The recent appointment of former Egyptian Petrochemicals Holding Company (Echem) head Osama Kamal as the new petroleum minister and his subsequent rapid resolution of one of the county’s most pressing project disputes have raised hopes over an improvement to Egypt’s dented investment profile.
One of Kamal’s first actions after being appointed Petroleum Minister in early August was to negotiate a partial settlement to one of the most immediate foreign investment issues – the environmental protests by villagers surrounding the expansion of the Misr Oil Processing Company (Mopco) fertiliser scheme near Damietta. The protests had delayed construction work for 10 months and brought operations to a standstill, resulting in substantial financial losses to its shareholders.
The settlement is understood to include a guarantee that there will be no legal action brought against the villagers, although it is not clear what compensation will be offered to the company and its stakeholders, which include Echem and Canada’s Agrium.
The Mopco affair had deeply impacted Egypt as an investment destination. Agrium originally signed up for a $1.2bn fertiliser facility in 2004, but work had to be stopped in 2008 following protests by local villagers protesting against environmental concerns. As an eventual compromise the Canadian firm obtained a stake in the existing nearby Mopco venture. However, this in turn was the brunt of protests in late 2011.
News of the partial resolution to the issue will have helped lift the prospects of a number of planned petrochemical and fertiliser projects, along with investments in other sectors, stalled over the past five years due to a combination of taxation issues, environmental opposition and financial constraints as well as difficulties in raising finance in light of concerns about political and economic risk following the 2011 revolution.
The appointment of the former president and chairman of Echem, the country’s main petrochemicals development company and one of its foremost proponents of investment co-operation, is seen as a potentially positive move for the local chemicals industry and Egypt’s investment image as a whole.
Projects in the pipeline include a new dimethyl-ether (DME) facility next to the E-Methanex plant also in Damietta, an ethylene derivatives complex in Alexandria, and several other projects, including a mono-ethylene glycol plant, bio-diesel and bio-ethanol plants and further olefins schemes.
The now imprisoned former petroleum minister Sameh Fahmy established Echem in 2002 and commissioned a masterplan setting the company a target of increasing petrochemical production to 15 million tonnes a year (t/y) over 20 years, in three phases. The target was to develop 14 petrochemical clusters comprising 24 projects.
Under Kamal’s leadership, Echem made some progress towards meeting its demanding targets, but also suffered setbacks. The amount of new production capacity brought on stream or under construction is about 3.5 million t/y, and although the first-phase investment budget of $3.5bn was exceeded by almost 80 per cent, the value of Echem’s products was also higher than originally envisaged.
A comprehensive overview of Egypt’s investment profile and in-depth analysis of its projects market as a whole can be found in the Egypt Projects Market 2012 Report, the latest report by MEED Insight, MEED’s consultancy arm, due to be released in mid-September. For further details please contact MEED Insight at email@example.com or telephone +971 (0)4 367 1302.