By Mariana Somensi

The demographic expansion in Egypt brings an enormous responsibility to the oil and gas industry. As the energy market is directly related to the performance of other sectors, increasing the supply of petroleum products to meet the growth in demand is especially important.

In order to cover the crescent usage of fuel and cut costs with the importation of oil, gas, and other petroleum products, the Egyptian Ministry of Petroleum and Natural Resources  has set up new strategies and targets, which include transforming the country into a regional energy hub, as well as achieving self-sufficiency in gas production by 2018.

Although production and exploration drive a great amount of investments in the North African nation, looking at the petrochemical industry is equally essential to reduce the burden at the federal budget and avoid fuel shortages throughout the country. However, the sector is extremely cautious when it comes to new technologies and production models, and might be resistant to sudden innovation in order to avoid risks.

Risk Aversion

To enjoy the benefits of a well-established petrochemical sector, investing in technology and innovation is highly required to optimize the sector’s operations. “Innovation can come in a variety of areas, including new product development, improvements in raw material and feedstock identification and utilization, the use of techniques such as pinch technology to identify ways to improve process efficiencies, increase production yields and improve energy utilization, and supply chain optimization, among others,” Dale Kline wrote to the Innovative Membrane Technology’s (Imtex) website.

Nevertheless, Kline highlighted that innovating is not an easy task for the petrochemical industry. According to him, considering all the consequences of a failure in the chemical processes, the sector presents a particular aversion to technical risks in its operations, which brings a roadblock to the industry’s upgrade.

“This is the one area where strategy and resources really do not come into play.  The chemical industry is perhaps the most risk averse of all established industries.  Compared to industries such as information technology, telecommunications, health sciences, and even pharmaceuticals, to name a few, the development, demonstration, and adaptation of innovative technologies within the chemical industry moves at a snail’s pace,” he pointed out.

“While emerging technologies – truly innovative game changers – exist in the chemical industry, their demonstration and adoption to enhance, or even replace, decades-old tried and proven technology can be a difficult risk hurdle to overcome,” Kline added.

Yet, the petrochemical sector’s importance calls up for a change of behavior. In order to avoid a decline in performance, the industry must revitalize its operations by following up with the newest technologies in the market.

Risking is Necessary

Products obtained from oil and natural gas hold a major role in running an economy. Due to their importance in other industries and their omnipresent status in people’s routine, the production and management of petrochemicals must be nearly flawless to avoid a severe economic crisis and a sharp drop in quality of life. Accordingly, improving the sector brings bright prospects of progress and stability.

“The petrochemical industry can transform any country into an advanced one, as [it] is responsible for producing all kinds of products used in the market,” Hoda Ragab Omran, Engineer Business Development at the Egyptian Petrochemicals Holding Company (Echam), told Egypt Oil & Gas on the sidelines of Egypt Petroleum Show 2017.

As she explained, the country imports a huge amount of petrochemical goods, spending a lot of the available foreign currency. “We have to reduce our imports and encourage the local industry to supply for our market and cover our needs. The petrochemical industry is the solution to reduce our imports,” she added.

Given its proven potential of lifting the country’s economy, backing off from the necessary changes would be a long-term suicide for the sector. “Chemical companies would be wise to take a hard look at their core strategies – and make sure that real innovation in all areas of their businesses are pursued where absolute value is evident, and encourage and reward those who are willing to identify and pursue new technology in non-traditional areas.” Dale Kline noted.

Changes are Already Occurring

In the last decade, new approaches were spotted in the two largest economies in the world. The impressive shale gas production in the United States (US) brought new prospects for petroleum products output, including ethane crackers and on-purpose technologies, and China has been successfully operating coal-based petrochemical units, whose economics are more attractive if compared to crude oil-based feedstock.

Furthermore, “multiple market disruptions — including the shale gas renaissance in the United States, plummeting oil prices worldwide, and a capacity expansion drive in China and Iran — are reshaping the Middle East’s petrochemical industry,” Udo Jung, Mirko Rubeis, Marcin Jędrzejewski, and Arun Rajamani pointed out in an article for the Boston Consulting Group (BGC).

Egypt’s Potential

In Egypt, the petrochemical industry represents 3% of the gross domestic product (GDP) and 12% of total Egyptian industries, according to the data disclosed by Hussein Hassan Selmy during the Third Annual Downstream Summit held in Algiers, Algeria, in 2015. These numbers indicate that any development plan established at the Egyptian petroleum sector should also include the petrochemical performance in order to boost its effectiveness.

“The country is heavily dependent on imports and the ambitious development program [managed by the Ministry of Petroleum] is, in part, aimed at balancing the country‘s trade deficit – alongside improving its export performance,” Sherif El Gabaly stated in his article Petrochemical Industries in Egypt: Present and Future, written for the Federation of Egyptian Industries and the Chamber of Chemical Industries.

The country’s rich natural resources place Egypt in a privileged position to embrace innovation risks. The great proven amount of hydrocarbons and the incorporation of new gas fields to the local production – including Eni’s Zohr, the largest gas reserve found in the Mediterranean Sea – turn on a green light to new approaches in the Egyptian petrochemical industry, which could be fed by local production.

“The cost of production of petrochemicals is highly dependent on feedstock cost. The regions with abundant low cost feedstock have obvious advantage over the regions where the availability of feedstock is limited or closely related to crude oil pricing levels,” it was disclosed during the Southwest Process Technology Conference, held in the US. Accordingly, saving costs with importation and meeting the petrochemical industry’s needs with local production works as a great push for the industry to invest in innovative approaches.

“With a population of over [90] million, and GDP growth rate improvement, Egypt’s domestic consumption of petrochemical products is expected to increase in the coming years. In addition, Egypt supplies petrochemical products to about 50 countries worldwide,” Selmy pointed out during the Downstream Summit.

As Dale Kline well noted, “the ultimate winners in the chemical industry will be those who resource and support innovation, and overcome the technical risk barriers through successful and more timely integration.” With all the cards in hand, Egypt is more than ready to make a bold move towards innovation in the petrochemical sector – a move that would add up to the overall win of the country’s ambitious targets for  petroleum industry in the near future.

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