Egypt readies new natural gas law, plans IPOs

22 November 2016, Week 46, Issue 666

Egypt is in the process of preparing a new natural gas law that will establish a regulatory agency for the gas market and enable private companies to import gas. Also in the pipeline are IPOs for several state-owned oil and petrochemical companies, coming in the wake of a new loan agreement with the International Monetary Fund (IMF).

Egyptian Minister of Petroleum and Mineral Resources Tarek El-Molla said last week that the natural gas law has gone to the State Council and that it should be completed before 2017. The regulatory agency will set parameters for the levels of price liberalisation with a view to creating equal opportunities for gas market contributors.

“By the end of 2017, we will have the law and the executive regulations ready, and we will have completed the establishment of the authority to allow private companies to import gas,” Molla said during an economic conference in Cairo on November 15.

Since 2011, Egypt has been hit with a gas supply shortage that has forced it to halt all exports, set up two floating storage and regasification units (FSRUs) and contract LNG deliveries in order to meet domestic demand. The country hopes to increase its own natural gas production by 30% by 2019 and thereby rely less on imports.

Egypt is also in the process of evaluating eight oil and petrochemical companies that it intends to privatise with a listing on the Egyptian Stock Exchange (EGX). Five companies have been selected for the first phase of the privatisation during which around 20% of their shares are expected to be made available to the public.

Molla said during the economic conference that the assessment of these companies would be made during November. The privatisation is being handled by the Ministry of Investment.

According to the Egyptian media, the first five companies include the Middle East Oil Refinery Company (MIDOR), which operates a 100,000 bpd refinery near Alexandria, the Egyptian Ethylene and Derivatives Company (ETHYDCO), Sidi Kerir Petrochemicals Company (Sidpec), Alexandria Mineral Oils Company (AMOC) and Misr Fertilisers Production Company (MOPCO). Engineering for Petroleum & Process Industries (ENPPI) is expected to be included in the second round of the privatisation.

Electricity companies are also expected to be selected for the privatisation programme, which is designed to raise US$10 billion for the state during a three to five-year period.

Egypt recently reached an agreement with the IMF for a US$12 billion loan in exchange for economic reform, which includes privatisation of state-owned companies. The IMF loan is designed to help Egypt reduce its budget deficit, bolster growth and restore investor confidence. Under the IMF scenario, Egypt will cut its deficit to 88% of GDP in 2018-19 from 98% in its 2015-16 budget.