Al-Ahram Weekly On-line 28 Sep. - 4 Oct. 2000 Issue No. 501
Published in Cairo by AL-AHRAM established in 1875

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Consumers hit by monopoly

By Sherine Nasr

In the past two weeks, Cairo and a number of the governorates in the Delta and Upper Egypt have been suffering from a shortage of gas cylinders. For some residential areas these cylinders are the only source of energy for cooking and heating water.

The crisis has created an environment in which the black market for cylinders has flourished. To the few who are able to lay their hands on it, the LE3 cylinder is sold on the black market for up to LE15.

Experts believe that the situation will be exacerbated by winter and Ramadan, the holy fasting month for Muslims which will begin in late November.

According to Emad Zaqlama, an expert at ExxonMobil, one of the reasons demand has increased for gas cylinders in recent years is that they have replaced other energy sources. "Gas cylinders have been introduced in rural areas and replaced traditional wood-lit ovens," he said.

Of greater concern are the causes for the shortage noted by Ibrahim Mahmoud, General Manager of the Technology Department at Alexandria Petroleum Company.

"It is a question of monopoly and poor distribution imposed by the owners of the [gas cylinder] stores who are trying to foster a black market to increase their profits," he said.

Mahmoud explained that stores prefer to deal with the owners of chicken farms, bakeries and wood factories who purchase cylinders in large quantities for as much as LE20 a cylinder. "By so doing, they guarantee more profits, yet, deprive ordinary citizens of their rights," he said.

Making this situation even more unacceptable is the fact that the state subsidises these cylinders. "The state spends some LE1 billion annually [on this subsidy], meaning that it does not go to those who deserve it," said Amin Mubarak, head of the Industry and Energy committee of the outgoing People's Assembly.

According to a report submitted by the committee, Egypt's production of liquefied petroleum gas (LPG), which constitutes the main substance in cylinders, is insufficient for the demand in the Egyptian market. "We consume some 2.1 million tons of LPG every year, 1 million of which is imported at a cost of US$300 million," said Mubarak. The main sources for LPG produced in Egypt are oil refineries and the newly discovered natural gas fields.

Petrogas, the largest producer of natural gas cylinders, turns out some 305,000 cylinders per day, while production by other private companies is estimated to total approximately 161,000 cylinders per day.

According to Mohamed Youssri El-Shamaa', chairman of Petrogas, the company plans to increase its production by 9 per cent.

Meanwhile, it is expected that more locally produced LPG will be available within the next two years following the completion of a factory for the processing of liquefied gases by British/American BP Amoco in El-Shoqir on the Gulf of Suez. Expected to be operational in 2002, the joint venture will be implemented at a cost of $139 million and will make an additional 139,000 tons of LPG annually.

Yet, Mubarak argues that the crisis in the prices and availability of gas cylinders is not due to an actual shortage in the quantity of LPG. "We should take into consideration that many houses and factories have been supplied with natural gas. Nonetheless, the problem persists," he said.

Pressed to say whether Egypt's production of natural gas will provide a permanent solution to this long-standing problem, Mubarak explained that it will cost the state billions of pounds to extend the network of natural gas pipelines to cover the entire country. "A more practical solution is to re-organise the already established system in a way that would exclude middlemen between the main producers and the end users of gas cylinders," he said.

Mubarak suggested that cylinders should be delivered directly to homes by these producers, at a cost of a few pounds more than the price of the actual canister. "By so doing, we will put an end to the monopoly by store owners," he concluded.

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