Egypt is pressing ahead with plans to link 800,000 households to its natural gas grid by next July as the government works to reduce its soaring energy bills.

Egypt sells many energy products at prices substantially below the cost of production and successive governments have struggled to cut the cost of the subsidies without angering citizens feeling the effects of economic instability since the overthrow of former president Hosni Mubarak in 2011.

Energy subsidies account for 20 percent of total state expenditure, but the government is taking steps to address the problem and possible abuse of the subsidy system by instigating a smart-card scheme for car drivers and by efforts to connect more people to the gas grid.

Adding households to the gas grid will enable consumers to cut back on their use of state-subsidised butane gas, according to an e-mailed statement from the petroleum ministry.

The funds spent on the project will be deducted from the subsidy bill in the state budget for the next fiscal year, Taher Abdel Rahim, chairman of state-run Egyptian Natural Gas Holding Company, told Reuters on Tuesday. Egypt's financial year ends on June 30

A figure on the cost of the project, indicating how much would be trimed from the subsidy bill in the next fiscal year, was not immediately available.

Abed Ezz El-Mahally, the head of Anglo-Egyptian energy venture the Gulf of Suez Petroleum Company, told Reuters on Monday that supplying households with natural gas is an "intelligent solution" to reducing energy subsidies. - Reuters