Progress has been made on securing debt financing for Egypt’s $2.1bn Asyut hydrocracker, according to a source with knowledge of the project.

About six institutions have committed to providing funds for the project, the source said, declining to name which lenders were involved in the deal.

The Asyut project will see a full conversion hydrocracker complex constructed next to the existing Asyut oil refinery facilities in Upper Egypt.

“Many of the backers for the Asyut project were also involved in the ERC [Egyptian Refinery Company Mostorod New Refinery] project,” he said.

“They are both very similar projects so they know what the risks are and they already have models for assessing the scheme.”

The $3.7bn Mostorod New Refinery project is in the execution phase and is expected to be completed in 2017.

ERC is a public-private partnership financed by the Egyptian General Petroleum Corporation (EGPC) and the investment company Qalaa Holdings, which was formerly known as Citadel Capital.

The following institutional financers were also involved in the project:

• African Development Bank (Ivory Coast-based)
• Ahli United Bank (Bahrain)
• Banco Espirito Santo (Portugal)
• Banque Misr (Egypt)
• Calyon Bank (UAE)
• Commercial International Bank (Egypt)
• Credit Agricole Indosuez (France)
• European Investment Bank (Luxembourg-based)
• Export-Import Bank of Korea (South Korea)
• HSBC Bank Middle East (UAE-based)
• Japan Bank for International Cooperation (Japan)
• KBC Bank (Ireland)
• KfW (German)
• Mitsubishi UFJ (Japan)
• National Societe Generale Bank (France)
• Nippon Export & Investment Insurance (Japan)
• Qalaa Holdings (Egypt)
• Standard Chartered Bank (London-based)
• Sumitomo Mitsui Banking Corporation (Japan)
• West LB (Germany)

Those behind the Asyut hydrocracker scheme are still looking for equity partners for the project.

Pharos Investment Banking, which is responsible for finding financing for the scheme, is looking for between one and three entities to take a stake in the project, with at least one of the equity partners being a strategic partner with prior experience of being involved in similar projects.

Pharos may struggle to find a partner in the current oil price environment.

Lower oil prices have reduced margins for downstream operations in the Middle East, making schemes like the Asyut hydrocracker less appealing to investors.

The first feasibility studies for the Asyut project took place in 2009, but the project failed to progress due to problems finding financing.

The hydrocracker will have capacity to process 3.4 million tonnes of fuel oil a year.

The existing Asyut refinery will supply 900,000 tonnes of fee stock, and 1.6 million tonnes of fuel oil will be supplied by a new crude distillation unit (CDU) due to be installed as part of the hydrocracker project.

The CDU will be fed by 2.5 million tonnes of heavy crude and will also produce other refined products, including diesel.

Oil products produced by the refinery will have a low sulphur content, making it possible to export products that are not sold to the domestic market.