Osama Kamal – Chief Strategy Officer; Member of the Board of Directors, Carbon Holdings, Egypt
Osama Kamal, former Minister of Petroleum and Mineral Resources for Egypt, shares his insights on the underappreciated potential of Egypt’s downstream oil and gas sector, gleaned from his 35 years of experience in the public and private sectors, while arguing strongly for Egypt’s ability to position itself as the Mediterranean energy hub by virtue of its strong infrastructure.
Osama, you have spent 35 years in the oil and gas industry, leading a number of public-sector companies in the downstream sector before being appointed Minister of Petroleum in 2012. Now you have a very busy career as an independent consultant for a number of leading Egyptian companies. What motivated you to move to the private sector in this non-executive capacity?
“It is important to recognize that Egypt is a very strategic player in the region and we are key to the dynamics of the region.”
First and foremost, having completed my assignment and ended my government career as the Minister, I felt it was more appropriate for me to work in a non-executive capacity, particularly as I was staying in the oil and gas business. I did not want to have any potential for conflicts or interference with my colleagues. That said, I currently own a company that works in total facilities management, which is a different sector.
I wear many hats. My fundamental motivation is to have my country develop radically and fulfil the potential I can see. I believe the downstream oil and gas business is a particularly promising area that can contribute significantly to Egypt’s development. Working as a consultant and non-executive actually makes me very happy because I can see that this business is growing in Egypt and I am doing my part to improve the lives of Egyptians.
During my term as Minister, I had prepared a plan to continue the development of the petrochemicals master plan in Egypt. We currently produce a significant amount of petrochemicals products, roughly 3.8 million tonnes per annum (p.a.). It goes without saying that petrochemicals are ubiquitous in our lives today: 85 percent of our surroundings derive from petrochemical products. While Egypt is blessed with oil and gas resources, we do not have the most abundant reserves in the world. Investing in petrochemicals is the way to extract maximum added value from what we do have.
The government has embarked on an ambitious modernization plan for Egypt’s oil and gas sector, and H.E. Prime Minister Sherif Ismail has announced an investment of USD 14.5 billion for the downstream sector specifically. Do you think this sufficiently reflects the importance of the downstream sector?
Strategically, this sort of strategy was started a long time ago. But practically, it has not been fully exercised, for the reason that people prefer to work on industries that are seen to be easier and less of a headache.
As a country, we have also made a historical mistake on subsidies – we subsidized commodities instead of poor people. These commodities are consumed by the rich and poor alike, and those with more purchasing energy naturally benefit more from the subsidies. As a result, 80 percent of the subsidies accrue to 20 percent of the population, and specifically those more well-off. This is not fair.
What we need in Egypt right now is not subsidies, but job opportunities. If we can give our people good jobs, they will be able to educate their children and live better lives than if we gave them low salaries and compensate by subsidizing everything else.
The only way out of this corner I see is to help people obtain fair job opportunities, most particularly by promoting and developing small- and medium-sized enterprises (SMEs) – and the petrochemical industry is a sector with huge potential in this sense. It is particularly helpful because Egypt has a very strong and experienced technical workforce, but you can imagine that in a country of 92 million people, we also have a significant base of lower-skilled workers, who can be upskilled and transferred into these various petrochemical initiatives.
Incidentally, you can find good examples of this in China and Japan. In Guangzhou, China, for instance, you will find lots of small shops on the streets, but these are all coordinated, supervised and supported by the government. I wanted to have this structure replicated in Egypt to some extent, particularly while I was heading the Egyptian Petrochemicals Holding Company (ECHEM). For entrepreneurs, it is very comforting to feel that the government is supporting them. The intention was to have a multifunctional plan, with ECHEM acting as a shareholder and securing their feedstock, while other institutions participate in different ways. For instance, banks can finance these projects on a long-term basis, the Minister of Industry can provide centers of excellence for training, the Minister of Trade to provide experience in marketing, for instance, not just locally but regionally and internationally.
The first oil and gas business started in Egypt in 1886 and the oldest refinery was built in 1910 – which is still operating now. We have very good facilities but they do need to be modernized further. I would say we also need to implement a number of other plans. For instance, we are currently focusing on producing petroleum products like benzene, kerosene and jet fuel to satisfy local needs, which means we are overlooking things like naphtha cracking, even though naphtha is a badly needed commodity all over the world. There is already a dialogue between the public and private sectors on this but there is no coordination yet, and I think the private sector is still in a ‘wait-and-see’ mindset.
