Political upheaval delays Egyptian refinery

07 March 2011

Lenders seek provisional government endorsement of financial agreement

Egypt Petroleum Corporation (EPC) has delayed construction work on the Mostorod refinery by two months as the banks involved in the financing of project wait for Egypt’s provisional government to endorse the financial agreement that was reached at the end of 2010.

A $2,6bn loan facility had been arranged with a total of 20 banks participating in the financing. Those financiers want the provisional government reiterate the state commitment to the project.

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.

“Lenders have already secured the government support letter for the financing arrangement. The new government should endorse that existing letter,” says a source close to the project.

As a result or the changes in the government and the wait for a new government to endorse the exisitng financing, the start of construction will be delayed.

“It is a bit difficult to make projections, but we hope that the project will begin in a couple of months time,” says the source. Construction had originally been planned to begin in February or March.

The project is jointly owned by Citadel Capital, an Egyptian private equity firm, 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.

The engineering, procurement and construction (EPC) contract for the project has been awarded to a consortium consisting of Korean GS Engineering and Construction and Japanese Mitsui in 2007, WorleyParsons are the project management consultants.

The new refinery will be built adjacent to the existing Cairo Oil Refinery Company (CORC) refinery in Mostorod, 40km northeast of Cairo. It will make use of existing facilities, and use some of 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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