Rice export ban for everyone but Argany
In early February, the Egyptian Customs Authority renewed its ban on rice exports, which has been in place for over eight years per the given rationale that it will help conserve the country's scarce water resources. Yet, just six days later, Sons of Sinai for Trading and General Contracting, a subsidiary of the Organi Group, 'proudly' announced it is exporting rice to 18 countries.
Official data published in January showed a 3,808 percent increase in the value of Egypt's rice exports during the first ten months of 2024 compared to the same period in 2023.
Traders and farmers speaking to Mada Masr attribute this surge to undisclosed exemptions granted to Sons of Sinai, owned by business magnate Ibrahim al-Argany, whose political and economic influence has grown significantly in recent years, in close collaboration with the state. According to sources in the rice trade, the company leveraged these privileges to impose compulsory fees on every ton of rice exported through them.
While the government insists the export ban remains in effect, officials tell Mada Masr that these shipments are designated as humanitarian aid. But rice industry insiders tell a different story — one of a trade entangled in political and economic interests, benefiting a select few.
***
For over two decades, successive governments have imposed restrictions on rice cultivation and exports in response to the country's water scarcity crisis. Rice is a water-intensive crop, consuming what the government estimates to be 25 percent of Egypt's annual Nile water allocation of 55 billion cubic meters. Despite the ban, the government periodically allowed exports under pressure from traders, in exchange for fines of up to LE2,000 per ton, which were to be paid to the Supply Ministry.
Since 2016, however, authorities have taken a stricter stance, imposing a ban on rice exports of all kinds, which has been renewed annually, particularly as concerns over the Grand Ethiopian Renaissance Dam grew. In 2018, the government restricted rice farming, limiting cultivation to designated plots — the majority of which are highly saline — based on an annually renewed decree. Farmers caught planting rice beyond these plots faced fines and penalties up to imprisonment.
Egypt's allocated rice farming areas — spanning over one million feddans — produce around four million tons of white rice annually, exceeding domestic demand, which stands at 3.6 million tons. Yet farmers continue to expand cultivation beyond imposed limits, drawn by rice's high profitability compared to costs, its guaranteed market, as well as concerns over soil salinity, as rice irrigation helps reduce salt levels in soil. This has led to a surplus of up to one million tons annually, according to official estimates, plus the 130,000 tons of Basmati rice imports each year.
In July 2024, just a month before the August harvest season, reports began circulating among farmers and traders that rice exports would be permitted. While some dismissed the claims, others confirmed that exports had been allowed, prompting traders to rush to stockpile rice from the market. Some hinted at exemptions granted to select traders, while others described what was happening as 'organized smuggling' on a scale 'larger than all previous years.'
The issue reached parliament when Nation's Future Party MP Mohamed Abdallah Zein Eddin formally questioned the government that same month about reports of rice exports benefiting 'certain companies,' warning of the potential impact on domestic prices.
At the time, Mada Masr reached out to leading rice traders, who denied that exports were officially permitted. They said that rice leaving the country did so through two main channels: smuggling operations and humanitarian aid officially exported by the state. The latter was exempt from the export ban, they said, and was either donated or sold to international relief organizations for redistribution. However, a single industry source told Mada Masr that one company received an exemption allowing it to export rice for commercial purposes, beyond the bounds of humanitarian aid. The source attributed the company's selection to its ties with what they described as 'sovereign entities.'
After a period of quiet, the rice export controversy resurfaced in January when the Central Agency for Public Mobilization and Statistics (CAPMAS) published official data. Mada Masr reviewed the figures, which showed that the value of rice exports surged to US$9 million in the first ten months of the previous year — a leap of 3,808 percent compared to the same period in 2023. In October alone, the spike exceeded 4,527 percent.
Despite the Egyptian Customs Authority's insistence that the export ban remains in effect, six sources in the rice trade sector tell Mada Masr that the state allowed certain companies to export rice. At the forefront was Sons of Sinai, followed by smaller allocations to the Egyptian-Sudanese Company for Development and Multiple Investments, founded in 2021 and jointly owned by Egypt's Holding Company for Food Industries, the National Service Projects Organization and Sudan's Etegahat Group affiliated with the Sudanese military-owned Defense Industries System.
