Egypt’s refinery plan

David Andrews looks at how Africa’s largest refining country plans to expand its capacity even further. It aims to do so while global demand is soaring and the industry is underinvested and stretched to its limit

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By  David Andrews Published  May 2, 2006

Refineries|~|refineries-200.gif|~||~|Egypt’s refining capacity — the largest in Africa — has been static for the last few years at around 725,000 barrels per day. However, the Egyptian General Petroleum Corporation (EGPC), which operates the bulk of the country’s refining capacity, wants to build five new refineries at a total cost of US $2.5 billion during the next decade. Output from this new capacity will be used to maintain export market share, meet growing domestic demand and also as feedstock for the government’s ambitious plans to create a large-scale petrochemical production sector.

In January this year, EGPC unveiled plans for the first of these new refineries — a 130,500 barrel per day (bpd) plant that will cost US$1 billion to build. Part of the financing will come from the private sector. The new facility will be located east of Cairo at Ain al-Sokhna on the Red Sea with EGPC expected to take a 16% stake (as operator) while other shareholders include investors from Saudi Arabia and Kuwait. Cairo-based Investment and Securities Group is the main developer.

In April, Kuwait’s energy minister Sheikh Ahmad Fahad Al-Sabah, visited Egypt where he held talks with his Egyptian counterpart Sameh Fahmi on a possible investment in a new refinery in the country, although the exact project under consideration was not disclosed.

The next new refinery under consideration is at Port Said with a capacity of up to 300,000 bpd as part of an integrated petrochemical complex. If built, it will be an export-oriented facility as well as acting as a feedstock supplier to the petrochemical complex. The new refinery is expected to cost up to $3.5 billion. The petrochemical complex will produce linear alkyl benzene (Lab), propylene, ethylene, styrene/polystyrene and methanol as well as acrylic fibres, PVC, polyester and ammonia/urea. Construction of the $196 million, 80,000 tonne per year (tpy) Lab plant is expected to begin in the second half of this year, and the Ministry of Petroleum has indicated it hopes to launch the refinery project by the end of the year.

It has also been reported that a third new refinery under consideration would have a capacity of 500,000 bpd — making it one of the largest in the world if realised. Investment would come from Arab nations.

Other investors interested in new refining capacity in Egypt include Indian companies Oil India and Indian Oil Corporation which are interested in investing up to $1 billion in a new refinery as part of a larger investment in Egyptian oil and gas concessions.

As well as satisfying growing domestic demand, the new refineries will also help maintain an export market — volumes have been declining since 2000 because of higher consumption within the country. In fact, the most recent refinery to be commissioned, Midor, is now supplying the domestic market only as opposed to exports as had originally been envisaged.

This refinery, with a capacity of 100,000 bpd, came on stream in 2001 and cost $1.5 billion to build. Operated by the Alexandria Refining Company, it was the first private sector project in Egypt to receive a loan from the European Investment Bank to the tune of $243 million. The main shareholders are: EGPC (40%); Medor (20%); and NBC Finance (Cayman) (16%). Israeli company Merhav, which had been the largest Israeli investor in Egypt, sold its 20% stake in the refinery to the National Bank of Egypt in June 2001.
Other shareholders include: EPPI Egypt (10%); Petroleum Projects Technical Consultation (10%); Masaka (Switzerland) (2%) and the Suez Canal Bank (2%).

The refinery processes crude delivered by a pipeline from the Sumed Mediterranean Terminal at Dekheila Port, and can handle both light and heavy Arab crudes. Production is weighted towards middle distillates and gasoline but also includes LPG, low sulphur kerosene, jet fuel and diesel as well as green coke and pure sulphur. Midor produces 2.18 million tpy of gasoil and diesel; 1.12 million tpy of high octane unleaded gasoline; and 676,000 tpy jet fuel and kerosene.

As well as Midor, Egypt’s other eight refineries are as follows: Mostorod owned by Cairo Petroleum Refining Company, 145,000 bpd; Tanta, El-Nasr Petroleum Company, 35,000 bpd; Suez El-Nasr Petroleum Company, 146,300 bpd; Wadi Feran El-Nasr Petroleum Company, 8,550 bpd; Alexandria Petroleum Company, El Mex, 100,000 bpd; Ameriya Petroleum Refining Company, 78,000 bpd; Suez, Suez Oil Processing Company, 66,400 bpd; and Assiut Petroleum Refining Company, 47,000 bpd.

As well as building new green-field facilities, EGPC wants to upgrade and modernise these existing refineries again favouring increased middle distillate production and increase low sulphur fuel production. Egypt introduced unleaded gasoline in 1996 and phased out leaded in 1999, and had already switched production accordingly. However, several of its refineries have continued to produce some leaded gasoline for neighbouring export markets who have resisted making the switch to unleaded although many are now planning to do so.

The government is also offering stakes in several refining companies as part of its privatisation programme. The shares offered include 100% of Alexandria National Company for Refinement and Petrochemicals — the parent company of Alexandria Petroleum; up to 90% of Misr Oil Production Company’s refining operations, and around 31% of Midor.
The government is insisting that iInvestors agree to carry out certain modernisation and upgrading projects as part of any deal.
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