Prime Minister Mostafa Madbouly issued a decision on Wednesday that includes a new mechanism for calculating the price of supplying natural gas to nitrogen fertiliser factories.
According to the decision, the price of natural gas in USD per million British thermal units equals the sale price of a tonne of urea supplied to the Ministry of Agriculture after tax deduction multiplied by the percentage of supply established for the Ministry of Agriculture divided by 60 plus the selling price of a tonne of urea export, according to the average global price during the month preceding the accounting month.
The decision indicated that, in all cases, the minimum selling price of natural gas for nitrogenous fertiliser factories shall not be less than $4.5 per million British thermal units.
The selling price of natural gas for non-nitrogenous fertilisers is set at $5.75 per million British thermal units.
The decision included that this equation does not apply to consumers who are charged according to price equations included in the natural gas supply contracts concluded with them.
Marina Makeen — Petrochemical Sector Analyst at Al-Ahly Pharos — said that the price of natural gas for nitrogen fertiliser plants in the new rate is equivalent to $7.8/million British thermal units, compared to $5.75/million thermal units, according to the formula that was approved and published in the Official Gazette.
She added that the decision does not have a significant impact in the short term, but a positive one in the long term because of the expectations that urea will return to normal rates at $400 per tonne in the long term. The average price of a tonne of urea is currently about $850 per tonne, according to international prices.
She also pointed out that the price of a tonne of urea locally amounts to $225/tonne, which is equivalent to EGP 4,275/tonne at an average exchange rate of EGP 19 to the USD.
In a related context, Abu Qir Fertilisers and Chemical Industries is currently conducting a study on the impact of the PM’s decision.
The company indicated that the equation included in the Cabinet’s decision means that the price of selling gas supplied to companies producing nitrogen fertilisers is linked to the price of selling a tonne of urea and according to the average price of global bulletins through a mechanism that is updated on a monthly basis.
It added that the PM’s decision will be studied in light of international urea prices, the local selling price, and the exchange rate of the USD against the EGP.
