Hesham El Amroussy, Chairman and Managing Director, ExxonMobil Egypt: Interview

Interview: Hesham El Amroussy

What trends do you see in terms of demand for fuels and lubricants in Egypt?

HESHAM EL AMROUSSY: Egypt has witnessed a steady economic recovery since mid-2014 – evident throughout a number of different sectors in the economy, and led by the launch of several mega-projects – which in turn has translated into positive trends in terms of demand in the Egyptian petroleum products markets.

One relevant example might be the new Suez Canal project, which since its inception has served as a key economic stimulus, with an impact on multiple sectors. In the coming years, this project will provide a platform for sustainable development, with the potential to transform the largely undeveloped area around the Suez Canal into a world-class logistics and industrial zone. Another good example is the expansion of power generation, which aims to better ensure that supply is able to meet demand, and which is critical in addressing the country’s electricity challenges and bottlenecks to economic growth.

In both of these cases, we have seen greater demand for fuels and lubricants, with our provisions – particularly of high-performance lubrication solutions – to the local market going up on the back of these mega-projects, in line with our value proposition to improve energy efficiency, enhance equipment life and provide productivity benefits.

What impact has the reduction of fuel subsidies had on domestic consumption?

AMROUSSY: Fuel prices and margins in Egypt are closely regulated and historically have been subject to large subsidies, which in turn have represented a heavy burden on the national budget. We are encouraged by the recent reforms to reduce the country’s subsidy bill, which is not an easy decision, but which reflects the strong political will it takes to make hard but necessary economic choices for Egypt’s future. We look forward to continued progress on the subsidy reform policy, given the importance of such a policy as a prerequisite to meaningful economic development. By reforming its subsidies, Egypt can help to enable the effective channelling of resources to support inclusive growth objectives, as well as permit the market to reach higher levels of economic efficiency through demand rationalisation.

It is important to note that from our perspective, particularly in light of the improved supply of crucial fuels from local refineries, the latest reduction in fuel subsidies did not necessarily have an adverse impact on volumes. And just as relevantly, developments in the sector have allowed for fuel margin improvements for marketing companies.

This increase in margins remains a factor affecting the overall attractiveness and return on downstream investments, particularly as we look to continue developing and investing in service station assets and infrastructure, consistent with our unwavering commitment to operational excellence.

How can Egypt work to increase the production and export of lubricants?

AMROUSSY: Egypt offers significant potential as an export market. With efforts to improve transport connections through mega-projects like the Suez Canal expansion, the country is naturally poised to become a much larger manufacturing and trading centre with a regional outreach. Egypt has two blending plants for lubricants, both with sufficient manufacturing capacity and advanced technology to serve the needs of both the domestic and export markets.

There is room for helping strengthen capacity further, of course, in areas such as the development of human resources. Our roots in Egypt go back to 1902, and as a result, we have long sought to invest in educational and development opportunities through programmes that contribute to the transfer of knowledge and experience to the Egyptian economy.