Kuwait offers vote of confidence with $6.8 B Egyptian investment

Offering a vote of investor confidence, Egypt’s energy sector announced a $6.8 billion investment partnership plan with Kuwait this week, putting them on track to meet a sprawling $14.5 billion industry goal, announced last year.

According to a Reuters report, the plan sets aside the investment for petrochemical projects, which have fallen short in recent years due to the country’s gas shortfalls. Egypt has a long history of energy challenges, though they have grown especially daunting over the last three years. With the collapse of the long-standing government of Hosni Mubarak, the country of over 80 million found itself economically isolated, which served to reduce its foreign reserves and with it, the ability to keep up payments to oil and gas importers. The country’s two successive governments have both pledged action meant to revive the country’s domestic production efforts and improve investor confidence, all while addressing the challenge of the country’s unsustainable subsidy program – a process that has been made somewhat easier by lower global energy prices. According to a recent report, Egypt spent 30% less on energy subsidies in the first half of 2014-15 than it did in the same period of the previous fiscal year, citing an oil ministry source on January 19th.

While the new partnership with Kuwait may have not completely address the country’s domestic demand issues, it does signal an improvement of investor confidence in Egypt as a whole and they county’s energy sector. This progress was reflected in statements by the International Monetary Fund, praising the country’s “structural and monetary reforms”. It is unclear how Cairo’s recent decision to begin military operations across the border in neighboring Libya might affect that renewed confidence in the country’s security situation.

According to local media reports, the Kuwaiti investment will focus on a complex for polypropylene production and its derivatives, a formaldehyde project and a complex for phosphate and complex fertilizers, with the publication citing Prime Minister Ibrahim Mehleb.

On the production front, Egypt is receiving increased exploration and production interest from international firms, including France’s Total and Italy’s Eni. In January, Eni announced a new discovery in Egypt’s Western Desert, according to a company statement. The well is located in the West Melehia deep exploration prospect and began with an initial daily flow of 2,100 barrels. Seventy-six percent of the license is held by Eni through a local subsidiary. Eni’s progress could ultimately help further regional, energy cooperation efforts. According to local media reports, Jordan’s Prime Minister Abdullah Ensour met with Egypt’s Minister of Petroleum and Mineral Resources Sherif Ismail this week to discuss further industry cooperation between the two countries.

http://www.forbes.com/sites/christophercoats/2015/01/31/is-enis-egyptian-bet-paying-off/