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The Impacts of Energy Crisis on Businesses in Egypt Essay


Introduction

Egypt is now experiencing one of the most severe energy crises after many decades. It is estimated that some parts of the country now face power interruptions nearly six times each day lasting for more than two hours for every interruption. The energy crisis noted in power interruptions and fuel shortage have led to extensive frustration with business communities, especially the cement sector reporting an acute downturn in production while citizens lament about the unexpected disruption in their normal lifestyles. The demand for electricity, for instance, has increased to 27,700 megawatts per day, 20% more than current generated energy (Kingsley, 2014). This project explores the impacts of the energy crisis on businesses, specifically the cement sector, and offers some alternatives to the ongoing crisis.

A business stakeholder in the cement sector who understands the loss of production and unreliable operational situations attributed to the country’s energy crisis addresses this project to the government of Egypt.

Energy Crisis in Egypt

The energy crisis in Egypt is characterized by three interrelated factors, namely electricity, oil and gas, and fiscal challenges. The fast-growing demand driven by government subsidies, low investment in new gas and oil production infrastructures and low prices to spur production are responsible for the witnessed gas crisis in Egypt (Mills, 2015). Additionally, increasing demands are also responsible for the electricity crisis in Egypt. In the year 2014, for example, the demand for electricity increased by at least five percent, and the country embarked on power cuts to mitigate the rising demand (Mills, 2015). Finally, the fiscal crisis has resulted from the government’s largest subsidy program. The increasing prices of electricity and gas have eased the fiscal crisis. However, the prices of diesel and petrol have remained below the global average prices. This implies that the state-owned oil firm accrues debts related to investments made by international oil and gas firms, which it cannot reimburse, leading to a decline in investment in the energy sector (Mills, 2015).

Any modern economy is defined by a sufficient supply of energy. More technically developed countries tend to have higher energy usage per capita. In Egypt, the energy mix is vital for the country. It is observed that the industrial sector is responsible for the largest consumption. Further, the transportation, residential, and finally, agricultural and mining sectors consume a considerable percentage. The above-mentioned sectors consume about 82% of the country’s total energy consumption (Ismail, Hafeez, Hamouda, & Soliman, 2015). Oil products (54.1% usage) are the major sources of energy in Egypt, followed by natural gas and electricity, representing 20.6% and 18.3% respectively (Ismail et al., 2015).

Why Manufacturing Cement in Egypt

It is now observed that the largest and fastest-growing cement firms are found in the emerging economies, and Egypt is among these economies. As Egypt grows, for instance, the country intends to build a new capital city that could accommodate more than five million persons. The reality is that as countries grow, cities become more advanced, causing inward movement and subsequent urbanization (Edwards, 2015). This situation has made the Egyptian cement sector extremely important for the country’s future prosperity because of enhanced demands for construction materials, specifically cement.

Thus, Egypt needs to be self-reliant in cement production to meet the growing domestic demands, as well as regional consumption. The availability of a vibrant cement sector in Egypt would eliminate the need for relying on imports, cut construction costs, and enhance economic growth through massive investment in infrastructure. In fact, a strong positive correlation has been noted between the cement usage of a country and its GDP over specific periods (Edwards, 2015).

The Egyptian cement sector remains bullish according to some industry analysts (Oxford Business Group, 2016). The domestic construction industry is seen as a single force driving mass production and consumption of cement in Egypt. It was initially projected that the Egyptian construction industry would reach $7.3 billion by the year 2015, but this estimate did not include the planned new capital city (Oxford Business Group, 2016).

This rate of investment and spending is vital for the country’s cement sector. It indicates that Egypt is positioning itself for the bulk production of cement because of a healthy economy. Cement manufacturers have witnessed increased activities from the government, large-scale players, and other construction firms. Thus, it is evident that the construction industry, driven by mega-projects, is a single reason for establishing cement manufacturing in Egypt. The demand for building materials will continue to increase as the construction industry does so.

The Cement Sector and Energy Crisis in Egypt

In Africa, Egypt is considered among the oldest manufacturers of cement since its first factory was established in 1927. Since then, the Egyptian cement sector has grown tremendously over the decades due to the construction boom in the region notably witnessed between the 1970s and 1980s. In fact, by 2004, Egypt was among the leading cement exporters in Africa. The country is currently generating about 62 million tons per year of cement.

