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Essar to invest $3.4bln in refinery: Egypt official

CAIRO - India’s Essar Global will invest $3.4 billion in a proposed 300,000 barrels per day oil refinery in northern Egypt, an Egyptian government official said on Monday.

“The planned refinery will cost $3.4 billion and we are expecting it to come on stream in 2010,” Ashraf Diwidar, adviser to the Industrial Development Authority, said.

“The Egyptian government could approve the proposal in a few weeks,” he added.

In India, an Essar spokesman said: “As a group we keep looking at growth opportunities. This is one such proposal being looked at, hence it’s too premature to comment on this.”

Egypt is drawing interest from international firms, keen to help tap the most populous Arab country’s oil and gas reserves.

Egyptian Oil Minister Sameh Fahmy has said the country plans to increase its oil output, which declined from peak levels of close to one million bpd in the mid-1990s, by 100,000 bpd to 800,000 bpd in 2008 by developing recent discoveries in the Gulf of Suez and the western Sahara.

A source at the ministry told Reuters that the government may decide not to have the project wholly financed by Essar.

“There are some talks at the moment that some refineries should be joint ventures between the foreign companies and the government due to their importance,” the source said.

Last month, Egypt put on ice a plan to privatise its 100,000 bpd Middle East Oil Refinery (Midor) in Alexandria on account of its strategic importance.

The new 300,000 bpd Egyptian refinery is part of Essar’s plan to have a bigger presence in the Middle East, where oil fuelled growth and a construction boom have boosted domestic consumption, squeezing supplies to Europe and Asia.

The company is in talks with Iran to develop the country’s biggest oilfield Azadegan to ensure fuel for a planned refinery and steel plant in the Islamic nation.

The diversified, family-owned holding company, with interests from telecoms to construction, plans to set up four steel plants in the Middle East, including a plant in Egypt that entails an investment of $590 million, tapping the north African country’s gas and iron ore resources.

Other Indian oil companies have been looking at investment opportunities in Egypt to meet rising global demand.

Indian Oil Corp.’s (IOC) has proposed participation in a crude pipeline project from the Mediterranean to the Red Sea coast. The project is to enable oil to flow to Asia, bypassing the Suez Canal.

Egypt last year received a proposal from Astra Horizons, a London-based consultancy firm, to build a refinery. The project has not received final official approval.