EGYPT is one of the smaller players in the Middle East oil and gas industry, but at the moment it is one of the busiest. The activity is spread throughout the industry, from exploration to petrochemicals. The Egyptian General Petroleum Corporation (EGPC) has just awarded a new clutch of exploration permits and is talking to Israel about exporting gas. A major new refinery contract has been let and bids have been submitted for Egypt's first ethylene plant.

Underpinning the activity is a perception that Egypt is a sound investment risk, and that conditions for doing business in the country have improved.

Crude oil prospects. The allure for companies investing in exploration is not so much the prospect of making huge discoveries, rather the record of Egypt in yielding modest but worthwhile oil output. Crude oil reserves now stand at about 3,300 million barrels, most of it in the Gulf of Suez, where oil has been produced since the late 19th century.

EGPC says it believes a further 10,000 million barrels remain to be found. Part of this will come from increasing reserve estimates from existing fields, and part will come from exploring in areas areas next to established fields.

Crude oil production has held steady at just under 900,000 barrels a day (b/d) for more than a decade. Gulf of Suez Petroleum Company, EGPC's joint venture with Amoco Corporation of the US, is the largest producer, by virtue of its interests in some of the major Gulf of Suez fields. Other significant players are International Egyptian Oil Company (IEOC - the local arm of Italy's Agip), Repsol of Spain, British Gas and the Royal Dutch/Shell Group. Oil exports, which have grossed just over $2,000 million a year over the past three years, are priced according to a formula linked to North Sea Brent.

Natural gas. For many of the new exploration areas - in the Western Desert, the Mediterranean and Upper Egypt - companies see gas as the most likely prospect. Gas reserves have been steadily revised upwards.

The figure for 1995 was 22 trillion cubic feet (tcf). A higher reserve estimate is due to be announced in the first quarter of 1996. An estimated 40 tcf remains to be discovered. IEOC, Amoco and Shell are the leading gas producers. Output is now about 1,400 million cubic feet a day (cf/d).

Amoco, IEOC and the EGPC affiliate Egypt Gas have formed Egypt Trans-Gas Company with the aim of expanding the domestic gas pipeline network, and building a gas export pipeline to Gaza, Israel and Jordan. The gas will come from offshore East Mediterranean fields where IEOC and Amoco have found large quantities of gas. The government says it expects to conclude a sales and purchase agreement with Israel during 1996 for the supply of about 250 million cf/d of gas. The pipeline would be ready for use in 1999 or 2000 (see Egypt).

Refineries. Egypt's seven refineries process just over 500,000 b/d. This has remained constant for several years, as increases in total energy consumption have been met by rising gas production. The existing refineries are heavily geared to fuel oil, which accounts for almost 50 per cent of total output. New projects are aiming to deal with a shortage of lighter products, in particular diesel.

The most ambitious new scheme is the Midor refinery, an estimated $1,000 millionplus Egyptian/Israeli joint venture. A European consortium led by Italy's Technipetrol signed a letter of intent for the engineering procurement and construction contract at the end of 1995. The refinery will process 100,000 b/d of crude, and will include a 25,000-b/d hydrocracker, geared to produce light products. EGPC, which has a 20 per cent stake in Midor (Egypt), will supply 30 per cent of the crude. The rest will come from the recently expanded Sumed pipeline, which can carry 2.4 million b/d of crude from the Gulf of Suez to the Sidi Krier terminal, west of Alexandria.

Financing for the Midor refinery includes $240 million in equity, 20 per cent from EGPC, 40 per cent from Egyptian businessman Hussain Salem and local partners, and 40 per cent from Israeli businessman Yosef Maiman's Merhav group. The European Investment Bank is to lend ECU 220 million ($290 million).

These funds will be supplemented by loans from Egyptian banks and supplier credits guaranteed by agencies in Italy, France, Spain, Israel and possibly Japan. Midor will also appoint an international oil company to operate the refinery in the first quarter of 1996.

EGPC affiliate Nasr Petroleum Company is also pressing ahead with a 35,000-b/d hydrocracker to be built at its refinery in Suez.

Licensing and basic design contracts are due to be awarded in the next few months. UOP of the US, which is principal licensor for Midor, is well placed to win most of the Nasr Petroleum packages.

Petrochemicals. Five international companies bid by the 2 January deadline for an estimated $220 million-260 million contract to build Egypt's first ethylene plant for the Egyptian Petrochemicals Company (EPC), owned buy EGPC. The bidders are ABB Lummus Global of the US - which will provide the technology licence - Snamprogetti of Italy, Daelim Industrial Company of South Korea, and Toyo Engineering and Mitsui Engineering & Shipbuilding, both of Japan.

It will produce 150,000 tonnes a year of ethylene, two-thirds of which will be used to make polyethylene.

BP Chemicals of the UK has finally been awarded the contract to provide the technology for this unit, after a long battle with Union Carbide Corporation of the US. EPC will use the remaining ethylene as feedstock for other units at its Alexandria complex.

Textiles magnate Mohamed Farid Khamis has been involved in efforts to set up two private petrochemicals schemes, a polypropylene plant in Alexandria and a vast new ethylene-based complex on the Gulf of Suez. Both schemes are at the early stages of development. Major US firms such as Dow Chemical have shown interest, but, so far no firm commitments have been made.

David Butter