Promoting petrochemicals
Egypt is trying to lure foreign investors into the petrochemicals sector. Shereen Nasr reports
Last week, Egypt hosted its first conference aimed at attracting foreign companies to invest in the fast-growing petrochemical sector. Organised by the Middle East Economic Digest (MEED) and sponsored by the Egyptian Petrochemicals Holding Company (Echem) and Oriental Petrochemicals Company (OPC), the event brought senior government officials and key players involved in the petrochemicals sector together for the first time.
According to Minister of Petroleum Sameh Fahmi, Egypt's investments in the petrochemical sector are worth $10 billion, generating $7 billion in annual revenues. 100,000 new jobs are expected to be created by the year 2020.
"Egypt has a 20-year plan to develop the petrochemical sector, which is based on Egypt's wealth of natural gas. This forms the backbone of the petrochemical industry," said Fahmi.
At present, there are five petrochemical plants operating in Egypt, with an output of 750,000 tonnes a year. Echem was set up a year ago with the aim of establishing 14 new complexes at six coastal sites to facilitate exports. "International chemical producers can be potential shareholders of these new companies," said Mustafa Shaarawi, chairman of Echem.
It is worth noting that Egypt's proven natural gas reserves have steadily increased over the last 10 years. According to the latest estimates, they have reached some 1.656 trillion cubic metres.
Egypt will begin exporting natural gas in May via a pipeline to Jordan. The pipeline will later be extended to Syria and Lebanon. Gas exports, according to Fahmi, have the potential to generate $2 billion a year for the Egyptian economy. "Egyptian strategic reserves are currently available for new gas export schemes," he said.
Since the early 1990s, natural gas has been the main source of energy for a variety of different sectors, including the cement industry, the iron and steel industry, as well as other residential and commercial purposes. Yet, it is the power generation sector that consumes 61 per cent Egypt's natural gas.
According to Hany Soliman, vice-chairman for Operations at the Egyptian Natural Gas Holding Company (EGAS), a prosperous petrochemical industry can be developed from natural gas wealth.
Ethane was first produced in Egypt in 2000 at a site west of Alexandria, with polyethylene being produced at Sidi Krir. "Our target for ethane production is 5000 tonnes per day by 2008," said Soliman. He added that Egypt has a well established gas industry, good infrastructure and high market accessibility, all advantages when developing a petrochemical sector.
Mohamed El-Ghamrawi, chairman of the General Authority for Investment and Free Zones was keen to see more guarantees and incentives for foreign companies to own and run petrochemical projects in Egypt. "These include full ownership for foreigners, guarantees against nationalisation and expropriation, tax exemption from 5 to 20 years and 5 per cent customs duties on imported machinery," said El-Ghamrawi.