'Any trader who wants to export goes to Sons of Sinai, pays them US$150 per ton, gets a permit, signs over the shipment, collects their payment and the company exports under its own name,' says a rice trader speaking on condition of anonymity.
But weeks before Sons of Sinai 'proudly' announced it exports rice, several sources, particularly those in official positions, insisted that exports were strictly limited to humanitarian aid for countries like Libya, Palestine, Sudan and Syria.
MP Magdy al-Waleely, a member of the Federation of Egyptian Industries' (FEI) Grains Chamber, told Mada Masr that exports were restricted to 'specific entities' granted special permits, often with links to official institutions such as the Defense Ministry, which he said made the issue 'non-negotiable.'
However, after Sons of Sinai's post, Waleely revised his stance, saying that the state had initially granted the Argany-owned company a permit to export rice to Gaza due to wartime circumstances. 'Then it expanded to Syria, Jordan, Iraq and other countries facing political issues. Later, it extended to regular trade with countries like Turkey and Morocco,' he said.
The decision to export rice despite Egypt's severe economic crisis and acute water shortages, particularly to countries that do not appear in need of aid, was attributed by some sources to political and strategic considerations.
Among these was Ragab Shehata, the head of the FEI's Rice Division, who told Mada Masr that the exports carry political dimensions tied to Egypt's foreign relations, within the framework of regional policies aimed at strengthening political influence and security cooperation, particularly given Egypt's rice surplus.
Shehata said that escalating political crises in the region led the government to reassess its export policies, whether for humanitarian purposes or diplomatic gains, while firmly denying the exports were for commercial purposes.
When Mada Masr reached out again to Shehata days after Sons of Sinai's post, he said: 'Maybe some stupid employee posted that. I'll call them and tell them to take it down. If this spreads, it'll only cause trouble and drive prices up.' He also advised our reporters to 'not to ask about things that might upset you if you knew the answer. Even if they posted it, it's best to turn a blind eye.'
A major rice trader exporting through Sons of Sinai tells Mada Masr that the company has been allowed to export for months as a reward for Argany's role in Sinai, albeit unannounced. However, the source criticized the company's public declaration as 'provocative.'
'They were specifically granted this exemption under special circumstances. We live in a state governed by law and a Constitution that guarantees equality — you can't grant privileges to some while excluding others. They are publicly saying that the state gave him special treatment, and that will create problems,' the trader said.
Beyond these semi-official exports, Egyptian rice continues to leave the country through smuggling, a practice that has surged since the export ban was imposed in 2016. Smuggling occurs either via informal border routes or through ports under the guise of other grains permitted for export, according to three sources speaking to Mada Masr — a grain trader, an Agriculture Ministry official and a prominent farmer in the Delta.
The smuggled shipments have been particularly noticeable in Gulf markets, where demand for Egyptian rice has surged. 'Before the ban, we exported around one million tons of Egyptian rice to 64 countries,' the Agriculture Ministry official says. 'It's a unique variety with no equivalent except a very expensive American type, which is why smuggling increased. Plus, some shipments leave informally with state approval,' they added, declining to provide further details.
***
The two rice traders, who exported through Sons of Sinai last year and this year, tell Mada Masr that the government initially allowed the company to export 100,000 tons in mid-2024. This was raised to 250,000 tons this year after it became clear that rice surplus increased due to cultivation beyond the designated areas, meaning that these exports would not impact prices or availability in the local market, one of the traders says.
While the government saw this surplus as an opportunity for exports, the Supply Ministry removed rice from ration cards in August 2023. Former Supply Minister Ali Meselhy justified the decision by stating, 'The subsidy per person is LE50, which is not enough to buy rice — only oil and sugar. Should we just send rice over to [food subsidy outlets] and have it go to waste?'
The fact that a non-governmental entity was granted the profits from surplus rice exports, at least officially, comes at the expense of the 61 million Egyptians reliant on food subsidies. For nearly two years, they have had to purchase rice from the open market at up to LE35 per kilo instead of LE12.5, after it had been scrapped from ration cards. It also comes at the expense of farmers, who were forced to sell their rice at low prices due to pressure from major traders looking to maximize their profits from exports, which reached up to $750 per ton.
