Egypt proposes plan to delink gas and crude prices

Feb 04, 2003 01:00 AM

Egypt unveiled a new approach to natural gas pricing that seeks to value gas as an energy product in its own right rather than linked to oil. Egyptian energy minister Sameh Fahmy told his fellow major gas exporters that de-linking gas prices from crude prices would make business more transparent and fair for all involved.
"Why should people in Europe suffer for the price of my gas because of what's happening in Venezuela?" Fahmy told on the sidelines of a gathering of gas producing countries hosted by Qatar.

Oil prices have been boosted since the beginning of the year by a two-month general strike in Venezuela which has drastically reduced supplies from the world's fifth largest crude exporter. "Twenty years ago it may have been realistic to link gas prices to crude oil but the gas industry has grown," he added.
Fahmy said that a gas price agreed between supplier and consumer would be escalated annually by a factor related to worldwide inflation and other factors yet to be decided, and be held in an agreed price band. No more specific details were given. Fahmy said that producers too needed stable and more competitive gas prices to ensure planning within the industry. "We need more investment in this sector, we need bankable projects," he said.

Fahmy said that his proposal to divorce gas and crude prices, debated for many years, drew support from several countries at the forum and that within one to two years contracts with the new formula should be drafted.
He clarified that the new formula would pave the way for exporters worldwide and not just Egypt alone. "We've established a committee to study the proposal and next year we should be able to present a more solid conclusion," the minister said.
Fahmy was attending the Gas Exporting Countries Forum (GECF) of 16 countries, which meets annually. Egypt, which boasts proven gas reserves of 58.5 tcf (1.656 tcm), has yet to start exports, but Fahmy said a natural gas pipeline to Jordan was due to start up in May.

Source: AP
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