Egypt's feedstock price revision to hamper RIL's US$10 bln proposal for petroleum refinery and petrochem & plastics industries

11-Aug-08
Reliance Industries Ltd (RIL), India's petrochemical giant will be coerced to delay its plan to set up a US$10 bln petroleum refinery, petrochemicals and plastics industries. Investments in oil and gas exploration sector in Egypt will also be hampered owing to the increased feedstock prices in the country. The plan was announced in August and planned in the port city of Alexandria. RIL currently exports oil products and gasoline to Europe and America from India. The strategic location of the projects and trade agreement ties with these continents was to offer to RIL and added cost advantage by lowering transport cost of petrochemical and oil product exports. As per the General Authority for Investment and Free Zones, the energy prices had been revised from US$1.6/million British thermal unit (mBtu) to US$3/mBtu. RIL along with Essar planned to start petroleum refineries at an investment outlay of US$13.5 bln in Egypt. The revision in RIL's tender (which initially allocated US$10 bln) by the Egyptian authorities would cause postponement of the proposed petroleum refinery, petrochemicals and plastics industries in Egypt. The increase in feedstock prices in Egypt could mean that the project would cost in excess of the earmarked amount by RIL. The feedstock price revision could easily provoke reconsideration amongst Reliance to invest in Egypt. At present, the contract review is on and it will take some time before the projects are in place.
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