Oil brownfields are the backbone of the oil industry. According to a report from IHS Cambridge Energy Research Associates, two-thirds of the world’s daily oil production hails from mature fields. This figure is even greater in Egypt, and according to empirical data at Egypt Oil & Gas’ (EOG) “Future of Egypt’s Brownfield Development” roundtable, crude production from brownfields in Egypt makes up a resounding 77%.With the expansion and development of the Egyptian economy, the domestic demand for refined petroleum products has increased significantly. Having the means to satiate demand through local refineries is crucial to help ensure Egypt’s future development.

What’s more, Egypt’s energy mix is changing. This has prompted a shift in product demand such as natural gas being utilized more and more to satiate Egypt’s expanding requirements for electricity, thus meaning the demand for fuel oil has dwindled. Therefore, a shift is required from producing fuel oil to lighter products such as diesel. This shift in demand for lighter petroleum products is one of the most crucial challenges Egypt’s oil and gas industry must overcome.

With this said, Egypt has recognized the importance of adapting, and as of late, there has been a wave of commissions to finance the renewal of Egypt’s refining sector as well as constructing two new landmark refineries.

In terms of existing infrastructure, Egypt is home to 12 operating refineries. As of 2019, they have a total capacity of 750,000 barrels of oil per day (bbl/d), a statistic that has propelled the country to rank as the biggest oil refining nation in Africa, according to BP’s Annual Statistical Review of 2019.

This review will detail how Egypt has regenerated the existing refineries as well as showcase the landmark projects in the pipeline.

State of Affairs Downstream

Firstly, let us delve into what the state of the downstream sector is looking like in the wake of the coronavirus. In terms of planned investment, APICORP’s MENA Energy Investment Outlook 2020-2024 report has revised planned energy investments in the region from $965 billion to $792 billion, a $173 billion decrease compared to APICORP’s 2019-2023 report.

However, this has not seemed to perturb the levels of planned investment and Egypt is seen as one of the four major players in the region with its new $38 billion petrochemicals drive paving the way.

Egypt’s downstream plan, as detailed by APICORP’s report, has a two-fold focus: the first objective is to cut reliance on imports of refined products and basic chemicals feeding its domestic industries. The second ambition is to solidify its status as an energy hub, with the Suez-Mediterranean (SUMED) Pipeline at the core of this strategy.

Refinery Upgrades

Egypt’s Ministry of Petroleum is currently adopting the policy of revamping existing refineries to achieve self-sufficiency for petroleum products and reduce reliance on exports.

On September 28, 2020, Egyptian President, Abdel Fattah Al-Sisi, inaugurated the Egyptian Refinery Company’s (ERC) project in Mostorod with investments worth $4.3 billion, to help maintain the refinery’s status as one of the most important petroleum refineries in Africa. With the implementation of these upgrades, the refinery is expected to see enhanced diesel production by 30% and increase gasoline production by 15%.

Another big-money refinery revamp comes in the form of the Assiut Oil Refining Company (ASORC). The $450 million project in Assuit is expected to operate with a production capacity of 660,000 t/y of naphtha in addition to producing butane. The project is scheduled to come into operation in Q4 2020.

Middle East Oil Refinery (MIDOR) is located in Borg EL Arab, West of Alexandria. The refinery has the capacity to refine both imported crude oil and crude oil coming from the Western Desert fields. MIDOR mainly produces Liquified Petroleum Gas (LPG), naphtha, jet fuel, diesel, sulfur, and coke, according to the Egyptian General Petroleum Corporation’s (EGPC) website. As a testament to the refinery’s importance in the Egyptian refinery sector, in June 2018 MIDOR was the beneficiary of an expansion project worth $2.3 billion with the aim of increasing refining capacity by 60%. Pre-investment total refining capacity was 5 million tons per year (mt/y). The project became operational in Q1 2020, which will propel the company’s production to 8 mt/y by the end of 2020.

El Suez Refinery was built in 1965 and has a current refining capacity of 3 mt/y, according to the company’s website. Located near the Suez region on the Red Sea, it supplies the market with LPG, Naphtha, Gasoline, Kerosene, Gas Oil, and Fuel Oil. There are two crude oil distillation units, which receive crude feed from the Gulf of Suez. In addition, it has a reforming unit that was established in 1983 with a capacity of 0.8 mmt/y and a coker complex, which was commissioned in 1966 with a capacity of 1.5 mmt/y. The refinery has been granted $250 million worth of loans in 2020 by the European Bank for Reconstruction and Development (EBRD) to improve the refinery’s efficiency.

In With The New

The Ministry of Petroleum, Mining, and Mineral Resources announced in May 2020 the highly anticipated updated version of the National Plan for Petrochemicals Industries (NPPI) 2020-2035, an updated manifesto from the NPPI 2002-2020. Within this plan two major refining complexes are set to be constructed:

A refinery plant due to be set up in Al-Alamein (Western Desert) costing in the region of $8.5 billion. It will have a 2.5 mmt/yr crude and condensate refinery producing 1 mmt/yr of petrochemicals and 0.85 mmt/yr of refined products. It is expected that it will be tendered through the Egyptian EPC Engineering for the Petroleum and Process Industries (ENPPI) in H2 2020.

Within the project, the targets include satiating domestic market needs supplying specialty chemical feedstocks for Egyptian industries, and exporting surplus quantities. It is expected that the Ministry of Petroleum will hold a minor equity share in this project and will seek a combination of institutional equity investors and project financiers.

The second project licensed under the updated NPPI is the $7.5 billion ECHEM project in the Suez Canal Economic Zone (SCEZ) to produce 2.2 mmt/yr of petrochemicals and 0.65 mmt/yr of refined products. Bechtel has been selected as the engineering, procurement, and contracting (EPC) partner while the US International Development Finance Corporation (IDFC) and US Exim Bank have been highlighted as potential contributors to the project’s finance.