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Pumping fresh blood into Egypt’s economy

Mervat Ayoub

08 Jun 2016 11:53 am

 

President inaugurates expansion at MOPCO, Dumyat

 

No question, Egypt is in dire need of new projects to pull it out of the economic doldrums in which it has been swamped since the 2011 Arab Spring.

President Abdel-Fattah al-Sisi’s recent opening of a number of large projects throughout Egypt was thus cause for general optimism. Among these were several in Dumyat (Damietta) on the northern tip of the Nile Delta, where the eastern branch of the Nile flows into the Mediterranean. They included the inauguration of the expansion of the Misr Fertilisers Production Company (MOPCO) factory at the Petrochemicals Compound for Fertilisers, and the military hospital in New Dumyat City. Dumyat is a renowned centre for manufacturing quality furniture in Egypt, and the President gave the starting signal for the construction of the new state-of-the-art Dumyat Furniture City in the district of Shata and inspected the Nile Transportation project.

 

Turbulent history

President Sisi assured the people of Dumyat and all Egyptians that the State would construct no project that would put Egyptians at any environmental risk. He warned Egyptians of agitators who constantly spread erroneous information about major projects, MOPCO included, to mislead the public into demanding that these projects should be halted.

The President said the MOPCO project complied with all environmental requirements, and suggested that a committee of Dumyat representatives be formed to conduct regular checks for monitoring the plant’s environmental impact.

President Sisi was alluding to the turbulent history of MOPCO’s Dumyat fertiliser plant. The company was founded in 1998 according to law number 8 of 1997.

In 2006, the Canadian fertiliser giant Agrium formed a joint venture with Egyptian companies that included the State-owned ECHEM  and EGAS to build a nitrogen fertiliser plant to produce urea on 400,000 square metres allocated by the government to the project. In 2007, the company received permission to build close to Ras al-Barr, a resort town on the Mediterranean coast near Dumyat. In 2008 local fishermen and resort developers, fearing the new plant would pollute the environment and affect their livelihoods and projects, waged fierce protests.

Public pressure led the government to assign two fact-finding commissions to investigate the environmental impact of the factory. Since they issued conflicting results, the parliament decided to play it safe and blocked the Agrium project.

Even before the parliamentary vote, the company, backed by Canadian authorities, threatened Egypt with international arbitration. The dispute was resolved in August 2008 with a share-swap deal in which Agrium handed its project over in exchange for a 26 per cent stake in MOPCO. The deal was made with the expectation that MOPCO would construct two additional production facilities at a new site just west of the original Agrium site.

 

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Reopened by court order

Protests against the project resumed in 2011 in the wake of the Arab Spring. In June 2011, the Ministry of Environment formed another fact-finding commission which recommended a series of measures to reduce any harmful environmental impact by the factory, including a ban on the dumping of wastewater. However protest heated up again and in November 2011 the government ordered the closure of MOPCO’s Dumyat plant and the suspension of any expansion.

MOPCO took its case to court which ordered a new report by a committee of Mansoura University professors. This study came out in January 2012, and declared the factory had no adverse environmental impact. The plant was reopened by court order.

Ownership of MOPCO is divided among the National Investment Bank, 12.5 per cent; Egyptian Petrochemicals Holding Company (ECHEM), 30.5 per cent; Misr Insurance Company, 2.58 per cent; Misr Life Insurance Company, 2.85 per cent; Nasser Social Bank, 3.27 per cent; National Bank of Egypt, 6 per cent; Agrium Inc., 26 per cent; Arab Petroleum Investments Corporation (APICORP), 3 per cent; Egyptian Natural Gas Holding Company (EGAS), 7.6 per cent; and Egyptian Natural Gas Company (GASCO), 5.7 per cent.

The State supplies MOPCO with the natural gas needed for the plant’s operation and also as raw material for the urea production, at a price equation of USD5 per 1MMBtu (1 million British thermal unit); the price might reach USD9 according to the fluctuation of urea price on the global market. Monthly energy bills are paid in US dollars.

