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Interview

Chem. Saad Helal – Chairman & CEO; Hossam El-Fahmy – Utilities & Offsite General Manager, The Egyptian Ethylene & Derivatives Company (ETHYDCO)

05.05.2017 / Energyboardroom

2Chem. Saad Helal, CEO of the Egyptian Ethylene and Derivatives Company (ETHYDCO), and Hossam El-Fahmy, Utilities and Offsite General Manager, outline the tremendous achievements ETHYDCO has accomplished since its August 2016 inauguration, including reaching a profit of USD 65 million with international exports to 31 countries; the impressive world-class infrastructure they have constructed, including their own dedicated power plant and the first zero-liquid-discharge (ZLD) ethylene plant in the world; and their ambition to strongly support Egypt in its transformation into a regional energy hub.

ETHYDCO was inaugurated in August 2016 by H.E. President Sisi himself. In the past nine months, what have been the key achievements of the company?

ETHYDCO was set up to be a world-class petrochemical facility in Egypt with a project budget of USD 1.9 billion. We are now the largest polyethylene (PE) production facility in Egypt, producing 22 different grades, from high-density to linear low-density and pipe grades using UNIPOL™ PE gas phase process, which can produce a wide range of commercial products. Whether your goal is to make high-density, medium-density or linear low-density PE, the UNIPOL™ PE Process can accommodate a wide range of densities and melt indices – with both narrow and broad molecular weight distributions, swing and bimodal capabilities are the key to resin differentiation.

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We have a total capacity of 400 kilo tons per annum (KTA). 25 percent goes to domestic use and 75 percent to exports, the latter of which is critical in bringing foreign currency into Egypt, who is currently facing a shortage in her foreign reserves.

Notably, within these first six months alone, we have not only paid the first installment of our loans in March 2017 – amounting to around USD 65 million – but we have also achieved a profit of USD 68 million.

Last month, we also finished the construction of our permanent power generation plant, which will secure our electricity needs by generating 70 megawatt (MW) of power.

This was all achieved with a workforce of around 700 employees, all of whom are Egyptians. ETHYDCO is a 100 percent Egyptian company, which we are extremely proud of. In addition, the majority of our employees are between 25 to 35 years of age.

One of the defining successes of ETHYDCO was that we have planned, managed and executed this USD 1.9 billion project entirely locally. Egypt is not only a large country of 92 million but we have a very well-educated and well-qualified workforce particularly in the oil and gas industry – and ETHYDCO is a paramount example.

What do you attribute to be the factors behind achieving such key milestones in just six months?

It came down to strategy and planning. We conceived the idea in 2011. Even before we started to develop the project, we formed a management team that we believed to be the crème de la crème. Then we started hiring employees that we believed were aligned with our vision and equipped with the capabilities necessary to achieve it. The petrochemical industry is inherently about adding value so we felt that we needed to have the best people on board from the very beginning.

Egypt was experiencing a period of great instability in 2011 and we actually built this plant between two revolutions. To support the country’s development, we fast-tracked this project and really pushed to ensure its success.

Many of us have also had extensive experience in petrochemicals, having run SIDPEC since 1999. Eng. Saad Helal started his career in Egyptian Petrochemical Company (EPC) in 1986, moving on to Qatar Petrochemical Company (QAPCO) in 1995, returning to Egypt in SIDPEC in 1998 and moving to Egyptian Styrene & Polystyrene Production Company (E.Styrenics) as Chairman & CEO in 2014, and finally moving to ETHYDCO in 2016. This meant that the team was able to learn from past experiences and avoid making the same mistakes.

As a result, we have been able to create an extremely strong company with robust foundations, not only at the top but in each of our divisions: ethylene, polyethylene, utilities and R&D. For instance, when Egypt started facing issues with importing because of the shortage of foreign currency, within a very short time frame, our R&D team was able to replace the grades, like low-density polyethylene (LDPE), that we were previously importing with grades that we could manufacture ourselves.

We are also grateful for the support from our shareholders. We are 20 percent owned by the NOC, Egyptian Petrochemicals Holding Company (ECHEM), 20 percent owned by Sidi Kerir Petrochemicals Company (SIDPEC), 11 percent by the Egyptian Natural Gas Company (GASCO), with the rest being financial institutions like Al Ahly Capital Holding and the National Investment Bank. GASCO supplies us with our feedstock while SIDPEC and ETHYDCO have complementary operations.

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Furthermore, we are humbled by the support we have received from the Egyptian government itself, from H.E. President Sisi himself, who came to inaugurate our facility; to H.E. Prime Minister Sherif Ismail, who as previous Minister of Petroleum visited our facility regularly to assess the construction progress; and H.E. Minister of Petroleum Tarek El Molla, who fully support our ongoing operations.

