Egypt to Build $2 Billion Oil Refinery, with Chinese Investment, for Local and Chinese Markets

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Researched by Industrial Info Resources (Sugar Land, Texas)--As China continues its burgeoning economic growth, the country has embarked on a refinery-building program that is designed to add up to 2.84 million barrels per day (BBL/d) of capacity over the next five years. In the latest move, China is set to invest up to $2 billion in a new refinery in Egypt.

The Egyptian state news agency has reported that the refinery will be the largest in Egypt, with an initial refining capacity of 15 million tons each year, which is equivalent to about 300,000 BBL/d. Future expansion of the refinery, under a second phase, will double this capacity. Output from the refinery will be aimed at both the domestic and Chinese markets.

The project will be run on a build-own-operate-transfer basis, with Chinese companies constructing and operating the refinery for a 25-year period before handing over the ownership on a gradual basis to Egypt.

The refinery is expected to be constructed by Chinese companies, including the state-owned China National Petroleum Corporation (CNPC) (Beijing, China) and the Rongsheng Petrochemical Company Limited (Hangzhou, China).

The project was launched by the recent signing of a memorandum of understanding among the government-owned Egyptian General Petroleum Corporation (EGPC) (Cairo, Egypt), CNPC and Rongsheng in Beijing during a three-day visit to China by Egyptian Oil Minister Sameh Fahmi.

The visit was aimed at strengthening ties between the two countries, particularly in the gas, oil and petrochemicals sectors, and attracting Chinese investments in Egypt. No further details of the proposed project have been released.

Egypt operates a total of nine refineries, with a total capacity of about 726,000 BBL/d, giving the country the largest refining sector in Africa. In August 2008, the Egyptian government had plans to upgrade and expand existing refineries to produce lighter oil and higher octane products, with the implementation of two new projects. One of these new projects is the Ain Al Sokhna oil and gas refinery on the Red Sea coast. This project has been under discussion since 2005.

The Al Sokhna refinery is being developed by the Sokhna Refining and Petrochemicals Company, a part of EGPC, and when it finally comes online sometime in late 2012 or early 2013, it will produce about 200,000 BBL/d.

The second greenfield project discussed in 2008 concerned a 500,000-BBL/d refinery to be built near the Suez Canal with investments from Egyptian, Saudi Arabian and Kuwaiti investors. As per discussions in 2008, this refinery was scheduled for start-up in the summer of 2009, but the plans appear to have been shelved.

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