Energy substitution in industrial sector is prominent issue in energy policy circles. During the 1970s, in the aftermath of two major oil price shocks, concerns about the role of energy in the structure of production has been the focus in both developed and developing nations. An important issue has been whether or not these countries were able to deal effectively with increasing energy scarcity. This study investigates the role of energy use in the industrial sector by focusing on the substitution possibilities between factors of production and type of fuels in a framework that allowed the interaction between inter-factor and inter-fuel substitution effects.