'A large number of farmers, especially those with small plots, sold their crops early in the season to traders or mills for LE14,000 per ton because they lacked storage space,' another prominent Delta farmer said. 'Now, the price has risen to LE18,000 per ton due to increased market demand. Meanwhile, traders who bought rice early and stockpiled it are now trying to maximize their gains by raising prices after learning about the exports.'
Moreover, rice exports encourage the arbitrary expansion of rice cultivation, which depletes Egypt's already limited natural resources in Egypt, such as water. The country's per capita water share has already fallen to 500 cubic meters annually in 2024, the threshold the United Nations defines as 'absolute scarcity.'
Most rice fields rely on flood irrigation, which consumes massive amounts of water. This reduces supply available to crops in neighboring fields, disrupts water distribution through irrigation canal networks and prevents adequate water from reaching many lands, as the water resources and irrigation minister said last year.
For over a decade, farmers have voiced complaints about hundreds of feddans drying up due to water shortages, which have led to recurring crop damage, and hence, annual financial losses.
MP Mohamed Abdallah Zein Eddin tells Mada Masr that he has yet to receive a response to his parliamentary inquiry on rice exports, submitted last July. 'If Egypt issues export permits to Sudan or Gaza as aid, that's fine. But the exports come from Egyptian companies selling to foreign companies and countries like Turkey — does Turkey need aid? If the decision is meant to serve the state's political interests, then no one can object, but it's important for us to know,' he explains. 'Some people advised me not to speak up, telling me not to dig into the matter,' he adds.
Mada Masr reached out to the ministries of investment and foreign trade and supply, as well as the Egyptian Customs Authority, but received no response as of the time of publication.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mada
4 days ago
- Mada
New law to regulate state ownership: Pushing through the IMF review with the same old recipe
During the International Monetary Fund delegation's visit to Cairo for its ongoing fifth review of Egypt's US$8 billion loan program, the government renewed its push for a draft law that would regulate state ownership in companies in which it holds full or partial stakes. While the IMF closed out its visit with praise for Egypt's economic performance, it once again called for a faster pace of reform to reduce the state's footprint in the economy, particularly by moving forward with asset sales in sectors the government had already committed to exit under its State Ownership Policy. The draft legislation, now with the House of Representatives a year after the Cabinet approved it, is closely tied to the implementation of that policy and the broader privatization agenda. Mada Masr broke down what's in the law and spoke to sources familiar with the key issues it introduces, who painted the new law as little more than 'reheating leftovers' — a recycled, hasty push aimed to appease the IMF ahead of its report. *** First, what's in the law? According to a copy of the draft law reviewed by Mada Masr, the legislation would establish a central unit within the Cabinet responsible for inventorying and tracking state-owned companies. This body would submit recommendations to the Cabinet and its ministerial economic group, with a mandate to 'implement the state-ownership policy according to specific timelines and targets, and remove obstacles to progress in this area.' First issued in 2022, the State Ownership Policy outlines the government's roadmap for withdrawing from sectors outside its designated 'core functions,' including those that the private sector has shown reluctance to invest in. The stated objective is to generate financial savings that could ease pressure on the state budget. The policy sets three directions to manage state involvement: full exit within three years, continued participation with either stable or reduced ownership; or continued participation with stable or increased investment. Under the proposed law, the new Cabinet unit would also develop frameworks to 'regulate' all state-owned assets. For companies entirely owned by the state, Article 6 outlines mechanisms that include selling shares — whether through initial or secondary market offerings — increasing capital, expanding the ownership base, or restructuring through mergers or demergers. In cases where the state holds only a partial stake, its role would be limited to managing the sale of shares or voting rights. The draft law also requires relevant authorities in share-owning state entities to provide the newly proposed Cabinet unit with any information or data it requests. This includes updates on restructuring plans and policies, as well as detailed reports on projected and actual cash flows and overall financial performance. Article 5 of the draft outlines steps the unit may take to implement its regulatory programs for both fully and partially state-owned enterprises, with frequent references to privatization and private sector involvement. These include recommending the best approach to attract private investment across various sectors, maintaining and regularly updating a comprehensive database of