VOL. XLIV
No. 19
7 May 2001 

EGYPT

Kuwait Declines Offer Of Stake In Midor Refinery

Kuwait has refused an Egyptian offer to take a stake in the 100,000 b/d Egyptian-Israeli Middle East Oil Refinery (Midor) at the 'Amiriyah Free Zone near Alexandria, according to Kuwait’s Oil Minister, Adel al-Sabeeh. The Kuwaiti official told reporters on 30 April that Egyptian Petroleum Minister Sameh Fahmy proposed during his visit to Kuwait a fortnight ago that Egypt would buy the Israeli equity in the plant and then resell part of its own share to Kuwait. Dr Sabeeh said Kuwait "will not enter into a project in which Israel is participating, directly or indirectly, and no matter how financially rewarding it is. We have concluded that we are not interested in participating in this project."

The $1.5bn Midor refinery, Israel’s largest investment in Egypt, has faced problems since its inception. The original plan was for private Israeli and Egyptian businessmen, with an Egyptian Government minority share, to build an offshore refinery in Egypt to process a cocktail of Gulf crudes delivered by the Sumed pipeline and export the petroleum products to Israel and other Mediterranean markets. At the time the project was launched in the early 1990s the political atmosphere between Cairo and Tel Aviv was relatively cordial, but as relations between Egypt and Israel soured and domestic opposition to the project started growing, the Egyptian Government decided to take full control of the operation. Instead of serving international markets as originally planned, the Egyptian General Petroleum Corporation (EGPC) decided to integrate Midor into its domestic refinery system to meet local needs.

Midor’s structure was changed in late 1996 when the company’s capital was doubled from $180mn to $360mn, with the Egyptian public sector equity quadrupled and the shares of the Egyptian and Israeli private sectors frozen (MEES, 13 January 1997). Originally the company was owned 40% by an Egyptian private sector consortium comprising businessman Husain Salem (through his Swiss firm Masaka) and local banks, 40% by Israel’s Merhav group (through its Irish company Medor) and 20% by the state-owned EGPC. After the increase in capital, EGPC acquired 40% of the equity and two EGPC affiliates, Petrojet and Enppi, acquired 10% each, giving the Egyptian public sector a 60% controlling interest. The Egyptian private sector consortium and the Merhav group did not contribute to the company’s increased capital. Midor is now owned by EGPC (40%), Enppi (10%), Petrojet (10%), Medor (20%), NBE Cayman Islands (16%), Masaka (2%) and the Suez Canal Bank (2%). To reflect the change in Midor’s shareholding, Egypt appointed Sameh Fahmy as president, deputy chairman and managing director. He was later appointed petroleum minister and replaced at Midor by Maher Abaza, the former electricity minister.

Last November, the company awarded a five-year $260mn contract to the Foster Wheeler Corporation (FWC), a subsidiary of Foster Wheeler International (FWI), to operate and maintain the refinery, and Midor started trial production a few weeks ago. The state-of-the-art refinery is geared for light and middle distillate production, with high octane gasoline accounting for 24% of its production, diesel for 43% and kerosene and jet fuel for 15% (as shown in the table below). Midor’s production structure and unit capacities are as follows:

One of Midor’s major problems is what crude to use and how to obtain it. The original plan was for the refinery to process a variety of Gulf crudes available at the Mediterranean terminus of the Sumed pipeline at nearby Sidi Kerir. However, it soon became apparent that none of the Gulf states were ready to deal with Midor as long as there was an Israeli stake in the refinery. A recent attempt by a European trader to deliver Iraqi Basrah Light crude also failed. Moreover, the refinery has no intake system from the Mediterranean, so all its crude supplies have to be delivered through the Sumed terminal at 'Ain Sukhna on the Gulf of Suez, meaning in effect that Mediterranean crudes would face the disadvantage of paying the Suez Canal transit fee. MEES understands that EGPC has now decided not only to incorporate most of the refinery’s output in its own system to meet domestic requirements but also to provide Midor’s crude feedstock from its own production, at least for the time being, for lack of viable alternatives.

The Midor refinery will be Egypt’s ninth and will increase the country’s refining capacity by some 17% (see Table below).