The cement sector in Egypt is responsible for consuming about nine percent of the total major energy in the country. As such, the cement sector is the largest consumer of the Egyptian energy (Ismail et al., 2015). Notably, natural gas and fuel oil are the most common forms of energy used in the Egyptian cement sector. The government offers these energies at subsidized costs.

In the last few years, however, it has become evident that Egypt has a relatively limited capacity for energy self-sufficiency when natural gas and fuel oil are evaluated. Consequently, a notable increasing trend for vital energy import has been witnessed year-over-year.

As the financial crisis continues to rise noted in budget cuts and constrained resources based on available funds, Egypt now finds it extremely difficult to subsidize the cost of energy consumed in the cement sector. Portland cement production, for instance, is an energy-intensive process. It is estimated that the production of one kilogram of PZ-Clinker from its raw material elements requires about 1.75 megajoules of thermal energy. Additionally, processes such as the removal of water from kaolinites and decarburization of limestone require more energy based on the production efficiency, ratio for bypass, false air, and availability of preheater processes among others (Ismail et al., 2015).

Cement production in Egypt continues to rise steadily. Likewise, the high energy needed for clinker production implies that the rate of energy crisis in the country’s cement sector will become severe. While the production of cement can rely on any type of fuel, price and availability are two major factors that determine energy selection in the sector. Egypt, however, tends to depend on natural gas and fuel oil for cement production as opposed to Europe that boasts of a mix of energy sources for the sector (Ismail et al., 2015).

The most effective solutions for the cement sector energy crisis in Egypt are alternative fuels and sources of energy. Solar energy, biomass, and biofuels, refuse-derived fuels (RDFs), wind energy, and hydrogen energy among others.

Biofuels can be derived from organic materials. Organic waste, methane gas, ethanol, and other agricultural residues can be used to generate energy to alleviate the crisis in Egypt. Carbon-based organic materials are potentially rich in energy, and they can sufficiently generate energy for the country. This implies that potential materials for providing alternative fuels are many. Hence, Egypt should develop regulatory measures and make sound economic investments for alternative energy sources.

Municipal solid waste (MSW) and RDFs are considered the simplest, low-cost sources of energy, which many cement manufacturers have exploited in other countries to meet their energy demands (Scarlat, Motola, Dallemand, Monforti-Ferrario, & Mofor, 2015). These waste materials require simple processes to generate energy. Besides, they are readily available in Egypt because of the country’s vast population.

It is estimated that Egypt generates about 17 million tons of agricultural waste annually (Ismail et al., 2015). Materials obtained from trees, sugar cane, rice straw, corn, and cotton among others can be used to produce alternative energy in Egypt (Salah, Mounir, & Gennaro, n.d). It is noteworthy that these agricultural waste materials are seasonal and, thus, availability could differ significantly.

Sewage sludge contains heavy metals, and it is biologically contaminated with microbes. Thus, it is classified as a hazardous waste material. Nevertheless, some farmers apply it, albeit illegally as fertilizer because of positive results on crops and low costs. Its application to generate energy for the cement sector is a better method of using sewage sludge (Lechtenberg, 2016). The presence of heavy metals could affect the cement quality. Sludge generally requires drying to attain sufficient moisture content. Switzerland and Germany now use sewage sludge as an alternative energy source for cement production (Lechtenberg, 2016).

Ismail et al. (2015) have noted that used tyres could be used to generate energy because of high calorific levels approximated at 31 MJ/kg. Tyres, however, have significant levels of sulfur and other different metals. Egypt has abundant tons of used tires suitable for cement production (Technology Needs Assessment, n.d).

As new technologies emerge, Egypt should consider fracking technology now widely used in the US to extract oil and gas from shale. Fracking technology has allowed the US to exploit its natural oil and gas resources previously considered difficult to mine.

Other alternative energy sources are coal and pet coke. Most cement manufacturers primarily rely on coal and pet coke for cement production. Following the energy crisis, Egypt has gradually embarked on coal and pet coke utilization in cement production. These alternative energy sources require mills, storage, and feeding and burning facilities to facilitate widespread adoption in Egypt (Ismail et al., 2015). The country must, therefore, prepare for change to exploit such energy sources rather than relying on oil and gas.