companies fully or partially owned by the state, evaluating whether continued state ownership is warranted, and determining the most appropriate exit strategy for each company based on the economic or investment sector under which it falls. The unit would also be authorized to identify state-held shares in companies and decide whether to sell them — either in full or in part — or list them on the stock exchange. It would be responsible for determining the size of the stake to be offered and approving the selection of investment banks, offering advisors, and financial consultants, in coordination with the relevant owning state entity. The draft law also stipulates that, upon a proposal from the unit's executive director and with Cabinet approval, a formal decision must be issued to set mechanisms for managing labor surpluses in state-owned companies. It states that any financial costs associated with these measures must not add further strain on the public budget. As part of implementing the State Ownership Policy, the law introduces restrictions on the state's ability to expand its holdings. It requires prior written approval from the unit before any state entity can establish or invest in a company whose primary activity falls within sectors where the state has opted to keep its investments unchanged. It also prohibits investment in sectors from which the state has committed to a full or partial withdrawal, as outlined in the policy document. *** Not everyone, however, believes the legislation has much chance of success or has been fully thought out. A member of the Cabinet's macroeconomic advisory committee criticized its timing as rushed, 'like reheating leftovers that have been there for a year.' Speaking to Mada Masr, the source said the law appears to offer a superficial display of reform to satisfy the IMF and secure a favorable outcome in the fifth review negotiations. The Cabinet approved the draft law in May 2024, and the parliamentary economic committee began deliberations in a closed session on May 25, without journalists present. The committee approved the draft and referred it to the House's general assembly for a final vote. The IMF previously referenced the draft law as part of Egypt's structural reform commitments. In its third review report, published in August, the fund said the law aims to 'embed key elements of the state-ownership policy into law.' The fourth review report has yet to be published, at the request of the Egyptian government for it to be withheld. The advisory committee source argued that the law's passage was merely 'a formal gesture to show that certain steps — with no value to the project's core — are being taken.' They also pointed to overlap between the proposed unit's role and existing bodies that already, in a way, manage state-owned assets: the Sovereign Fund of Egypt, the Public Enterprise Ministry, and the National Investment Bank. By contrast, Nation's Future Party MP Mahmoud al-Saeedy, a member of the House Economic Committee who took part in the discussions, told Mada Masr he sees no conflict between the new unit and the sovereign fund. 'As part of its multiple roles,' he said, 'the unit may recommend transferring a specific asset to the sovereign fund after reviewing its data.' A second member of the Cabinet's macroeconomic advisory committee raised concerns about the 'ambiguity surrounding the new unit's role and its actual purpose.' They noted that a committee with nearly identical responsibilities — the higher committee on implementing the State Ownership Policy — was already created by administrative decree in December 2022 and also reports directly to the Cabinet. Amr Adly, an assistant professor of political economy at the American University in Cairo, told Mada Masr that such overlap and conflict between the roles of the sovereign fund and the new unit is not unusual. Egypt's bureaucratic system, he noted, has long been characterized by parallel bodies with overlapping mandates. 'Take, for example, the National Center for Planning State Land Use,' he said, 'whose responsibilities both resemble and clash with those of the Industrial Development Authority, the Tourism Development Authority and the New Urban Communities Authority.' Beyond questions of overlapping mandates, the draft law also includes a broad exemption from its own provisions. According to the text, the law does not apply to companies engaged in activities deemed to be of 'national or strategic importance, as defined by a Cabinet decision issued based on a joint proposal from the relevant minister and the competent authority within the owning state entity.' But the draft provides no definition or clear criteria for what qualifies as a national or strategic activity. This vague exemption strips the law of its substance, according to both advisory committee members. The first of the sources said that it further demonstrates that 'the government has no real intention of implementing the law, and only aims to show the IMF that it is fulfilling the required tasks.' Adly echoed the same skepticism, suggesting that the broad exemptions indicate the law is not grounded in any genuine governmental belief in the need to exit the economic sphere or scale back its role in line with the IMF's repeated calls. Instead, he argued, the government is primarily seeking short-term financial returns from select assets to compensate