 

Thousands of job opportunities

The MOPCO fertiliser plant provides thousands of job opportunities. The first expansion of its production lines started operation in June and December 2015, producing more than 200,000 tons of urea. The second expansion, President Sisi said as he inaugurated it, was a new step along Egypt’s road to advancement and development; it would raise the factory production from the current 650,000 tons of fertiliser to a projected 1.35 million. This will meet the local market’s need of high-quality fertilisers and will be exported to foreign markets, which represents an added value to the Egyptian economy.

The sum of USD1.050 billion needed to fund the recent expansion was provided by loans from 22 local banks; in addition, USD910 million came from self-funding by MOPCO’s shareholders. Total investment in the project amounts to USD2.5 billion.

Studies estimate annual revenues at USD300 million according to the cheapest price of urea on the global market, with an expected increase in revenue in the coming period to reflect the global increase in prices. Around 60 per cent of the factory’s urea production is to be exported according to long-term supply contracts signed with 20 countries. After full operation of all the factory’s expansions, the annual urea production is expected to reach 6 million tons whereas the needs of the local market do not exceed 4 million tons, part of which are supplied by other fertiliser plants.

 

Rationalising fertiliser use

Mahmoud Nazeem, former Deputy Minister of Petroleum, is full of praise for the MOPCO project. “This project helps achieve Egypt’s development goals,” he says, “and will help in the desert cultivation project termed the Million-and-a-Half Feddan Project.” He says the MOPCO expansion provides many job opportunities, and has no negative environmental impact. “It operates according to state-of-the-art environment-friendly technology,” he says.

Salah Hafez, former head of the Egyptian General Petroleum Corporation (EGPC), says that fertiliser projects are an urgent need during the current period in which Egypt faces food deficit. “Such projects help farmers raise agricultural yield especially for strategic commodities such as rice and wheat,” he says. On a wider economic perspective, Mr Hafez says, the MOPCO expansions send the world a message that Egypt remains an investment-attractive, export-oriented economy.

The special attention given to fertiliser projects in Dumyat, Alexandria and other Delta governorates, economic expert Rashad Abdu says, aims to supply farmers with high quality local fertilisers, thus cutting on fertiliser imports and the foreign currency spent on importing them. In addition, the expansions in MOPCO factory increase production in such a way that creates some 7,000 job opportunities inside and outside Dumyat, and allows for exports to increase Egypt’s foreign currency revenue.

Not all see the project as problem free, however. Professor of Economics at Mansoura University Mukhtar al-Sharif is critical of the copious consumption of fertilisers by Egyptian farmers and peasants. “This pattern of consumption ought to be rationalised,” he says. “Currently, farmers use much more fertiliser than the land needs, under the belief that it leads to better yields. We need to raise awareness that this is not the case.”

 

Managing industrial waste

The environmental impact of the fertiliser factory, a heated issue over the past few years, was addressed by Environment Minister Khaled Fahmy when he accompanied President Sisi at the inauguration of the MOPCO expansion. Dr Fahmy said the plant had been granted environmental approval in 2005, and that periodical follow-ups would be conducted to gauge MOPCO’s environmental impact. The factory’s industrial wastewater treatment plant, he said, conformed to environmental standards, and the latest checks conducted last March confirmed the stability of the area’s ecosystem. He demanded that MOPCO install environmental sensors to further assure the residents of Dumyat that all environmental hazards were under control, and called on local residents to participate in monitoring the environmental impact of the project.

Dr Fahmy said the Environment Ministry’s plan to manage industrial waste in all public and private sector factories had started a few years ago. The disposal of industrial wastewater into the Nile had already been halted, he said; what remains was to halt the disposal of such waste into irrigation canals and drains.

Liquid waste resulting from industrial plants, he said, was treated through a zero sludge treatment system which involved the complete recycling of industrial wastewater. The treatment plant had been installed, Dr Fahmy said, and operational trials were underway.

 

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Watani International

8 June 2016

 

 

 

 

 


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