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Egypt Megaproject

Creating energy stability for Egypt

Adding 16.4 GW to Egypt’s electricity generating capacity is Siemens’ largest order to date. It will help to close the supply gap the country will be facing in the future, suggests Professor Hafez A. El-Salmawy.

Since 2009 the accessibility to electricity in Egypt is at 99.6 percent – which is the highest rates in Africa. In recent years, however, Egypt witnessed a crippling wave of blackouts across the country where electricity generation relies heavily on natural gas. According to the International Energy Agency, natural gas accounted for 76.8 percent of the electricity generated in 2013. However, the crisis is only partially due to a lack of fuel resources – the mega size gas field discovered in August 2015 by the Italian energy company Eni testifies to the relative abundance of local reserves and is only one of 22 sites that have been selected for further gas production – but instead triggered by economic and regulatory factors.

After 2011, the political, economic and social confusion prompted a lack of funds, which in turn provoked a delay of payment by the Egyptian government to foreign investors and companies in the oil and gas sector. According to the Central Bank of Egypt, foreign exchange reserves fell to the lowest level of US$ 13 billion dollars in early 2013. Consequently, the gas production plummeted. According to the BP Statistical Review of World Energy, in 2009 domestic production of natural gas peaked at 6.07 billion cubic feet (bcf) per day while consumption averaged 4.11 bcf per day. By 2014 domestic gas production had fallen by 22.4 percent to 4.71 bcf per day.

Recovery of the oil and gas sector

The oil sector in Egypt has registered losses for several years; the standard practice is to import oil at international market prices and sell it domestically at subsidized prices. Thus, about 20 percent of the annual government expenditure currently goes to supporting energy subsidy. In order to reduce these subsidies, the government came forward with a five-year-plan in July 2014 to restructure the electricity tariff. As a result, there will be no more electricity subsidies by the end of 2019 and electricity prices will start to actually reflect the real cost of generation plus a suitable revenue for investments in generation, transmission and distribution infrastructure.

Already in 2015 during peak demand power outages were comparatively minimal. “The crisis is over,” says Dr. Hafez E. El-Salmawy, Professor of Energy Engineering at Zagazig University, – because of a strategy that targeted three fronts:

1. The five-year plan to correct the tariff subsidies.

2. Speeding up power plant construction, including an emergency plan with more short-term investments in the plants.

3. Resolving issues with foreign companies in the oil sector and designating more regions for oil exploration as well as importing LNG for a short period to close the gap in supply, until the full recovery of the oil and gas sector, which is expected in 2018.

“Thanks to these stabilizing measures the financial situation has improved,” Salmawy explains. “And what is even more important for the security of supply is the diversification of generation sources – not to rely on one specific type of fuel.”

What is even more important for the security of supply is the diversification of generation sources.
Dr. Hafez E. El-Salmawy, Professor of Energy Engineering at Zagazig University

Ho to satisfy 2030’s power demand

The generation capacity in Egypt is currently just over 30 GW. But with a population growth rate of roughly 2 percent per annum the electricity demand is expected to rise substantially – also due to the fact that more and more people can afford to use air conditionings and other electrical appliances. So there has to be a very significant investment into electricity generation in the foreseeable future, he maintains.

“With a sharp projected increase of electricity demand over the next 20 years, Egypt will have to build even more capacity,” Salmawy points out. The acute crisis might be over, but the expansion of the generating capacity has only just begun.

Egypt’s population is growing fast, and its electricity demand is increasing steadily.

 

The largest project currently underway to improve Egypt’s energy supply is the Siemens Egypt Megaproject, which includes the construction and turnkey delivery of three 4.8 GW combined cycle power plants and 12 wind parks with approximately 600 wind turbines with a generating capacity of 2 GW. The power plants fitted with state-of-the-art H-class gas turbines will be able to produce 4.4 GW “early power” in open cycle configuration by the end of this year to alleviate some of the stress placed on Egypt’s electricity supply. By mid-2018, operating in combined cycle configuration, they will feed 14.4 GW into the grid, making them some of the largest power plants worldwide.

Proven technology applied on an unprecedented scale

Thierry Toupin, General Project Manager of the Egypt Megaproject, explains: “The H-class gas turbines were selected for Egypt because this is a proven technology – not just in terms of performance and efficiency but also in terms of mechanical integrity and durability. The H-class gas turbines are already in commercial operation in the US, Germany, Turkey, Malaysia and South Korea.” He adds: “What’s truly special about this project – and at the same time its biggest challenge – is its size. In order to deliver at such a scale and in such a short time, we have to do things in a different way.

So far, however, everybody who looked at the progress of the three power plant construction sites was impressed of the amazing execution speed, he says. The success in the implementation is also due to full support from the customer and ministry. He explains: “In Egypt I only met key people in the Egypt Electricity Holding Company and the Ministry of Electricity who collaborate fully and give top priority to this project.”

“I don’t know many ministers in other countries who are willing to sit down and go through all the specific details,” Toupin points out. “It shows a strong dedication to the Megaproject. This project is a key infrastructural project for Egypt which will create energy stability for Egypt.”

Manu Abdo, journalist based in Cairo.
Picture credits: Roger Anis