No movement for most high budget projects despite recent $560m Tecnimont award
The recent news that Egyptian Chemical Industries (Kima) had awarded the Italian contractor Tecnimont a contract to rehabilitate a urea plant was welcomed as a signal that Egypt was open for business again.
The Kima award is significant and will involve Tecnimont both rebuilding the old lines at the plant as well as constructing a new plant that will run on natural gas instead of electricity. The Italian contractor bid about $560m to secure the deal and the capacity at the plant will double to 1,200 tonnes-a-day.
The deal is significant because it is the first major award since popular protests ousted President Hosni Mubarak in February. However, any hopes that this award will be the catalyst that initiates a flurry of similar deals in Egypt’s heavy industries sector is somewhat optimistic.
|Egypt projects on hold|
|Foulath pelletising plants||$1.4bn|
|ArcelorMittal Red Sea Steel Facility||$340m|
|Red Sea Copper Smelter||$850m|
|Ain Sokhna steel plant||$475m|
|Source: MEED Projects|
According to Middle East projects tracker MEED Projects, about $3bn of heavy industrial projects are currently on hold in Egypt. All of these are in the metals industry and includes Gulf United Steel Holding Company’s two steel pelletising plants with a combined budget of about $1.4bn.
This does not tell the full story as many other projects not officially listed as “on hold” are still nowhere near ready to begin a construction phase.
The petrochemicals sector has been adversely affected as multibillion-dollar projects are lying dormant as a result of several factors, the most important of which is a lack of decision-making in government. This is especially affecting key areas such as land and feedstock allocations.
Other factors include a reluctance to finance projects from foreign investors to commit to projects while there is still not a new government in place and reticence from international contractors to work on projects they might not get paid for.
Egyptian Petrochemicals Holding Company (Echem) has several projects in the planning stages although industry insiders believe many of these will not now go ahead in the foreseeable future.
The most high profile of these is the $17bn Kafr el-Sheikh integrated refinery and petrochemicals complex. Engineering, procurement and construction (EPC) contracts were due to be issued in early 2012, but that is now not going to happen and no new timeline has been issued.
Another more realistic Echem project is its $1.7bn ethylene and polyethylene plant it is planning to build. The EPC for the ethylene has already been awarded to Japan’s Toyo Engineering, but work has not yet started. The polyethylene award has yet to be made, but sources close to the deal say no communication has been made in months.
Egypt still has some way to go before normality is resumed and it knows a strong heavy industrial sector will go a long way to placating the frustrated population with job opportunities. These projects are not cheap and while there is still no decision-making government in place and banks remain reluctant to take on big loans, then short-term stagnation is the only outcome.
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