The facts about Mostorod

Ahmed Morsy , Tuesday 29 Sep 2020

The Egyptian Refining Company was inaugurated by President Abdel-Fattah Al-Sisi this week, with Ahmed Morsy answering frequently asked questions about a project intended to reduce Egypt’s reliance on oil products

What is the Mostorod Complex?

The new complex is owned by Al-Qalaa Holding’s Egyptian Refining Company (ERC) and represents an estimated investment of $4.4 billion. It is a state-of-the-art greenfield hydrocracking complex and one of the most advanced petroleum refineries at this technological level in Africa.

This largest infrastructure private-public partnership (PPP) project in Egypt was established in cooperation between the public and private sectors, represented by the Egyptian General Petroleum Corporation (EGPC) and Al-Qalaa Holdings. The ERC will convert 3.5 million tons of heavy residue from the refining process at the nearby Cairo Oil Refining Company (CORC) plant to higher-value products like diesel and gasoline and then sell the production to the EGPC.

Al-Qalaa Holdings invested in the project with Gulf and international investors, global export credit agencies, and development finance institutions.

What does the new complex contribute to the local petroleum market?

The ERC converts low-value fuel oil into middle and light distillates to meet domestic consumption needs. It produces about 4.7 million tons of refined products and high-quality oil derivatives per year, including 2.3 million tons of Euro V diesel (30 to 40 per cent of Egypt’s current imports) and 600,000 tons of jet fuel.

How did the project start?

According to Al-Qalaa Holdings chairman Ahmed Heikal, planning for the mega-project started over 12 years ago. Heikal explained at the Africa Investment Forum in Johannesburg, South Africa, in 2018 that the ERC had had to overcome several obstacles, such as the global financial crisis in 2008-2009 followed by the 25 January Revolution in Egypt, both of which put significant pressures on the banks and reduced investment appetites, resulting in some interested investors pulling out.

The construction work began in 2014, and all project units have been in operation since September 2019, according to the Al-Qalaa Holdings website.

What is the total investment cost of the ERC?

The investment cost of the greenfield refinery amounts to $4.4 billion, equivalent to LE70 billion. In the light of global and local financial hardships, Heikal said at the Johannesburg Forum, many financial institutions had participated in pumping investments and loans into this huge project, numbering 35 international institutions from Japan, South Korea, the European Union, the African Union, and the Gulf countries in addition to five local institutions.

What is the strategic importance of the ERC?

The project comes within the framework of Ministry of Petroleum plans to increase production and reach self-sufficiency in petroleum products by 2023. Among the ERC’s main objectives is to secure stocks of petroleum products, reduce the possibility of fuel crises, and overcome delays in the arrival of imported petroleum products.

According to Heikal, the ERC will reduce Egypt’s imports of petroleum products and save $600 million to $1 billion in foreign currency.

Why is the ERC located where it is?

  ERC is part of an integration framework being implemented in the Qalioubiya region of Mostorod. Its location puts it near the EGPC’s Cairo Oil Refining Company and main distribution companies. The ERC and CORC, which provides feedstock for the ERC, provide some 22 per cent of Egypt’s current refining capacity.

What is the social and environmental impact of the ERC?

Heikal said in Johannesburg that the ERC would have positive impacts on the environment of the surrounding area, whether in reducing harmful emissions by converting them into coal and sulphur, by relying on natural gas as fuel, or by converting the CORC to be able to use natural gas instead of diesel as fuel.

In the Mostorod region, the ERC has created more than 18,000 employment opportunities for local people. It has provided scholarships to the best Egyptian universities for students excelling in their studies, and it has raised educational levels in the surrounding region by providing scholarships for the area’s teachers to the American University in Cairo in addition to national universities.

The first decision of the company’s board of directors was to raise the budget for community services by preparing projects based on improving local incomes and helping families whose breadwinners are women, Heikal said. 

*A version of this article appears in print in the 1 October, 2020 edition of Al-Ahram Weekly.

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