October Magazine: Egyptian minister of petroleum: oil companies join bourse soon
Egypt, Economics, 8/19/2003

In statements during an interview with October Magazine, Minister of Petroleum, Sameh Fahmi, said that oil companies will join, for the fisrt time, the bourse to activate the stock market and render substantial revenues to junior investors. Here is part of the interview:

Q: A national plan for petrochemicals industry in the coming 20 years has been set. What are the expectations for the Egyptian petrochemicals industry in light of the world competition?

A: In fact, the country that has no future chemical expectations has no future industry that is because the basic raw materials such as iron, glass and wood are diminishing from the whole world so the world is now heading to replace these materials with the petrochemicals which is the future industry. The petrochemicals industry has been established in Egypt in the 1980s based on importing the raw materials but such a policy didn't achieve the Egyptian ambitions.

Q: Egypt achieved a self-sufficiency in Poly-Ethelin, however the prices are still high. When will we reach a solution to such a problem?

A: This issue is significantly important so I intend to hold a meeting with the officials in the Holding Company for Petrochemicals for discussing such an issue. I believe that the Petrochemicals Sector can make some concessions for enabling the Poly-Ethelin consuming factories to absorb the increasing labor. The truth is that the prices are high which burdens the factory owners so we are trying to reach an adequate price of the Poly-Ethelin for the two parties.

Since the year 2000, we have achieved some of our goals in this industry such as extracting the gas from the Western Desert and turning it into a raw material. As a matter of fact, without a sound planning, we can do nothing so we had to prepare a 20-year national plan for petrochemicals industry and I believe that this plan is one of the best plans in the history of the Petroleum Sector and the indications show that Egypt will soon assume a pioneering position on the international arena.

The pioneering countries in this industry are Saudi Arabia and Iran. Egypt has benefited from the experience of the two countries and as a result of our gas reserves, we are now able to establish a huge petrochemicals industry. It is due that several projects will soon be implemented for realizing our aspirations in this domain.

áQ: The Petroleum Sector lately witnessed the application of a new economic model in the petroleum projects, what are the features of this new model particularly in the field of export as a strategic goal and in the field of attracting Arab and foreign investments?

A: The Arab and foreign investments in Egypt are an easy thing, but they have to benefit Egypt because if we bring the great investor in the world then he imports his production and obtains the revenue, thus we will gain nothing at all. Therefore, this new economic model was inevitable, because I want investors to come to Egypt but we should have share in this investment in addition to having a rate in the international investment directly then a rate in export.
And so, we have a rate in exports and foreign currency to get experience in management and projects which we already have in the Petroleum Sector. We also make a new condition that is the necessity of making our companies share carrying projects out to turn a part of capital share during exchange.

Therefore, we obtain the stipulated share that is 25% or 33%, then we exchange our part from Arab funds without making any burdens on the State. And so, we obtain quarter or one third of exports in foreign currency and through the extension of the project we gain profits and make profits for the next generations in Egypt through the coming 20 or 30 years.

áQ: Why does restructuring the petroleum sector by joining four entities together: the Petroleum Authority, the Holding Company for Gas, the Holding Company for Petro-chemicals, and South Valley Company, take place now?

A: If you make limited-goals strategy, you do not need restructuring of the Petroleum Sector, but if you make ambitious strategy with respect to the revenues whether dollars or pounds, in addition to the development future in Egypt, thus we have to restructure the Petroleum Sector because these are its tools that move it. We want to move in several directions rapidly to produce oil and refine it and to develop gas reserve and export it in addition to the direction of petro-chemicals where we have an important area in Egypt which we did not make use of up till now.

In fact, we are not alone in restructuring the Petroleum Sector, Britain has two companies, Iran has three authorities for oil, gas and petro-chemicals 12 years ago. Thus, Iran preceded us in this field, and I found that this is the appropriate time for restructuring the Petroleum Sector, otherwise, I cannot achieve the strategic goals I told President Mubarak about.

For example, gas export began in early 1990s, through protocols till 1999, because the gas official in the Petroleum Sector was a deputy of an authority head, in addition he was not positive and lacked enthusiasm. Therefore, gas could not be exported. The same is true in the field of petro-chemicals where its official was a general director and he did not meet the minister but few times.

Yet, the head of the Holding Company argues and differs with me and I like this. In fact, the general director would not differ with me saying that everything is ok. We need strong leaderships to argue and differ with the minister when the public interest requires this. Indeed, I'm proud of these entities that are expected to achieve fantastic results in the near future.

áQ: Is it true that Egypt globally rated the sixth in providing gas to 44.000 cars, and the United States the fifth by 100.000 cars?

A: We have now the smart cards system. The cost was LE 5.000 or 6.000 paid by installment. In fact, the smart cards system is a simplified one and is not expensive and very economic, and we have a national plan for making stops to provide cars with natural gas.

áQ: Is the subsidy granted for petroleum productions goes for real beneficiaries? We notice that some indifferent youth are driving luxury cars with subsidized fuel.

A: Frankly, subsidy does not go to real beneficiaries. There was an application on 450 cases of Putagas consumers, including both rich and poor. We found that all people pay the same prices. We also found that there are many stores in rich areas, while peoples in poor areas pay more in return for taking gas cylinders from place to another. When we talk about subsidy, some people think that we are going to eliminate it. Of course this is wrong, we want to grant subsidy for real beneficiaries. I want to pay the cooking gas cylinder for three pounds rather than six.

áQ: Why are most of the great petroleum companies such as companies of Australia and Russia looking for oil in Egypt, although some of them have failed for ten years?

A: I think that Egypt provides many advantages, such as political stability and wise leadership, for many investors. The recent discoveries in gas and oil have encouraged many people to invest in Egypt.

Egypt, for the sixth year successively, topped the region countries in getting findings which are represented in the number of oil fields discovered.

Q: Why did not petroleum companies join stock markets and achieve reasonable revenues for small investors?

A: This is my mistake. The Prime Minister has issued his directives in this regard, but I give the chance for my assistants to study the subjects and then I work according to their visions. Recently, I asked the help of men of bourse to probe this issue. You will listen soon about the entering of petroleum companies to refresh stock market.

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