Herodotus declared that Egypt is the gift of the Nile. But with growing demand, the Nile is now becoming a stretched resource. Peter Ward looks into the problems and possible solutions in Egypt’s utilities sector.
Egypt has a vast and expanding population and as such, a strong demand for infrastructure is growing in the country.
As with any expanding population, its main challenges stem from providing an ever increasing amount of power, water and supporting infrastructure to the people.
In order to help meet this growing demand, the government of Egypt is planning to build up to 17 new gas-fired power plants by 2012.
Other infrastructure boosting plans put in place by the government include a US$9.5 billion refinery and petrochemical plant at Kafr al-Shaikh, and a US$8.7 billion container terminal at Easter Port Said.
These plans have inevitably been affected by the economic downturn and although Egypt is not one of the worst hit countries of the global crisis, there is no doubt it has had an impact. Export and tourism in the country is declining and income from the Suez Canal has also been reduced.
The need for more power in the country is being driven by population growth. In 2007 it was reported that by 2012 the population will hit 81.9 million.
Power plan
In February this year the World Bank agreed to lend Egypt US $600 million for the construction of the Ain Sokhna power plant. The loan was part financed by the African Development Bank and the Arab Fund for Economic and Social Development and will help the Egyptian Electricity Holding Company (EEHC) finance the 1 300 MW plant. This particular project is expected to be completed by 2013.
Electricity generation in Egypt is based on gas and hydropower and the country has an electrification rate of 98%. Since 2000, electricity consumption has risen by 42%, while generation has risen by 36%. At the end of 2004 Egypt boasted 38 000 km of power transmission lines, and a further 400 km was then added in 2005. In 2006 Egypt generated 111 terawatts (TWh) of power and consumed 96TWh.
In December last year KEC, an India-based transmission equipment manufacturer, announced it had received a US $131 million order from the Egypt Electricity Transmission Company to design supply and build 196 km of circuit lines throughout Egypt. This project is scheduled to be completed within 24 months. Other power based projects have been announced and tendered and opportunities in Egypt seem to be forthcoming.
Nuclear option
One major step for the country’s power industry is the move into nuclear power. Egypt had previously closed, alongside Italy, its nuclear power industry following the Chernobyl disaster.
In November US-based Betchel was rumoured to be leading the race to design Egypt’s first nuclear power station. It has been confirmed that the reactor will be built at Dabba, on the Mediterranean Coast.
It has been reported that the plant will have a capacity of 1GW and will be built over ten years. Other companies such as WorleyParsons and AF Consult have been linked with the bidding process for the project, which has an estimated cost of US $1.5 billion.
Egypt is currently working with other countries in Africa to build an interconnection under the Nile Basin Initiative (NBI). The NBI features Burundi, Eritrea, Ethiopia, Kenya, Rwanda, Sudan, Tanzania and Uganda along with Egypt.
A BMI report on the oil and gas forecasts for Egypt suggests that the country’s oil industry is now in decline. Estimates by the firm predict that the level of crude imports will rise as oil and liquids output falls by 14% between 2007 and 2012. Natural gas production in Egypt is set to increase, with exports set to rise over the coming years. A number of pipelines that will take gas to Europe are currently in the planning stage.
Recent gas discoveries in Egypt have boosted investment in the petrochemicals sector. Prime Securities, a local analyst in Egypt, revealed that the petrochemical industry is expected to grow from US $328 million in 2004, to an expected US $3 billion in 2009. Currently the sector consists of 16 JV companies and three free zone firms. The government is looking to attract more than US$10 billion of investment by 2022 in order to set up eight petrochemical plants in the country.
Egypt relies heavily, and understandably, on the Nile as a water resource. It is estimated that 55 million m3/year of water is used as a resource by Egypt. However the dependency ratio on external water resources is around 96%. The Aswan Dam, which blocks the Nile and regulates it’s flooding, also acts as a major power source. The dam powers 12 generators which produce a hydroelectric output of 2.1 gigawatts. When the dam was first at its peak output it produced more than half of Egypt’s total electricity production, although that figure has dropped dramatically over
the years.
Although the dam provides the country with a good amount of power, the concept of a dam this big has been criticised. Dr Saleem Ali, principal advisor to the Asia Society leadership group on water scarcity reveals: “Large dams are not renewable or sustainable. They lead to both micro conflicts and macro conflicts.”
Nile conflict
Conflict caused by the Nile has been evident for many years. There is a long standing tension between Egypt and Ethiopia over the Nile, and Ethiopia’s proposed construction of dams on the headwaters of the Blue Nile. In 1979 the then Egypt president Anwar El Sadat declared: “The only matter that could take Egypt to war again is water.”
Dr Mohamed Raouf, programme manager, environment research at the Gulf Research Centre, says the reliance on the Nile could cause problems: “It represents a serious problem because there is no other alternative for Egypt. Any decrease in Egypt’s quota over the Nile (which is hardly nowadays meeting the country demands) will affect severely the development and all aspects of life in the country.”
This over reliance also affects the countries surrounding Egypt. Raouf adds: “It affects mainly Sudan. Sudan like Egypt is a receiving country and any plans or projects in upper Nile sources will affect Sudan as well.
“It was also suggested for GCC countries to import water from the Nile but it was declined because both countries already having water problems and due to political reasons.”
It has been suggested that the country can improve its water use in the future by improving irrigation techniques.
This would reduce in less water consumption and can be done through a decrease of cultivated land, using modern irrigation systems and minimising the area of high water consuming crops.
The Gulf Research Centre also suggests that a larger emphasis on water recycling, through conservation of deep fossil groundwater, desalination of sea and brackish water and construction of super and infrastructure measuring networks, enhancing forecast and prediction mechanics.
Raouf concludes: “There is enough water in the river Nile for all ten Nile countries, the problem is that every country wants to maximise its benefit. Egypt is capable and should play an effective role through diplomacy, economics, or even threats, in order to get the various countries involved in a joint project that can benefit all countries so every single country is a winner.”
Egypt is a country that seems to have solutions to some of its problems, but nothing but questions over others.
While the government appears to have a comprehensive plan for power supply and the petrochemical industry looks about to take off, water remains an issue. However, with cooperation among the Nile countries, through groups such as the Nile Basin Initiative, this is not an insurmountable hurdle.