The challenge in Egypt is that business here depends a lot on individuals. Once an individual leaves his position, his plans and strategies leave with him – perhaps this recalls Egypt’s pharaonic heritage. In addition, after the 2011 revolution, there was a lot of instability in the country. We were trying to fight fires everywhere. Any sort of strategic planning requires more long-term stability.
Speaking of long-term strategic planning, we see that the government’s ambition is to position Egypt as an Eastern Mediterranean hub. How realistic do you think this vision is?
I actually wrote an article on this topic for an Arabic paper, where my argument was yes, it is realistic because of five major factors. Firstly, we have excellent infrastructure for the refining stage of the value chain. Our current refining capacity is around 35 million tonnes p.a., and we are only using 26 to 28 million tonnes right now, so we have spare capacity of around 8 million tonnes. There is also the potential to increase this to 50 million tonnes p.a. by upgrading exciting facilities. I would say each refinery in Egypt now is overstaffed by 1000 percent at the moment, and their existing facilities and utilities can support three to five additional refineries! In terms of exporting final products too.
Secondly, I see that we have a very strong geographic edge in our proximity to Europe and Africa. Africa is a very good market for us, because they are importing products right now from Asia and Europe. Through the COMESA agreement, we actually have an edge over countries from those regions because it gives us concessions on taxation and custom duties.
The third factor, we have strong oil and gas networks and utilities linking the oil and gas regions of Egypt, from the Western Desert to the Red Sea area, which can be used not just for existing discoveries but new discoveries. In addition, these networks also link to our deep water fields, which also links to our neighbors like Cyprus. They are currently idle but the capacity is there.
The fourth factor is Egypt’s strong manpower base. We have extremely experienced and skilled people, not just in engineering but other technical sectors and even construction. This is not something to be overlooked.
The last compelling factor is the SUMED pipeline and storage facilities, which are currently being upgraded at the moment, which reflects the value this pipeline is bringing to not just Egypt but our neighbors, some of whom are investors on this project: Saudi Arabia, Kuwait, the UAE and Qatar. It is important to note that the SUMED Pipeline is not just about the 350-kilometre pipeline itself, but the extensive storage facilities that line the pipeline. In addition, we have also two LNG facilities, that can receive the discovered gases in Cyprus & Israel and re-export to the European customers.
The new Trump administration is expected to herald a new era of US-Egypt ties. Given all the activity that is going on in Egypt now, who do you believe to be the best partners for Egypt?
Egypt has had an open door policy to foreign investment for a number of years now, and I think this is very sensible. As strong as our relations with the US are, imagine if we were reliant exclusively on US investment. It would put us in a disastrous situation should they decide to stop.
In the oil and gas sector, we are working with 78 partners from over 30 countries. Each country brings their own set of benefits and attributes. The best technology come from the Americans and the British. But we feel warm when we deal with the Koreans and the Chinese. We believe we can rely on the Italians, French & Russians even when things are difficult. We feel like family when we deal with our Arabian colleagues. I have lived with them all and each of them brings something different.
I do not think people should be scared to invest in Egypt today. It is a very political fear. Egypt has no history of nationalization or appropriation in the oil and gas sector, in the past 130 years that we have been operating in this industry.
Ultimately, it is important to recognize that Egypt is a very strategic player in the region and we are key to the dynamics of the region. For that reason, I believe we are the closest country to the US in the region, despite other factors, for instance, like the abundant energy resources that exist in the Gulf region.
“Egypt has no history of nationalization or appropriation in the oil and gas sector, in the past 130 years that we have been operating in this industry.”
On that note, what final message would you like to leave our readers about investing in Egypt?
Firstly, in terms of big ticket investments, I would recommend foreign investors invest more in deep water, which will become very profitable in Egypt if we have more investment and exploration activity. The infrastructure already exists so this represents a great opportunity for big E&P players.
On the other hand, I also fully encourage investors to come and invest in SMEs. The Suez Canal Zone is full of great investment opportunities, for instance, and the added benefit is that this area is governed by a special law, which gives investors the flexibility to invest and repatriate their profits. One of the companies on whose board I sit, Carbon Holdings, for instance, is in the process of building a huge, USD 9 billion petrochemical facility that might be the biggest in the world currently, in the Sokhna area, which will eventually produce 4 million tonnes of petrochemicals. It is most certainly a very exciting time to invest in Egypt.