EGYPT is at long last embarking on the second phase of developing its petrochemicals industry. The trigger has been the rapid expansion of domestic gas supplies, and the improved prospects for raising finance.

However, there are some complicated issues that still have to be resolved. The first relates to future gas supplies and whether Egypt will be producing enough gas in four or five years time, both to meet the extra demand from petrochemicals producers and to satisfy export commitments. There are also question marks over the role the private sector will play in petrochemicals production as it might conflict with existing state-run projects.

Egypt’s petrochemical industry was created in the early 1980s when the Egyptian General Petroleum Corporation (EGPC) set up The Egyptian Petrochemicals Company (EPC) as a wholly-owned subsidiary. Its first investments were in chlorine, caustic soda and vinyl chloride monomer (VCM) units – all built by Japan’s Toyo Engineering – and a polyvinyl chloride (PVC) unit, built by Italy’s Technipetrol. These units, at the Ameriya complex outside Alexandria, came on stream in 1987. The Ameriya complex also houses a linear alkyl benzene plant, built by Snamprogetti of Italy and an aromatics unit, built by Technipetrol. Both started up in the late 1980s, and are operated by Nasr Petroleum Company, another EGPC affiliate. All have operated smoothly, although the VCM unit is now being replaced.

In 1987, EGPC announced plans to develop the Ameriya complex by adding ethylene, polyethylene and polypropylene units, as well as paraxylene and purefied terephthalic acid (PTA) plants. The paraxylene/PTA scheme actually went as far as to be internationally tendered. But a lack of finance brought the whole programme to a halt and it was not until 1995 that a revival became feasible.

EPC invited bids for two plants. The first was an ethylene plant that would produce an initial 150,000 tonnes a year (t/y) which would be doubled later. The second was a polyethylene plant that would initially use 100,000 t/y of the ethylene available from the first plant – the remaining 50,000 t/y would be used by existing EPC units. ABB Lummus Global secured the licence for the ethylene plant, and is one of four companies bidding for the construction contract. The tender process has been delayed because of changes in the composition of the gas feedstock and because of EPC’s decision to go to 300,000 t/y immediately. The contract is due to be awarded in early 1997. The other bidders, besides ABB, are Snamprogetti, Toyo and South Korea’s Daelim.

The licence for the polyethylene unit has been awarded to BP Chemicals of the UK. The plant, which will produce linear low density as well as high density polyethylene, is designed for a capacity of 200,000 t/y. It is not yet clear if contractors will be asked to bid for the full capacity or for an initial phase of 100,000 t/y.

The picture has now become more complicated, with the announcement that Phillips Petroleum Corporation of the US wants to set up a joint venture with EGPC or EPC to make 150,000 t/y of high density polyethylene. Cairo industry sources say it is clear there would not be sufficient locally produced ethylene for both a full-capacity EPC polyethylene plant and a Phillips plant.

Private venture

While these matters are being deliberated, a new private venture, Orient Petrochemicals Company, is pressing ahead with plans to build a polypropylene plant in Alexandria. OPC is a joint venture of leading local textiles firms and EGPC engineering affiliate Enppi. It is headed by Mohamed Farid Khamis, chairman of the Oriental Weavers Group and head of the Federation of Egyptian Industries. Six international companies have bid for the plant which will produce 120,000 t/y. The bidders have associated themselves with one of three process licensors – Union Carbide Corporation of the US; Montel of Italy; and BASF of Germany.

OPC was originally planning to import the propylene feedstock, but has since decided to set up a dehydrogenation unit so that it can produce it in-

house. This unit will process the propane cut of the natural gas that is piped to Alexandria from the Western Desert. The ethane cut will go to the ethylene plant.

The strategic question hanging over these developments is the future availability of gas. Production of natural gas has increased rapidly over the past 10 years, and is now about 1,400 million cubic feet a day (mcf/d). It will not increase appreciably until 1999, when a number of new fields will start to come on stream. At the same time, the government has started negotiations with prospective importers of Egyptian gas – first Israel, and now Turkey. The memorandum of understanding signed with Turkey on 13 November at the Cairo economic conference envisaged exports equivalent

to 1,000 mcf/d in 2000. Given that domestic demand for gas is expected to reach some 2,000 mcf/d by that date, the fulfilment of such a large export requirement would mean that local gas production would have to more than double in the next three years.

Even if some of the numbers do not add up, the fact remains that the Egyptian petrochemicals sector is finally on the move again, and private investors are keen to get involved.