for its inability to grow tax revenues — while maintaining control over assets it is unwilling to relinquish. In contrast, the law's explanatory memorandum defends the exemption, claiming that decisions related to such companies may involve matters of national security or require approval at higher levels of decision-making. The exemptions outlined in the draft law also include 'companies established under international agreements, companies named in special legislation that governs their purpose or ownership structure, and contributions by state-owned insurance firms to the capital of other companies.' Under the law, the new asset inventory and tracking unit is to be led by a full-time executive director with proven expertise in investment, corporate management, and economic project administration. The unit will be supported by a team of experts and specialists in these fields, alongside personnel with financial, technical, and legal qualifications. Staff may be hired on a contractual basis or seconded from existing administrative bodies. The unit's organizational structure will be determined by a decision from the prime minister, based on a proposal by the executive director and after consultation with the Central Agency for Organization and Administration — 'without being bound by the current government rules and regulations.' Saeedy interpreted this provision as intended to bypass several standard government constraints that may not be compatible with attracting top talent to the unit — 'particularly the public sector's maximum wage cap,' he noted. The government's decision to revive this law came as Egypt undergoes its fifth review under the IMF loan agreement, which shows how closely the State Ownership Policy is tied to the terms of the country's arrangement with the fund. The State Ownership Policy document was issued following the government's November 2021 announcement of the findings of a study — prepared, it said, by the Cabinet Information and Decision Support Center — the full text of which was never published. The study was intended to lay out steps to reinforce the state's shift toward supporting the private sector. According to the government at the time, the document emphasized the need to 'identify key sectors in which the state will remain, those it will exit, and others it will gradually withdraw from.' It also recommended 'reforming the public sector by retaining major companies in strategic, high-priority sectors' while divesting from those deemed less critical. The study's conclusions closely mirrored the IMF's second review report, released four months earlier. That report explicitly called for 'a clear state ownership policy,' stating that 'reform of state-owned enterprises should start with developing an ownership policy to enhance accountability and transparency, define the sectors where public intervention is governed by a public service mandate, and implement performance boosting measures. This would enable the state to withdraw from other sectors and allow for private sector-led productivity gains.'
Mada
29-05-2025
- Mada
IMF still pushing for privatization after otherwise ‘relaxed' Egypt loan review
An International Monetary Fund (IMF) delegation concluded its fifth review of the ongoing US$8 billion loan program with Egypt this week in Cairo with praise for the country's economic performance. However, the fund noted that further steps toward privatization are required, stressing 'the need to accelerate reforms aimed at reducing the state's footprint in the economy.' The current program began in 2022, as Egypt's economy faltered in the economic tailwind caused by Russia's invasion of Ukraine. The agreement has been marked by friction between the IMF and Egyptian authorities, which have been cautious not to spark public anger while implementing recommended policies that undermined Egyptians' purchasing power. The praise Egypt received this time, however, appeared to reflect the degree of 'laxity' shown by Egyptian officials and 'leniency' on the part of the IMF Executive Board during the talks, a government source told Mada Masr on condition of anonymity. Pressure on Egypt has diminished somewhat, according to a member of the House of Representatives' Planning and Budget Committee who attributed the IMF's softened stance to the country's delivery on key loan requirements in ways that 'exceeded expectations.' Liberalizing the exchange rate and monetary tightening are at the forefront of these requirements, the source said. Moving away from a managed peg, the central bank has devalued the Egyptian pound multiple times against the dollar since 2022, allowing daily fluctuations in the exchange rate in recent months. The source also mentioned recent hikes in fuel and electricity prices. Delays in implementing scheduled price increases in both sectors, recommended under the IMF's program to reduce expenditure on subsidies, had been a major stumbling block in completing past reviews. The government has hiked fuel prices by as much as 87 and 207 percent in recent years. During the same period, electricity rates increased by 40-65 percent. Natural gas bracket prices, which had remained unchanged for three years, were raised in September by 15-25 percent. Further hikes in fuel and electricity prices are expected in the upcoming fiscal year, the parliamentary source and a former Petroleum Ministry official told