Linking Alternative Fuels to the Egypt Cement Sector

Based on the above-mentioned recommended solutions, there are practical examples that demonstrate how alternative energy sources can be linked to the cement sector to alleviate the current energy crisis in Egypt and its negative impacts on the sector. These efforts require inputs from both the private sector and the government.

Arabian Cement Company, for instance, has initiated a new project for alternative fuel processing machinery (Pro Global Media Ltd, 2016). This modern machinery will make the company to depend solely on alternative fuels and coal for its operations. Besides, it would allow the company to run its kilns by alternative energy materials without the need for pre-heating. The company has created an energy mix consisting of abundant coal (70%) and alternative fuels (30%) composed of a mixture of agricultural wastes, municipal sludge, and refuse-derived fuels (RDF). On the same note, Lafarge Industrial Ecology (Ecocem) has also focused on managing and operating current RDF facilities located in Suez and Qalyubeya in Egypt.

Also, the government of Egypt has focused on improving coal consumption but introduced new laws that support the usage of coal only in the production of cement, iron and steel, coke and aluminum, and in power plants (Pro Global Media Ltd, 2016). Also, the Ministry of Petroleum and Mineral Resources is keen on improving oil and gas explorations to alleviate energy shortages.

Conclusion

Egypt is now in the middle of a severe energy crisis noted in electricity, oil and gas, and fiscal challenges. The crisis has negatively impacted business, specifically the cement sector, which is the single largest consumer of energy in the country. Egypt has traditionally relied on electricity and gas to run its cement factories. However, this energy mix can no longer meet rising demands for energy. As such, it is recommended that the government should consider other alternative sources of energy while making critical investments in energy infrastructures. In fact, Egypt can learn from best practices in cement production and alternative energies used in other countries. The country can still accommodate numerous sources of alternative energies to alleviate the current crisis.

References

Edwards, P. (2015). The Rise and Potential Peak of Cement Demand in the Urbanized World. Web.

Ismail, I., Hafeez, H. A., Hamouda, A., & Soliman, A. (2015). Energy Crisis in Egyptian Cement Sector. Web.

Kingsley, P. (2014, August 20). The Guardian. Web.

Lechtenberg, D. (2016). Use of Sewage Sludge in Cement Industry. Web.

Mills, R. (2015). Web.

Oxford Business Group. (2016). Web.

Pro Global Media Ltd. (2016). Alternative fuels for cement and lime industry news from Global CemFuels. Web.

Salah, E.-H., Mounir, G., & Gennaro, L. (n.d). Web.

Scarlat, N., Motola, V., Dallemand, J., Monforti-Ferrario, F., & Mofor, L. (2015). Renewable and Sustainable Energy Reviews, 50, 1269–1286. Web.

Technology Needs Assessment. (n.d). Web.

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IvyPanda. (2020, July 31). The Impacts of Energy Crisis on Businesses in Egypt. Retrieved from https://ivypanda.com/essays/the-impacts-of-energy-crisis-on-businesses-in-egypt/

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"The Impacts of Energy Crisis on Businesses in Egypt." IvyPanda, 31 July 2020, ivypanda.com/essays/the-impacts-of-energy-crisis-on-businesses-in-egypt/.

1. IvyPanda. "The Impacts of Energy Crisis on Businesses in Egypt." July 31, 2020. https://ivypanda.com/essays/the-impacts-of-energy-crisis-on-businesses-in-egypt/.


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IvyPanda. "The Impacts of Energy Crisis on Businesses in Egypt." July 31, 2020. https://ivypanda.com/essays/the-impacts-of-energy-crisis-on-businesses-in-egypt/.

References

IvyPanda. 2020. "The Impacts of Energy Crisis on Businesses in Egypt." July 31, 2020. https://ivypanda.com/essays/the-impacts-of-energy-crisis-on-businesses-in-egypt/.

References

IvyPanda. (2020) 'The Impacts of Energy Crisis on Businesses in Egypt'. 31 July.

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