Working Papers

The Pricing of Natural Gas: A Discussion of Pricing Policy in Egypt

Publication Number: ECESWP26-E

May, 1998

Author : Robert Mabro

Type : Working Papers

This paper is concerned with gas pricing policies and begins by describing the unique characteristics of gas that influence the market and pricing. In Egypt, the upstream and downstream pricing of gas is based on the institutional system, which governs the hydrocarbon industry and the multiplicity of objectives the government tries to achieve.The policy proposals aim to improve consistency and transparency. In gas pricing the basic reference should be the price of the petroleum product displaced. The reference for gas acquisitions from the upstream should be the weighted average price of petroleum products averaged over a short period and should not include crude oil price.If the government passes the economic gain to gas users, then the price of gas must be set at $1.5/MMBTU. The resulting increases in electricity prices can be mitigated by spreading the rise over a number of years and by designing new tariffs which subsidize the poor and small businesses and tax the rich and large businesses.