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Egypt firm to build $9 bln oil refinery plant - Daily News Egypt

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Egypt firm to build $9 bln oil refinery plant

CAIRO: Egypt’s state-owned oil company – along with other unnamed investors -will spend $9 billion over five years to build an oil refinery complex in the north of Egypt, the country’s petroleum minister recently told Reuters. The refinery will have a capacity of 350,000 barrels per day (bpd) and should begin operations by 2010, said …


CAIRO: Egypt’s state-owned oil company – along with other unnamed investors -will spend $9 billion over five years to build an oil refinery complex in the north of Egypt, the country’s petroleum minister recently told Reuters.

The refinery will have a capacity of 350,000 barrels per day (bpd) and should begin operations by 2010, said Minister Sameh Fahmy. It will be located either in the city of Port Said or the town of Gamassa.

The minister declined to reveal the identity of investors that would join the state-run Egyptian General Petroleum Corporation (EGPC) in the project.

“Most probably, the non-Egyptian stake in the project will be held by Gulf oil investors, specifically from Kuwait and Saudi Arabia, said Magdy Sobhi, senior economist at Al-Ahram Center for Strategic Studies. “The general trend in the Gulf these days is to pour in oil investments overseas.

He explained that as heavy oil consumers such as European and US markets haven’t established new oil refinery plants over the past years, Gulf oil investors are eyeing emerging markets to boost their crude oil production. “The US, for example, hasn’t built a new refinery plant in almost 20 years, while at the same time its domestic oil production capacity falls short of some 3 million bpd.

“That is why the Gulf is now shifting gear towards establishing refinery plants in countries such as China and Egypt, he said.

Egyptian oil refinery plants are perfect matches for Saudi oil because they process heavy crude oil. “Saudi Arabia is the biggest heavy crude oil producer in the Gulf. However, that type of crude is not widely used in oil refineries because it does not produce gasoline. Light crude oil produces gasoline and is therefore more attractive, so Saudi investors resort to markets such as Egypt to address that problem, Sobhi pointed out.

“No doubt this new refinery complex will add value to Egypt’s energy sector because oil refinery projects are lucrative to host countries, he added.

Egypt’s refinery plants have also attracted Libyan investors who recently revealed plans to build an oil refinery on Egypt’s north coast as part of a $10 billion of investments in Egypt.

Meanwhile, Fahmy said last May that Egyptian oil production was expected to rise 30,000 barrels per day (bpd) to 735,000 bpd within three months after declining from peak levels of close to one million bpd in the mid-1990s. The country’s reserves of crude oil and condensates clambered 221 million barrels to reach 4.189 billion barrels in the 2007/08 fiscal year which ended on last June, he added.

“Egypt’s oil production capacity has been on the rise as a result of establishing several refinery plants over the past years such as Midor [Egypt’s Middle East Oil Refinery], Sobhi said.

Around a fifth of Midor’s refined products output is being consumed in the domestic market, while the rest flows to European markets. The firm announced mid-July it plans to boost capacity to 130,000 bpd by 2011 to meet rising domestic demand.

EGPC owns 78 percent of Midor’s refinery, while subsidiaries Enppi and Petrojet each own 10 percent, and Suez Canal Bank owns 2 percent.

“Egypt’s exports of crude oil are usually generated from regional and foreign ownership in its refineries, Sobhi pointed out.

Egyptian private equity firm Citadel Capital also said last year it was planning to build a $2.4 billion oil refinery in Egypt to be finished in four years.

“Egypt is now self-sufficient of its domestic gasoline consumption, while it is a net importer of diesel and butane fuel, he added. “Establishing new oil refineries should enhance the country’s production capacity of diesel and butane fuel and fill in our domestic needs.

Topics: FJP

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