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An indispensable step as well has been the attainment of the industry licenses certifying that our facilities operate to the highest international standards. Our ethylene plant is licensed by CB&I Lummas, our butadiene plant is licensed by BASF, and we also have a license from UNIVATION for UNIPOLTM PE processes.

One of the main considerations for the success of petrochemical plants is the feedstock supply. How have you safeguarded against potential disruption to supply?

As our feedstock supplier, GASCO, is also a shareholder, we have a very good relationship with them.

Domestic demand for gas in Egypt has increased significantly in the past few years so the petrochemical sector has had to compete with power generation for the available gas supply. The recent gas discoveries in the Mediterranean is therefore a very positive thing for everyone. We are in fact already in negotiations with ECHEM to increase our production capacity and correspondingly, our feedstock supply. Even in the initial planning of ETHYDCO, we have outlined plans for expansion. For instance, we designed surplus capacity into the infrastructure so that with only small modifications, we can increase our ethylene production by 50 percent to over 600 KTA in just two years.

In the past few years, Egypt has faced shortages in electricity and power supply, with water supply being challenging as well. How might this affect ETHYDCO’s production?

As part of our long-term vision for ETHYDCO’s growth and sustainability, we planned for the construction of a permanent power plant to supply the company with its power needs. This was completed last month and we have an ‘n+1’ strategy, which means that we have two machines running to cover our needs and one spare machine on standby! Our ethylene plant is also the most energy-conserving plant in the country using only 9 MW per hour. We also have the largest cooling tower in Egypt with a circulation rate of around 34,000 m3 per hour at 11 degrees centigrade cooling capacity.

Currently, we are generating an excess of 35 MW. We are also setting up a connection to the national grid either as a back-up or even to sell our excess power to them! Our sister company SIDPEC very recently announced the launch of a new polypropylene (PP) plant, so we are in a position to divert this surplus power to them as well.

In terms of water, in the initial design phase, we estimated that the finished plant would consume 2,600 cubic meters (m3) per hour, which is very high. We made it a priority to optimize our water consumption through conservation and recycling, reducing it by nearly 70 percent to 700 m3 per hour.

This set the stage for us to become the first plant in Egypt to achieve zero-liquid-discharge (ZLD) status, and we are also the first ethylene plant globally to achieve this! It means that we are 100 percent environmentally friendly with no liquid waste released into the environment. As a result, we have actually been shortlisted at the 2017 Global Water Awards.

More generally, how much potential does Egypt have in terms of the development of petrochemicals, particularly when oil-rich countries in the Gulf have also embarked on petrochemical megaprojects?

Some of the largest petrochemical projects in the world are in the Gulf region, but looking at global trends, the Gulf area tend to supply Asia, with China obviously being a huge market. Abu Dhabi Polymers Company (Borouge) has a production of almost three million KTA and Saudi Basic Industries Corporation (SABIC) in Saudi Arabia has around 2.5 million KTA production, but these all go to feed China’s voracious demand. North Africa – i.e. Egypt and Algeria – supplies to Europe and South America, which also has huge need for petroleum products, so it is not a matter of competition. In addition, we produce some grades like monofilaments and pipe grades with bimodal technique that are not produced at all in Europe or Asia, so we fulfil certain market niches too.

On a matter of principle, we are certainly able to compete but there is no need to. We export to 31 countries all around the world, from Italy to Russia to Turkey to India and even to the Gulf! The next target for us is South America.

Furthermore, there is huge demand locally in Egypt; we are currently importing petroleum products at great expense. In fact, we are sometimes facing pressure to supply a larger proportion of local demand but we cannot do that as yet because we also need to fulfill our distributor commitments. This is why we are lobbying to increase our production capacity and feedstock. We have told GASCO that we are able to take as much gas as they can give us!

On a softer side, how is ETHYDCO supporting local development projects?

In September 2014, we joined the United Nations Global Compact (UNGC) to demonstrate our support of human right principles, labor standards, environment concerns and anti-corruption practices. We also firmly believe in giving back to our local community, which is why we have initiated numerous projects around us. For instance, we support local medical clinics and schools, as well as recruit and train qualified people from local areas to join ETHYDCO. We want to make sure that local communities can feel the tangible benefits of our presence and activity here.

ETHYDCO is clearly a flagship project for the country with the President himself having taken a personal interest in it. As Egypt seeks to become a regional energy hub, how will ETHYDCO continue to contribute?

Within a year, ETHYDCO will expand its portfolio and production significantly. We will never be satisfied with our production and we are already thinking about the next step. By 2020, I expect to see our production double and to be one of the leading producers of PE in the world!

Egypt absolutely has the potential to become a leader in petrochemicals and all the right conditions for success are in place. This is what ETHYDCO has proven: that Egypt can build a world-class petrochemical facility to compete and export globally. I hope our story will inspire more investors to come to Egypt to seize the bountiful opportunities here.

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