa Energy Forecast
As African countries begin to produce large quantities of natural gas over the coming years, and in order to support expected economic expansions and to increase low rates of electrification, consumption of natural gas and installed power capacity are expected to rapidly increase…
Natural gas consumption CAGR (previous 5 years %)
Installed Capacity CAGR (previous 5 years %)
0%
1%
2%
3%
4%
5%
2009 2014 2019 2024 2029 2034
World
Africa
0%
1%
2%
3%
4%
5%
2009 2014 2019 2024 2029 2034
World
Africa
Natural gas consumption in Africa is expected to increase from 100 BCM in 2013 to 200 BCM in 2034, at CAGR of 3.4%compared to world CAGR of 1.8%
Installed generation capacity in Africa is expected to increase from 145 GW in 2013 to 240 GW in 2034, at CAGR of 2.4%compared to world CAGR of 1.7%
Africa is the ideal region to duplicate the business model