Al-Khorafi pulls out from Egypt 'Maidor' project

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KUWAIT: An Al Khorafi GroupAl Khorafi Group spokesperson yesterday confirmed reports of the group's withdrawal from the eco-friendly "Maidor" petrochemical refinery construction project in the Ein Al Sokhna area of Suez governorate in Egypt. The official explained that the group has withdrawn from the project due to the negative effects of the application of Egyptian Law No. 114 of 2008, which canceled the free zone system, changing the basis on which the project's feasibility study was conducted. The official also explained that there is no truth in reports published by some business dailies stating that the withdrawal decision may be reversed.

The aforementioned law has levied extra costs on the overall project investment costs, which include customs duty on the import of essential project equipment at an average rate of 7 per cent, as well as customs duty on imported crude oil at a rate of 5 per cent except for crude of Arab origin, with similar customs duty on the spare parts required for refinery production. Lastly, explained the official, 20 per cent of the refinery's annual net profit is to be given to the government.

Sources said that this sudden decision had adversely affected the feasibility of the project, especially since the profit margin in such business is very lowow compared to other industries which one can invest in. As a result of these factors, the Kuwaitait International Petroleum Company and the Indian Isar Company have also announced their withdrawal from the project after reaching advanced levels of negotiations and studies into joint ventures, as well as spending more than 40 million Egyptian pounds on the project to date.

The official emphasized that the project, on which the Al Khorafi group was predicted to spend an estimated one billion dollars in total, was supposed to attract about $5 billion of foreign investments to Egypt. He added that these setbacks mean that Egypt has lost one of its primary partners which would have helped to supply its growing demand for petrol and petrochemical products, including diesel and gasoline, from 2012.

The original operational plan was that the refinery would provide around 4.7 million tons of diesel and petro gas, with the current import value of these commodities reaching $1.7 billion. Sources said that in addition to those losses, there will be loss of 7,000 direct jobs and 18,000 indirect jobs, in addition to direct revenue to the Egyptian treasury through operating ports and national companies and providing engineering, construction and other services.

© Kuwait Times 2008