Connecting Poor Households to Natural Gas in Egypt

There are millions of residential households near existing gas infrastructure that continue to use costly and highly subsidized canister-based LPG for their domestic energy needs. The objective of the study was to demonstrate the economic benefits of converting households – especially poor households- from LPG to natural gas given the savings that will accrue for both the Government of Egypt and individual households.

For more information please see: http://go.worldbank.org/D3PU3KH7J0 [3]

The study was highly successful and demonstrated the economic benefits of converting the residential sector (including the poor) from LPG to natural gas to the Government of Egypt.

The project has been highly successful and has provided the client with an analytically rigorous framework to embark on an ambitious gas conversion program. The World Bank has now agreed with the Government to finance a US$75 million conversion project. GPOBA’s Technical Assistance was instrumental in assessing the economic viability of connecting residential households, including the poor.

The system for connecting users to the gas network in Egypt involves an output-based aid approach which was the rational for GPOBA involvement. The costs of connections are recovered through contributions by users and through a subsidy provided by the government which is channeled through local gas distribution companies. Under this scheme, gas distributors pre-finance the costs of connections through debt or equity. Once connections are verified, distributors are allowed to recover these costs through appropriate user tariffs over a four-year period.

Franz Gerner [4]