By Cynthia Johnston
CAIRO, Dec 2 (Reuters) - With black smoke belching from
battered vehicles on the congested streets of Cairo and the
sickly smell of exhaust hanging in the air, Mohamed Daoud's taxi
glides quietly along on cheap, clean fuel.
His black and white cab is part of a growing fleet of
roughly 100,000 vehicles that have been converted to run on
cheap natural gas after the Egyptian government pushed for more
reliance on greener energy.
Compressed natural gas (CNG), which produces fewer harmful
emissions than gasoline or diesel, is catching on in the
smog-shrouded northern cities and demand may grow further as the
fuel becomes more widely available across the country.
But it is the tough economy, not the environment, that is
leading a growing number of drivers to make the switch as the
cost of even heavily subsidised petrol rises beyond what many
Egyptians can afford.
The most populous Arab country is one of the Middle East's
least well-endowed in energy reserves. Egypt has 1.2 percent of
the world's gas and 0.3 percent of its oil.
"I am interested in the environment. But it (CNG) is also
cheaper," said Daoud, who switched his taxi to run on natural
gas five years ago. "I can bring in more profit."
"In this atmosphere, we can't use petrol," he added as he
waited for his taxi to be worked on at a bustling CNG service
station, the first in Africa and the Arab world.
The Egyptian government, hit this year by inflation and a
larger-than-ever bill for bread subsidies for the poor, slashed
petrol subsidies in a lightning move in May to cover the cost of
pay rises for civil servants.
Long accustomed to cheap petrol, Egyptian consumers woke to
prices that had risen by up to 57 percent overnight for the
highest grade of petrol. Popular 90-octane fuel surged 35
percent to 1.75 Egyptian pounds ($0.32) per litre, expensive by
local standards but still well below free-market prices.
An equivalent amount of compressed natural gas sells for a
quarter of the price.
ENERGY CRUNCH
Worried about an energy crunch in coming decades, Egypt
wants to diversify its resources. That includes developing
renewable energy like wind and nuclear power.
Lending urgency to the drive for alternative energy is
Egypt's limited supply of fossil fuels, especially crude oil.
Experts say Egypt's proven oil and gas reserves will last for
roughly three more decades.
Egypt wants to generate 20 percent of electricity from
renewable sources by 2020, according to the country's New and
Renewable Energy Authority. It already gets significant
hydroelectric power from the Aswan High Dam.
Cairo also wants to build several nuclear power stations and
has secured U.S. backing for the project, for which it is
seeking Russian expertise. But it is also encouraging other
forms of greener energy.
Wind farms dot the country's Red Sea coast, and one of
Egypt's largest industrial firms, El Sewedy Cables, launched a
wind energy subsidiary in October to build turbines. It expects
sales of 435 million euros by 2011.
Egypt has more gas than crude, with reserves of around 76
trillion cubic feet, making natural gas an attractive and
somewhat greener alternative to petrol.
With the cost of energy subsidies eating up nearly a fifth
of the budget, the government is expected to keep raising fuel
prices on a regular basis, possibly annually, although recent
falls in global oil have eased some pressure.
"I think they are logically going to wait until next year
when inflation is down to single digits again ... possibly in
the second half of 2009," said Reham el-Desoki, senior economist
at investment bank Beltone Financial.
Cutting energy subsidies would free up government funds for
public services or infrastructure and may also spur more vehicle
conversions to natural gas.
EXPANSION PLANS
State-owned natural gas holding company Egas expects the
number of natural gas vehicles in Egypt to rise sharply to
300,000 by mid-2012 as investors enter the market, although it
calls that goal "ambitious".
The number of fuelling stations will more than treble in the
same period to 390, and natural gas will be available up and
down the populous Nile Valley and in the Sinai peninsula, Egas
said in a written statement to Reuters.
Drivers rushed to natural gas after the cut in petrol
subsidies, with the number of conversions per month surging to
several thousand, according to Egypt's leading conversion and
refuelling firm, Cargas.
Around 70 percent of Egyptians who have converted their
vehicles are taxi drivers, many of whom ply the streets in
battered fuel-guzzling vehicles for cross-town fares ranging
from 5 to 10 pounds. They operate on razor-thin margins.
Conversion costs around $1,000 and takes less than half a
day, and drivers can pay in instalments.
Private consumers are also making the switch, converting
fuel-hungry sport utility vehicles and luxury sedans as well as
older, less fuel-efficient vehicles. Private cars now account
for more than 17 percent of CNG vehicles.
Cargas Managing Director Mahmoud Aly El Newehy said his firm
was also planning to expand conversion of diesel vehicles,
including minibuses, after a successful pilot programme. Cargas
would also offer know-how to other countries in the region
seeking to follow Egypt's example.
"There is no country in the Middle East like Egypt. We are
the pioneer," Newehy said. "We are not only ready to give the
know-how ... We are ready to construct and build stations to
operate in other countries."
($1 = 5.53 Egyptian pounds)
(Additional reporting by Simon Webb in Dubai; Editing by Peter
Millership and Sara Ledwith)
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