EGYPT - Middle East Oil Refineries (Midor).

This is a 100,000 b/d state-of-the-art refinery built in a free zone next to Ameriya near Alexandria, 7 km from the Sidi Kerir oil terminal of the Suez-Mediterranean crude oil pipeline and close to Dekheila port. It is near LPG storage tanks and a loading station for tankers. On stream in early 2001, years behind the original schedule and becoming fully operational since July 2003, it can produce: 2.18m t/y of very high quality gasoil and diesel; 1.12m t/y of two kinds of high octane unleaded gasoline; 676,000 t/y of top quality jet fuel and kerosine; about 350,000 t/y of petroleum coke; 193,360 t/y of LPG; and 97,000 t/y of sulphur. The products are marketed locally and in the Mediterranean.

The plant has atmospheric and vacuum distillation units, a hydrocracker licenced by UOP, an isomerisation unit, a CCR, a coker, a desulphurisation unit and a sulphur recovery unit. Its sophistication is measured by the complexity index, with the world index being 6 and the Midor rating being 8.7. The world's highest rating, 12, is in the US. With Midor excluded, Egypt's complexity rating is 2.8. After Midor started up, the country's refining sector got a rating of 3.8. But Midor is a complicated venture.

Approved by the government in 1993, the $1.3 bn Dublin-registered JV was first to be a showcase of Arab-Israeli peace. Then the promoters were the Israeli Merhav Group of Yosef Maiman (close to Shimon Peres) and Hussein K. Salem Group (businessman Hussein Salem was formerly in the Egyptian intelligence). But the negative turn in the Arab-Israeli peace process - particularly Israeli Premier Sharon's use of excessive force against the Palestinians after he came to power in 2001, compelled Cairo to get rid of Merhav. Merhav's 20% in Midor was bought in late May by the state-owned National Bank of Egypt (NBE). Now the Midor ownership structure is as follows: EGPC, 40%; ENPPI, 10%; Petrojet, 10%; NBE Finance, 38%; Hussein Salem, the Midor chairman, 2%; and Suez Canal Bank, 2%. ENPPI and Petrojet are engineering and construction firms in which EGPC has the majority share, although nominally they have a private-sector status. (Originally, EGPC had a 20% share in the venture, while Hussein Salem and Merhav each had 40%. In early 1997 EGPC doubled its stake and brought Petrojet and ENPPI into the venture). Reportedly NBE paid $155m for the Merhav stake, compared to a nominal value of $72m reported by the Cairo press. NBE was later negotiating with Kuwaiti and other Arab Gulf investors for the sale of the 20% equity.

The refinery was designed to process Saudi Arab Light crude and similar crudes from the Arab Gulf countries, rather than Egyptian grades. But none of these states agreed to supply Midor. As a result, Midor had to buy crudes from the spot market. It also buys Russian Urals occasionally. Because Midor has no crude unloading facility, Urals cargoes have to travel south through the Suez Canal and then north through the Suez-Mediterranean (Sumed) pipeline.

Midor has been operated and maintained by Foster Wheeler under a five-year contract worth $260m signed in late 2000. Foster Wheeler had managed the refinery project since 1998. The front-end engineering and design (FEED) for Midor was done by Fluor Daniel of the US in early 1995. In December 1995, a JV of Technip and Technip Italy got the $1.2 bn EPC contract. Daelim and Petrojet got the main subcontracts. Other sub-contractors included Tecnicas Reunidas and Mannesmann.

Several satellite free zone JVs have emerged from Midor. These include Middle East Oil Tankage & Pipelines (MidTap), created in 1997 for building and running pipelines and port facilities and supply of water and gas, with a gas purchase contract signed with Gasco, a firm controlled by the state-owned Egyptian Natural Gas Holding Co. (Egas), in charge of the national gas distribution network. Capitalised at about $410m, MidTap is owned 40% by ENPPI, 20% by Misr Bank, 20% by Private Egyptian Co. for Investment Projects (EIP), 12.5% by NBE Finance, 4% by NBE, and 3.5% by Masaka. Middle East Electric Co. (MidElec), capitalised at $70m, was set up in 1999 to provide power to Midor and MidTap from a 180 MW gas-fired plant built at the free zone near Midor by Siemens. MidWater, owned 20% by MidTap, 70% by Italian water companies and 10% by Egyptian Water Works Co, supplies water from facilities built on BOOT basis at the free zone. PetroMaint, capitalised at $20m, was set up in 1999 by EGPC, ENPPI, MidTap and other companies to provide various services in the free zone and the Alexandria/ Ameriya/Sidi Kerir areas. It also provides consultancy, quality control, and training.

Marketing of refined products by the state is done through three EGPC units: Misr Petroleum Co., Petroleum Gases Co., and the Co-operative Society. Misr Petroleum is 100% owned by EGPC, while the company owns more than 98.5% of the other two. They control most of the domestic market, selling almost 18m t/y of products.

Private companies are authorised to distribute refined products under a law passed in 1990. Private retailers sell over 3m t/y, with the largest being ExxonMobil. Shell is involved through Shell Marketing Egypt for Distribution which began operations in 1990. Tamoil is among the retailers.

A number of private investors have been given licences to build refineries in Egypt. One of these is Albaraka Int'l Co. for Oil Refining of Saudi Arabia, which got a licence in 1997. Egypt-Canada Co. for Manufacture and Blending of Lube Oils, formed by Egyptian investors and a Canadian firm, was set up in mid-1996.

Shell is promoting a gas-to-liquids (GTL) venture in Egypt. It says this will be part of a programme to develop and produce offshore gas from a deep-water block and to export the gas in LNG form (see Gas Market Trends Nos. 1 & 3).

Ivanhoe Energy (Middle East), a unit of Ivanhoe Energy of Canada, and EGAS in October 2005 signed a memorandum of understanding for Ivanhoe to prepare a feasibility study to build and operate a GTL plant to convert natural gas to ultra-clean liquid fuels in Egypt.

EGAS has agreed to commit up to 4.2 TCF of natural gas. This means a supply to the GTL plant of about 600 MCF/day, for the anticipated 20-year operating life of the proposed venture, if the study indicates that the project is economically feasible.

Ivanhoe Energy's President and CEO Leon Daniel was on Oct. 26, 2005, quoted as saying: "This commitment of natural gas to a project is a significant step toward the potential development of a GTL plant in Egypt. This agreement advances our discussions related to GTL opportunities in Egypt, which have been ongoing for a number of years".

Ivanhoe Energy by then had begun the engineering design of a GTL plant to incorporate the latest advances in GTL technology. Ivanhoe Energy was in the process of obtaining an updated market analysis for GTL products to reflect changes since the original evaluation was completed several years ago. Plant capacity options of 45,000 and 90,000 b/d will be evaluated.

If the feasibility study indicates that a GTL plant is economically viable, the parties will enter into negotiations for a definitive agreement for development of a project. Ivanhoe Energy holds a master unlimited-volume licence for the proprietary GTL technology owned by Syntroleum Corp. The technology is used to monetise stranded natural gas deposits by converting them into ultra-clean synthetic fuels. GTL products, ultra-clean diesel and naphtha, attract a premium price over today's low-sulphur fuels.