Mada Masr. Inflation has slowed overall, and private investment has increased relative to public, the IMF said. Inflation peaked at around 30 percent in 2024 and has slowed by around 13 percent, according to recent figures. The statement the IMF released on Tuesday to mark the end of its delegation's visit to Cairo also praised a 35 percent increase in the share of private investment relative to public investment over fiscal year 2024/25 compared to FY 23/24. Government investment has shrunk over the past three years from around $15 billion annually to less than $10 billion, the parliamentary source noted. The program has included diminishing expenditure on key public services like education and health. Another reason the review went smoothly is the relative easing of the acute dollar shortage that had frozen imports and economic activity in previous years. 'The government has reopened imports, but they remain constrained primarily by falling demand and purchasing power,' the source said. Speaking to Mada Masr, a financial analyst at an investment firm echoed this view, pointing to around $35 billion in hot money inflows that have helped shield Egypt from a dollar gap. This, they said, has given the government some breathing room, especially with the program set to expire in October 2026. $4.8 billion are yet to be disbursed from the IMF's $8 billion loan. What remains unresolved in the program, the parliamentary source added, is the state's role in the economy. Privatization has been a priority for the IMF in successive package reforms it has recommended since 2016. The source said that the government has offered several explanations for its slow progress toward privatization, including a lack of satisfactory bids for state assets and the need to restructure some of them before they can be put up for sale. In its statement, the IMF emphasized the need to accelerate reforms aimed at reducing the state's footprint in the economy, primarily through the sale of state-owned assets in sectors the government had pledged to exit under its State Ownership Policy. This, the statement said, 'will play a critical role in strengthening the ability of the private sector to better contribute to economic growth in Egypt.' It also warned of Egypt's widening budget deficit, driven by a surge in imports and a decline in fuel exports due to falling production levels. A drop in Suez Canal revenues also contributed to the deficit, the statement said, offsetting gains from tourism, remittances and non-oil exports. It stressed the need to boost government revenues by broadening the tax base to bolster the state's capacity for social and developmental spending, while welcoming recent government efforts to streamline tax and customs procedures to 'increase efficiency and build confidence' — reforms it said are starting to yield positive results. The praise came even as the IMF has yet to publish its fourth review's staff report, which the Egyptian government requested be withheld. The review was approved in March, unlocking a $1.2 billion disbursement. At the time, the IMF also approved Egypt's request for a Resilience and Sustainability Facility agreement, allowing it to access an additional $1.3 billion in financing. The program terms are yet to be announced. Meanwhile, Egypt faces over $6 billion in outstanding payments to the fund through the end of next year, including nearly $3.8 billion due in 2025, according to IMF data. This issue falls under what the IMF describes as Egypt's 'deeper reforms' — measures that are expected to 'unlock the country's growth potential, create high-quality jobs for a growing population, and sustainably reduce its vulnerabilities and increase the economy's resilience to shocks.' Egypt began negotiating with the IMF for a $3 billion loan in late 2022, but the program stalled for several months. Talks resumed in late 2023 and concluded with the loan's augmentation adjustment in two years, which brought the dollar to LE50.
Mada
25-05-2025
- Mada
Govt cuts industrial gas supplies after ‘inaction' to offset planned drop in Israeli imports
The government temporarily reduced natural gas supplies to state-owned petrochemical plants, particularly fertilizer producers, by around 50 percent starting May 17, according to seven sources who spoke to Mada Masr — two from the petrochemical industry, four from fertilizer companies and a former Petroleum Ministry official. The decision came to mitigate a temporary widening of Egypt's natural gas deficit after Israel cut gas exports to the country for the third time in less than two years, due to planned ten-day maintenance at the Leviathan megafield, a government source told Mada Masr on condition of anonymity. Egypt's domestic production of natural gas has dropped dramatically over the past three years amid steadily rising demand, increasing the government's reliance on Israeli gas imports, LNG shipments, and mazut to meet electricity generation needs. Egypt was notified of the maintenance work in December, according to the source and an informed economic consultant who spoke to Mada Masr. After that, the petroleum and electricity ministries held three meetings to discuss the matter, which would see inflows from Israel drop by around 480 million cubic feet per day, the government source said. They agreed to secure 35,000 tons of mazut per day during the disruption as an alternative — a plan