Alternative fuels in the Arab world: part 3

Part 1 can be read here.

Part 2 can be read here.

The oil price drop

The Middle East is the most exposed region to volatility in global energy markets, and the region that can cause the most variation, as seen through Libya’s production fluctuations. A sustained drop in the price of oil below US$50 per barrel could jeopardise the economic stability that many of the region’s energy exporters have enjoyed following the tumult of the Arab Spring.⁶

Following an overcapacity in oil production (mainly derived to the shale oil production in the US), the leading OPEC producer Saudi Arabia dropped prices under the production costs of some oil producing countries. Coal prices steadily declined in the first few months of 2014 in response to a combination of increased supply and lower import demand from China. Following the oil price drop, coal prices are expected to decline further.

For this reason, it is anticipated that the majority of alternative fuel projects in the Arab countries will be postponed until the fossil fuel prices reach a pre-crisis level. This is particularly the case for Egypt, where all plants are now implementing coal-grinding facilities to switch from natural gas and heavy fuel oil to imported coal, meaning that the use of refuse-derived fuels will be hindered. So long as no gate or treatment fees are received by cement plants, the use of refuse-derived fuels will become uneconomic. However, being independent from world market prices for fossil fuels, there will still be some room for the development of alternative fuel projects. As Rajab El Mahmoudi noted, this may be a few years too early as fuel prices are too low, but it will be the future.

Written by Dirk Lechtenberg, MVW Lechtenberg, Germany. This is an abridged version of the full article, which appeared in the May 2015 issue of World Cement. Subscribers can read the full article by logging in. They can also read the magazine on smart phones and tablets by downloading World Cement’s app.

References

1. Bassam Fattou, Laura El-Katiri, ‘Energy Subsidies in the Arab World’, United Nations Development Programme, Regional Bureau for Arab States, Arab Human Development Report, Research Paper Series (2012).
2. Aljazira Capital, ‘Alternative Fuels in Saudi Cement Industry’, Thematic Report (December 2014).
3. Heba Saleh, ‘Egypt Sharply Raises Energy Prices’ (July 2014). Available at: http://www.ft.com/cms/s/0/08576d00-043f-11e4-ab6a-00144feab7de.html#axzz3QDu7n0mt
4. Partial Fuel Switching to Agricultural Wastes, Sewage Sludge & Refuse Derived Fuel (RDF) at Arabian cement plant. Project Design Document Form for CDM Project Activities, Version 07 (22 December 2012).
5. Current Experience of Alternative Fuels Utilization in Egypt, CementUAE.
6. When Oil Prices Drop, Some Countries Lose. Stratfor Global Intelligence (November 2014). Available at: http://www.stratfor.com/analysis/when-oil-prices-drop-some-countries-lose#axzz3QE3TeSm6

Read the article online at: https://www.worldcement.com/africa-middle-east/07052015/alternative-fuels-in-the-arab-world-part-3-793/