Egypt has signed a contract to construct the largest petrochemical complex in Africa and the Middle East, at an investment cost of $7.5 billion.
A statement by the Egyptian Cabinet said that the complex, which will be built by the government-owned Red Sea National Refining and Petrochemical Company, will be located in the Ain Sokhna Industrial Zone of the Suez Canal Economic Zone.
The aim is to establish an industrial complex for refining and producing a range of petroleum and chemical products with added value such as polyethylene, polypropylene, polyester, bunker fuel.
The project is built over an area of 3.56 million square meters.
“The project contributes to Egypt occupying a distinguished position in the field of producing many petrochemical and petroleum products,” Tariq Al-Mulla, Minister of Petroleum and Mineral Resources, said.Kuwait perhaps, with 3 million barrels per day and a population just over 4 million? Saudi Arabia or, looking further afield, Brunei or Norway? No, that honour will belong to the South American nation of Guyana, which could well be sharing output of 700,000 barrels per day among just 770,000 people.
Although adjacent to Venezuela, Guyana has been better known for sugarcane, and cricketers such as Clive Lloyd, Lance Gibbs and Shivnarine Chanderpaul, than oil. But after first striking oil at Liza in 2015, ExxonMobil and partners Hess and China National Offshore Oil Corporation have made seven major discoveries in deep offshore waters, with production due to start in 2020.
Other companies, including Spain’s Repsol and African-focused explorer Tullow, are also looking. And the trend may extend into the former Dutch colony of Suriname to the east. Beyond Suriname is the overseas French department of French Guiana, where Tullow found oil in 2011 although follow-up exploration has been disappointing.
Guyana is one of the few major new conventional oil provinces discovered this century, along with the Kurdistan region of Iraq (which has subsequently disappointed) and India’s Rajasthan in 2004, Brazil’s “pre-salt” and Uganda in 2006, Ghana in 2007 and perhaps Senegal in 2014. After just four years of exploration drilling, Guyana is already set to be the biggest of these after Brazil. Estimated production costs of $46 per barrel are well below current oil prices, and competitive with shale or other leading deep-water areas.
Unlike the US’ mostly very light shale oil, Guyana’s is a medium-light crude closer to major Middle East grades. Likely to be rich in diesel when refined, it helps fill a hole in the world’s crude diet.
Finding new conventional oil is important for the global industry. Companies such as Shell, Total and Eni have increasingly shifted to gas, which has proved much easier to discover in quantity, while BP and their American peers, ExxonMobil, Chevron and ConocoPhillips, have focused on US shale. Both the International Energy Agency and Opec warn of under-investment and a coming oil crunch, but the major oil reserves in Opec countries and Russia are mostly closed off to international firms by government policy, insecurity and sanctions.
If the discoveries are significant for the world, they will be transformational for Guyana. Gross oil revenues of some $13 billion annually by the mid-2020s, or about $17,000 per inhabitant, contrast to its 2016 GDP of just $3.4bn. Only some 14 per cent of this will come to the government for the first two to three years while costs are paid off, but this is still an enormous bonanza.
But, like other new oil states, Guyana has to manage the perils of a sudden influx of wealth. It has good advice, as a member of the New Producers Group, an initiative of UK think tank Chatham House, the Natural Resource Governance Institute, and the Commonwealth, which brings together experts, politicians, government and civil society from a number of newly-established oil- and gas-producing countries.
These problems are well known but not so easy to solve. Government faces the risks of corruption, nepotism and patronage; a weakening of democracy; over-spending and vulnerability to falls in oil prices; and a lack of capability to manage oil operations and tax collection. The economy is threatened by conflicts over fiscal terms with the oil companies; the temptation to introduce wasteful energy subsidies; inflation and currency over-appreciation; and a loss of competitiveness from the non-oil sector. And the local population confronts unrealistic expectations of sudden wealth; an influx of outsiders; and environmental damage.