that ultimately fell through, forcing the government to cut back gas supplies to the industrial sector. According to the government source, the Petroleum Ministry had flagged the maintenance at Leviathan in a March report detailing plans for May, which included preparations to supply mazut (fuel oil) as an alternative energy source. As the Leviathan maintenance period approached in early May, the Petroleum Ministry began sourcing only 20,000 to 25,000 tons of mazut per day, according to the source. To prevent power outages in the residential sector, the government opted to scale back gas deliveries to industrial users. In mid-May, the state-owned Egyptian General Petroleum Corporation issued a tender to purchase two million tons of mazut for delivery in May and June, according to Bloomberg. Cutting supply to industry was ultimately a political decision, a source at a state-owned nitrogen fertilizer company told Mada Masr, noting that the government chose to risk the petrochemicals and fertilizers sectors rather than jeopardize the stability of the national power grid. Prioritizing natural gas for electricity generation over industrial use is an effort to avoid a repeat of last summer's public backlash over widespread power outages, the fertilizer company source and a parliamentary source in the House Planning and Budget Committee separately told Mada Masr. Electricity generation accounts for about 60 percent of Egypt's natural gas consumption, while around 20 percent of the country's gas goes to the petrochemical industry, particularly fertilizer plants, according to Hafez Salamawy, former head of Egyptian Electric Utility and Consumer Protection Regulatory Agency. The government source dismissed media reports suggesting the May supply cuts were prompted by Israeli pressure on Egypt to raise the price it pays for imported natural gas. Instead, the source said that in their view, the disruption to industrial supply was 'a result of the government's failure to take timely action.' Egypt and Israel are currently holding negotiations under the periodic review of their gas export agreement. Cairo is seeking to increase its daily imports of Israeli gas to 1.5 billion cubic feet, up from the current cap of 900 million cubic feet per day, according to both the government source and a former Petroleum Ministry official. In exchange, Israel is demanding a price increase of around 25 percent, the two sources said. Both sources anticipated that Egypt would likely accept the price hike. To avoid further rolling power cuts, the government has chosen to absorb the financial burden of securing multiple shipments of liquid natural gas and renting regasification units to feed those supplies into the demand. According to the sources, even with the proposed price hike, Israeli pipeline gas would still be cheaper than LNG alternatives. In 2024, Israeli gas made up 72 percent of Egypt's total gas imports, but only accounted for 58 percent of the overall import bill. While the average cost of 1,000 tons of LNG stood at US$685, the same quantity of Israeli gas cost $338. Egypt's total gas import bill for the year reached $4.7 billion, according to CAPMAS foreign trade data. Egypt's domestic mazut production, meanwhile, stands at 17,000 tons per day, enough to cover around 12 percent of the country's electricity generation needs. Power plants nationwide are equipped to handle around 35,000 tons of mazut daily, a potential 24 percent of national generation per day. If these quantities were directed toward electricity generation, Salamawy said, Egypt would require additional import volumes of mazut. The reduced gas supplies for industry are expected to last around two weeks, according to the former ministerial official and a source in the petrochemical industry. Meanwhile, a source at the Chemical and Fertilizers Export Council told Mada Masr that no exact timeline has been set, but that the government informed the council that the supplies will remain limited until LNG shipments reach Egypt in the coming weeks. The gap between domestic gas production and demand has widened over recent years to represent nearly a third of Egypt's total demand. While the country currently requires between 4 and 6 billion cubic feet of gas per day, local production has continued to drop to around 4 billion cubic feet, according to an informed private sector source, the former official and the MP from the House Planning and Budget Committee. Data from the Joint Organisations Data Initiative confirms that, showing that output reached 4.1 billion cubic feet per day by the end of March, 2025. Cairo began requesting increased imports from Israel during the summer of 2023, prompting production companies operating in Israel's major gas fields to boost investments and ramp up output, reassured by Egypt's reliability as a buyer. The cuts in the Israeli supplies due to maintenance this May represent the third time that Israeli gas flows to Egypt have been interrupted since the outbreak of the war on Gaza in October 2023. The sharpest cut came that same month, when imports plummeted to a record low of 357 million cubic feet per day — a 51 percent drop from the previous month — as Israel shut down production at the Tamar field, citing security concerns in the wake of Operation Al-Aqsa Flood. Another drop occurred in June 2024, when daily imports fell to 728 million cubic feet per day.
