Abstract
The credibility of the reform—or its capacity to provide stability of commitments, and the ability of its governance structure to solve regulatory problems—is critically supported by the design of “effective” regulatory institutions. In MENA, clarity of roles, participation of relevant stakeholders, and accountability are usually guaranteed. The autonomy from political intervention and the predictability of decisions are less certain. The development of robust regulatory frameworks and strong institutions was hampered by under-funding and a reluctance of authorities to transfer independent decision-making to regulatory authorities.
The growth in the volume of subsidies is usually not offset with the hypothetical decrease in production costs due to efficiency and competition. A subsidy applied through fuel pricing can potentially be counter-productive to stimulating efficient use of energy. The restriction of fuel supplies obliged most countries to rethink their position vis-à-vis subsidies. But there are still several constraints affecting the review of subsidies.
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Economic theory and scrutiny of market behavior suggests a positive correlation between market share and market power, although the degree and nature of correlation is sensitive to market structure.
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Article 25 of Oman Electricity Sector Law, detailing the principal functions of the Regulatory Authority.
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See M. Pollitt « the future of electricity and gas regulation in a low-carbon policy world », Energy Journal, 2008 special issue on the future of electricity (papers in honor of David Newberry).
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Or around 2 Omani Rials per customer account, or a tenth of a Baiza per kWh supplied.
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The Executive Council was formed in 1974 to replace the Council of Ministers created in 1971. It is the local authority of the Emirate and assits the Ruler to carry out his duties. It is chaired by HH Sheikh Mohammed bin Zayed al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. Its membership consists of chairmen of the local government departments, some local authorities and other members appointed by the Ruler.
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Experiences elsewhere illustrate that if not dealt with properly, subsidies could skyrocket figures. By way of comparison, Egypt’s energy subsidies increased from $220 million in 1999 to $7.7 billion in 2006.
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Saudi Arabia’s potential subsidizing the petrochemical industry through low gas prices has been a major issue when the country was discussing its accession to the WTO. The report of the Working Party on the Accession of the Kingdom of Saudi Arabia to the WTO of November 2005 detailed the Saudi position and arguments in this regard. More specifically, “the representative of Saudi Arabia stated that producers/distributors of NGLs in Saudi Arabia would operate, within the relevant regulatory framework, on the basis of normal commercial considerations, based on the full recovery of costs and a reasonable profit. He confirmed that his Government’s policy was to ensure that these economic operators, in respect of their supplies of NGLs to industrial users, would fully recover their production and investment costs and make a profit in the ordinary course of business.” Also, “local NGLs sales have a higher relative commercial value to the producer than sales to seasonal customers in export markets that purchase NGLs for uses such as fuel, with seasonal swings in demand”. On the other hand, “natural gas was not sold for export due to the high costs of liquefying, transporting and re-gasifying such gases, and therefore had no international reference price in the Gulf region. Previously, natural gas had been burnt as a waste product, but was later collected and made available to all interested users on a non-discriminatory basis, at a regulated price of 281 Halalas per million BTU (US$ 0.75 per million BTU) until 2015. This decision was taken based on a combination of commercial reasons and environmental concerns”. Saudi Arabia became a full WTO member in December 2005.
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We applied a gas price of $3 per MMbtu to the Egyptian gas fired utility.
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According the IEA, 20 non-OECD countries, including China, India, Russia, Iran and Saudi Arabia, spent $310 billion to subsidize oil, gas and power in 2007.
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The date of switching from gas is estimated by extrapolating demand to the point at which a production plateau of 15 years can be supported based on proven reserves.
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See also Chevalier (2004), les Grandes Batailles de l’Energie, pp. 337–338.
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For example, about 66% of contracted Qatari LNG goes to Asian customers, on long-term oil-linked contracts using the so-called S-curve to protect exporters against low oil prices and consumers against high prices. An additional 16% is contracted to Europe.
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“Price is generally the go-to solution if you want to do something quickly (about the rising demand for water and electricity). But if you are looking at affecting the curve over the long run, and not necessarily having to install all that capacity—3, 5, 7 years out in the future—then you need to educate and apply a softer approach.” Erik Jankel, chief executive officer of Norway’s Aqualyng, 9 December 2008, MEED.
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It excludes super gasoline from the rationing system (priced at $0.59/L up from $0.15/L previously).
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Iran and Egypt have been developing a dual-fuel vehicle fleet, not only to tackle local pollution problems, but also to partially solve the gasoline issue. In Iran, the current number of CNG cars is estimated at around 50,000 to 70,000 cars out of a total fleet of 6 million, consuming around 1 BCM of gas. The authorities stated that they were investing $1.5 billion in four years to convert 1.5 million vehicles by 2010. However, these plans look overambitious in view of the potential gas constraints facing the country, the shortage of CNG cylinders and the concentration of the production in two local car manufacturers (Iran Khodro and Saipa), creating additional bottlenecks.
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The choice of this threshold stems from empirical evidence that, even though inflation is felt across the social spectrum at moderate level, it is more costly in terms of impact on GDP growth when it surges above 8%.
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The $5.5 billion Ras al Zour project faced difficulties. Originally conceived as an IWPP, the project was turned into an EPC contract in April 2009, following a proposal of the finance ministry. Earlier in the month, the preferred bidder consortium, led by Japan’s Sumitomo Corporation, fell apart after Malaysia’s Malakoff pulled out, as it was not able to fulfill all its equity contribution, even if partners proposed to raise their stakes. Malakoff was originally due to take 20% in the project. The power project was already able to secure $2.5 billion in funding from the Japan Bank for International Cooperation. It was designed to supply electricity for an aluminum smelter and a fertilizer plant to be built in the new industrial complex north of Jubail. The power plant was to have a capacity of 1100 MW and 1 million cubic meters of water per day, and would be fueled with heavy crude.
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Algeria’s talks for accession to the WTO have been going for more than 10 years.
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Based on author’s observations in various projects advising governments in the region on their energy policy.
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These are recurring price subsidies that make electricity more affordable for low-income and vulnerable consumers. Bill assistance programs include discount programs (block or lifeline tariffs), percentage of income payment plans and arrearage management programs. They may also include emergency assistance to forestall service disconnection or ease the burden of short-term energy price spikes or extreme weather.
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Benali, L. (2019). Evaluation Step 4: Credibility. In: Electricity-sector Reforms in the MENA Region. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Cham. https://doi.org/10.1007/978-3-319-96268-9_7
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