Sherine Nasr reports on plans to boost Egypt's petrochemical industry A 20-year, three-phase plan to develop the petrochemical industry was announced last week by Sanaa El-Banna, newly appointed chairman of the Egyptian Petrochemical Holding Company (Echem), during the second conference on petrochemicals organised by the Middle East Economic Digest (MEED). "The plan," he said, "aims to make use of Egypt's extensive natural gas reserves which will serve as the cornerstone of the emerging industry." Egypt's petrochemical industry currently generates $7 billion in annual revenues, according to the Ministry of Petroleum's statistics. Under the ambitious plan $10 billion worth of investment will be pumped into 14 new petrochemical complexes in the governorates of Behira, Kafr Al-Sheikh, Damietta, Daqahlia, Ismailia and Suez over the next two decades, creating an estimated 100,000 new jobs in the sector by 2020. "The sites have been chosen because of their proximity to export facilities," said Samir Abul-Fotouh, an executive at Echem. Echem was established by the Ministry of Petroleum with a mandate to overhaul the petrochemical industry in Egypt. "We intend to maximise the benefits that will accrue from Egypt's proven natural gas reserves and are seeking to attract more foreign investment to this vital sector of economy," said Abul-Fotouh. Last year saw several major projects initiated in the sector. Echem and the Damietta Port Authority have already signed a contract for the production of basic and intermediate petrochemical products at the Mubarak Complex for Natural Gas and Petrochemicals in Damietta. A $500 million methanol plant, with a capacity to produce 1.3 million tonnes annually, and a $700 million urea/ammonia plant capable of producing 3,500 tonnes daily are currently planned in the concession area which also houses the recently completed SEGAS plant for Liquified Natural Gas (LNG), a joint Spanish-Egyptian project budgeted at $1.3 billion. Echem has also finalised a $450 million contract with the Oriental Petrochemical Company (OPC) establishing the Egyptian Company for Propylene and Polypropylene. A new plant is to be built on 90 acres of land at Port Said with a capacity to produce 350,000 tonnes of polypropylene annually. OPC, Egypt's only manufacturer of polypropylene, currently exports 10 per cent of its production to Europe, the Middle East and Africa. Attempts to develop the petrochemical industry in Egypt, says Abul-Fotouh, began as early as 1961 when "an extremely ambitious plan was laid". Unfortunately it foundered over a lack of natural reserves and failed to attract the necessary direct foreign investment leading to a situation in which the production of chlorine, styrene and polypropylene is currently concentrated in a single complex, the Oriental Petrochemical Company's (OPC) plant at Al-Ameriya in Alexandria. The new projects will join five other petrochemical plants established in the wake of natural gas discoveries, which have been growing steadily over the last decade. According to the latest figures released by the Ministry of Petroleum, Egypt's proven natural gas reserves have reached 60 trillion cubic feet (tcf). Petroleum and natural gas now account for eight per cent of GDP and 40 per cent of Egypt's exports. But this could well be the tip of the iceberg. According to Sameh Fahmi, minister of petroleum, gas exports alone have the potential to generate $2 billion annually. "Egypt's strategic reserves," he says, "are currently being made available for new gas export and manufacturing schemes." But however important to the nascent industry those reserves are, they constitute only one element when it comes to competing in the global market. "The pricing of gas, which must be competitive with other producers in the area, and the general business environment are two major factors that will determine who becomes the region's key players," argues Nehad El-Kordi, general manger at SEGAS. Egypt's location gives it a comparative advantage when it comes to exporting to Asia and Europe. To exploit this to the fullest, though, El-Kordi believes that much must be done to improve a business climate that currently hinders rather than encourages foreign investment. "The total time required to enforce a contract and the protection of foreign investors' rights are all factors that must be considered by policy-makers," he says, if Egypt is to successfully compete with Algeria, Saudi Arabia, Qatar and Iran, the region's other major petrochemical manufacturers, and attract the massive investments needed to implement Echem's plan.
