OBG talks to Osama Kamal, Former President, Egyptian Petrochemicals Holding Company (ECHEM)

Interview: Osama Kamal

What obstacles is ECHEM encountering as it implements its master plan for the sector?

OSAMA KAMAL: The biggest challenge is project financing. Given the current economic climate, finding international financing for mega-projects is not easy. ECHEM is actively pursuing the local private sector to play a larger role in this area. The company also expects that the political situation will stabilise and funding challenges will ease now that the president is in place.

We do have projects that are currently under way, either in the construction or feasibility phases, but we have not started any new ones recently. At present we have four projects worth about $7bn that are in the process phase, and we are looking for an additional $5bn of financing. We are currently meeting with international and local banks to discuss their potential participation in financing.

With several projects in the region set to come on-line, is there concern of excess supply?

KAMAL: No, we do not expect to have excess supply in the future because petrochemicals products are replacing other materials like steel, sand and wood, and demand is rising. Also, Egypt and other petrochemicals-exporting countries have not realised the potential of Africa as a serious growth market. Currently our target markets are Europe and East Asia, but I look to Africa as the next big step in expanding the petrochemicals business. In particular, we are interested in focusing on Central and West Africa.

What can be done to increase the volume of domestic natural gas used for local petrochemicals processing? And what will be the effect of the phasing out of subsidies for natural gas?

KAMAL: Filling the gap between the domestic supply and demand is not my area of expertise. However, I have no problem at all importing gas, which I think should be a consideration. If it is more expensive to produce gas in Egypt, why don’t we import it?

In the petrochemicals business, for example, we buy natural gas at international prices so it does not matter if we buy from Egyptian suppliers or import. Qatar is selling gas at $2 per litre, while I get natural gas here in Egypt from Damietta for $5 per litre, so there is obviously a case to be made for importing. For this reason, phasing out fuel subsidies on domestically produced gas will not have much of an impact, as we are already buying from foreign suppliers at lower prices.

What are the primary challenges facing the domestic petrochemicals industry?

KAMAL: We are facing the normal challenges in our business, such as competition from foreign firms. Many of our neighbours are hydrocarbons-rich countries that produce far more oil and gas than does Egypt. These significant resources are then directed towards the petrochemicals sector at subsidised prices. Therefore, we expect stiff competition from companies that are based in the region.

What is the role of small and medium-sized enterprises (SMEs) in the industrial sector?

KAMAL: We aim to work with various government institutions to increase the involvement of SMEs in different aspects of our projects. ECHEM, for example, would offer technical support, the General Authority for Investment and the Industrial Development Authority would provide land and infrastructure, and the Social Fund for Development would support the involvement of SMEs by providing financial and other types of assistance.

Incorporating SMEs into future projects should be a priority for the next 10 years, as this will create a lot of job opportunities for poor people and small investors. Also, this will satisfy Egypt’s need for many products like construction materials such as line pipes, insulation and other packaging requirements.

This interview was conducted in May 2012 prior to Osama Kamal’s appointment as minister of petroleum