Financial close for Mostorod refinery imminent

17 April 2011

Construction to start as soon as financing is in place

Financing for Egypt’s Mostorod refinery project will be closed at the start of June at the latest, with construction work expected to begin as soon as the funding is in place.

The greenfield project was delayed by the political unrest that swept President Hosni Mubarak from power and installed a provisional government under the auspices of the military. Lenders were unwilling to commit to the deal before the new government reiterated the support for the project expressed by the old regime.

Egypt’s oil production (thousand barrels a day)
Source: BP 

The Finance Ministry issued a letter of support in late in March, according to a source involved in the project.

“Based on this letter, we are currently working with the client to close the financing. This will happen by the end of May or the beginning of June,” said the source.

“Once the financing is closed we are planning to start our design work immediately and also the construction work,” he added.

Before the political upheaval forced a delay, construction was planned to start in February. The refinery will now come online in 2015, said the source.

A $1.8bn engineering, procurement and construction (EPC) contract for the project has been awarded to a consortium consisting of South Korea’s GS Engineering & Construction and Japan’s Mitsui in 2007.

The project is financed by a mix of equity and loans, with the local private equity firm Citadel providing the equity. A $1bn loan facility has been arranged through private banks, with export credit agencies lending the outstanding amount.

The project is jointly owned by Citadel Capital and national oil company Egyptian General Petroleum Corporation (EGPC). Citadel owns 85 per cent of the project’s holding company EPC, and EGPC holds 15 per cent. Saudi-based Swicorp Joussour in 2008 acquired a stake in the project worth $200m.

The government has a stake in the project through Egyptian General Petroleum Corporation (EGPC), which will also supply the refinery with feedstock and buy the output at international prices under a 25-year purchase agreement.

The new refinery will have a capacity of around 5 million tonnes a year of refined products, half of which will be diesel oil. It will be built adjacent to the existing Cairo Oil Refinery Company (CORC) refinery in Mostorod, northeast of Cairo. It will make use of existing facilities and use CORC’s products as feedstock. CORC is Egypt’s largest refinery, with a processing capacity of 142,000 barrels a day (b/d).

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