Energy has universally been recognised as one of
the most important contributors to economic growth and human development. There
is a strong two-way relationship between economic development and energy
consumption.
The consumption of energy in Egypt is low compared to its regional peers. This can be seen in its still substantial agricultural sector, its reliance on desalination for water supplies and the country's comparatively modest hydrocarbons reserves. It is expected that Egypt’s energy consumption will increase to 3.6% annually, on average, over 2015-20, which is in line with the rate of GDP growth, which is predominantly influenced by increases in local electricity consumption. 

 
Due to the political instability and the decline in natural gas
production, the demand for energy has decreased since 2011. Recently, demand
growth was supported by demographic trends, the economic recovery and the
increasing use of products, such as air conditioners, refrigerators and
freezers. Since 2014, the phasing-out of electricity and fuel subsidies over
five years has been reducing waste and encouraging  investment in supply.

The sharp decline in the natural gas supply since 2011 has resulted
in a shortfall in electricity generation capacity. It is likely to bridge the
gap in energy by end-2015 as a result of cement plants switching from gas usage to coal, the commencement of imports of liquefied natural gas and the start-up of new power plants built under an emergency
programme.
On the one hand, the growth of an economy, global competitiveness, hinges on the availability of cost-effective and environmentally benign energy sources, but on the other, the level of economic development has been observed to be reliant on the energy demand.
 
Egypt’s energy requirements have grown
significantly since the initiation of market reforms by the government few years ago. Energy sector reforms, capacity addition and improvement in existing infrastructure are the government’s primary focus areas as energy is a key necessity for meeting the country’s high economic growth expectations.
 
In line with the above, KPMG Global focuses on the ever-evolving and increasingly important Energy sector in Egypt as a priority growth area for our firm to offer services to, with a 100 plus strong team working together towards this.
 
 
Energy policy 

The domestic production of natural gas is not adequate to meet the
local demand. The government has responded by restricting gas supplies to the industry, switching gas-fired power stations to fuel oil and diverting gas
designated for export previously to domestic use.

 
The newly introduced government's hydrocarbons policy focuses on
encouraging exploration and production activity by providing favourable
commercial and fiscal incentives for international oil organisations, in
addition to structuring historical terms of payment arrears. 

Based on the new law that came into effect in 2015, the Electricity sector will experience extensive reforms. This will allow for the establishment of a dedicated regulatory authority and private investment in transmission and distribution, as well as generation. In the past, private generators of electricity could sell their output only to the Egyptian Electricity Holding Company.
 
Electricity

The electricity consumption was estimated to reach about 175 billion kWh in 2015. Electricity demand growth is expected to average about 5 percent during 2016–20. This will reflect the wider ownership of home appliances such as refrigerators and freezers. Furthermore, the growth in the usage of air-conditioning and the increasing penetration of personal computers will also contribute to demand.

The Ministry of Electricity and Energy plans to increase the capacity of electricity to 75 GW by 2027. It is mostly generated from gas-turbine plants, supplemented by a handful of large coal-fired plants, a couple of nuclear power stations and a significant amount of solar and wind capacity. Furthermore, a plan is currently in place to link Egypt to the KSA electricity network; however, the project has not started yet.

In the past, the government adopted only a single-buyer model, and as such, it has not permitted private investment in power generation. However, a new Electricity sector law will allow private power companies to invest in the transmission and distribution of electricity. 

The law will also lead to the need of a fully independent regulatory authority
to govern the Electricity sector.
 
How can we help?

KPMG in Egypt is organised around the understanding that no two industries are alike. In case of energy, we maintain a strong industry focus that takes an advanced approach to service delivery using consistent and tested worldwide methodologies to deliver objectivity, valuable insights and robust opinions of tax and advisory services to clients.

From our position as the professional service providers of choice to the world’s largest energy and natural resources companies and domestic stalwarts, we are acutely attuned to leading practices throughout the industry and around the world.
KPMG’s Egypt ENR practice strives to address all the issues of companies across the energy value chain, in the defined subsectors of Power & Utilities, Oil & Gas, and Mining and Renewables.
Our professionals have the technical skills and industry-focused experience that can enable them to understand the issues faced by energy companies, along with strong relations with key government bodies.
In addition to this, with focus on our four core solutions of strategic planning, operations improvement, transactions advisory and project planning, we ensure our readiness to address our clients’ primary concerns.