Two countries - two different operational challenges

On my next trip to the MIddle East I will be visiting both Egypt and Saudi Arabia - two countries which despite being close in physical terms are oceans apart in terms of the challenges that they face. But strangely enough, the challenges are both fuel related.

In Egypt, the kilns have traditionally been fired with gas or HFO, as well as power for the country being produced by gas. The cement manufacturers have faced shortages of fuel for the kilns, which is caused mainly by under-investment in gas production in the country despite reserves being abundant. This has lead to shortages of cement supply in the market as well as a loss in profitability of the cement suppliers. To answer the fuel supply issue, the countries cement producers have considered two potential solutions - coal/petcoke and alternative fuels/biomass. Progress in both areas has been slow. In the case of coal and petcoke, due to permitting and the perception of these fuels being a "dirty" fuels as well as the suitability of ports to handle and store these solid fuels and logistical issues in getting the fuel to the plants. Alternative fuels have also shown slow progress with limited waste collection infrastructure in place. Biomass is currently available but there are unrealistic price expectations from the producers of the material making this an unattractive investment option for the cement producers.

The Saudi Arabian Cement producers are facing an altogether different challenge. Again, kilns are fired on HFO or gas. However, unlike Egypt the country has an abundant supply of both fuels. Part of the regulatory regime in Saudi Arabia is the Saudi Energy Efficiency Centre (SEEC), which has imposed fuel consumption and power consumption targets which need to be achieved by 2019. The target of 830 kcal/kg clinker can be particularly challenging for some producers, as no account is taken of process type or by-pass use, which is high at some of the plants. This drive for efficiency is to reduce the use of fuel in the industry - fuel which could otherwise be sold in the open market at a much higher price. Saudi Arabia does have petcoke capacity coming on stream - although this material would be high sulphur and would require investment by the cement producers to install fuel grinding mills. Alternative fuel use in Saudi is non-existent but could be developed by the government as waste collection is relatively well developed but would require a subsidy. However, as fuel is currently subsidised, why not subsidize the waste fuels as well?

Ironically, both countries are looking at new licenses for cement producers - but Egypt, with greater fuel supply issues compared to Saudi Arabia - looking more likely to issue licenses.



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