Feedstock hits RIL and Essar’s $13.5 bn plan
Reliance Industries’ plan to invest $10 billion, and Essar Oil’s plan to invest $3.5 billion to set up petroleum refineries and allied businesses in Egypt have hit a roadblock with the country raising feedstock prices.RIL’s plan to set up a petroleum refinery, petrochemicals and plastics industries in addition to investing in oil and gas exploration sector in Egypt was announced in August last year by the Egyptian prime minister Ahmed Nazif in the port city of Alexandria.RIL’s investment in Egypt alone was touted as being in the region of $10 billion. Neveen El Shafei, vice chairperson of General Authority for Investment and Free Zones, the promoting authority for investments in Egypt, said there has indeed been a revision of energy pricing for investors. “Under that directive, the price of feedstock or natural gas is being increased from $1.6 per million British thermal unit (mBtu) to $3mBtu.”“It can go higher for feedstock consumption in excess of the contracted amount,” he said. At present, the contract review is on and it will take some time before the projects are in place, Shafei said.A senior Indian diplomat hinted the revision could trigger a rethink by the two conglomerates. An email sent to RIL and Essar group last week went unanswered. “The oil and gas reserves in Egypt are estimated to last for 30 years, but gas exploration in the country is at a nascent stage. The Indian companies are first movers and can explore this area well. The two projects alone will bring more than $15 billion of investment in Egypt,” the diplomat said. But a revision in the tender pricing may delay their entry. RIL has earmarked $10 billion for the petroleum refinery, petrochemicals and plastics industries and Essar had estimated more than $3.5 billion for the same. But now with the increase in the crude prices the cost of the projects would go up considerably, he said.RIL, at present, exports oil products and gasoline to Europe and America from India. Once the refinery is set up, the company would be able to export petrochemical and oil products at much lower cost due to Egypt’s strategic location and trade agreement ties with these continents and also in the African region.
