Qatar rescue is boon for Egypt

Egypt’s $3.6bn Mostorod refinery is finally approaching financial close after securing new equity and debt investors. It will be a significant boon to the state’s battered economy.

Even before Egypt’s revolution in February 2011, the project was delayed several times since it was first launched in 2006. The scheme also suffered a series of setbacks as contracts signed by the former regime were re-examined by the new government. Banks also held things up as they sought assurances from the state that it still backed the scheme.

Now things look like they are back on track. Qatar has come in with a combined investment of about $400m split between equity and debt. Without this investment, the project would probably not be happening.

The Mostorod refinery is strategically important for Egypt. It will convert waste oils into cleaner diesel fuels benefiting Cairo in two ways. Firstly, the cleaner oil will have environmental benefits. Secondly, a new local source of fuel will enable the state to reduce costly imports, which have drained foreign exchange reserves over the past year to dangerous levels.

Qatar, along with the other investors in Mostorod, will be hoping this means that whoever ends up ruling Egypt in 12 months’ time will remain supportive.

Serious concerns have been raised about how welcoming the country will be to foreign investment after a spate of private deals agreed under the old regime were overturned in the Egyptian courts.

The refinery shows that private investors are still interested in the region’s most populous country. Egypt needs to make sure they remain interested.