Egypt to get more than $3 bln in free fuel from Saudi

Saudi fuel donations to Egypt from last month through August will be worth more than $3 billion, a top Egyptian energy official said, as part of a financial lifeline from the Gulf helping to ease the country’s energy crisis.

Tarek el-Molla, head of state-run Egyptian General Petroleum Corp (EGPC), said Egypt had received an oil shipment from Saudi Arabia “at a value of between $650 and $700 million” in April and would keep getting the same amount monthly through August.

“Saudi petroleum aid to Egypt will be more than $3 billion from April until the end of August,” he told Reuters by phone.

El-Molla did not specify whether this aid came on top of the $2 billion worth of petrol product donations announced by Saudi Arabia last year after the Egyptian military deposed Islamist President Mohammed Mursi.

The government said last week that gifted fuel from Gulf nations including Saudi Arabia that supported Mursi’s ouster last July totaled $6 billion.

The supply is a welcome relief for Cairo as it struggles to avoid major blackouts this summer. The cuts are caused by gas shortages and a dilapidated power grid but are more broadly driven by a wasteful subsidies system that drains foreign exchange reserves.

The Gulf fuel can be used at some power stations as an alternate to gas, the main fuel used for electricity generation in Egypt.

But experts say the severe gas shortage guarantees a substantial megawatt shortfall that will cause major blackouts and strain a power grid already badly in need of renovation.

Power cuts deepened discontent against Mursi in the run-up to his ouster last July. Last year, extra supplies of liquefied natural gas from former ally Qatar helped ease the burden. The Gulf state was sympathetic to Mursi and the Muslim Brotherhood, and has withdrawn its support of Cairo since their ouster.

Presidential frontrunner and former army chief Abdel Fattah al-Sisi gained enormous popularity when he removed Mursi from power but will face the same challenges as his predecessor if he attempts to tackle reform of the subsidies system.

Raising energy prices, which are among the lowest in the world, could trigger unrest in a country where street protests helped topple two presidents in three years.

Failing to ease the subsidies will continue to prevent economic growth, experts and government officials say.