Qatar is positioning itself to sell liquefied natural gas to Egypt as it uses its financial firepower to cement its ties with Egypt’s new Islamist leadership in a time of unprecedented economic instability.
The world’s biggest exporter of LNG signed a joint venture with Egyptian private equity firm Citadel Capital (CCAP.CA) last Thursday to build a floating LNG storage facility and re-gasification unit to deliver natural gas to Egypt.
Oil-rich Gulf states such as Saudi Arabia and the United Arab Emirates have pledged funds as they seek to define their new relationships with Cairo but Doha is taking a more proactive approach, investing directly in Egypt’s energy sector and financial services.
“It is investing where it knows and where it can develop new markets,” says Farouk Soussa, emerging markets economist at Citigroup in Dubai. “There are very good growth prospects in Egypt and the kind of investments Qatar is undertaking would capitalize on those.”
Unlike its Gulf neighbors, who are more suspicious of the Muslim Brotherhood, Qatar has supported Egypt’s new order, hosting members of the group in Doha.
Qatar’s most recent announcement preceded the weekend’s large protests after Egypt’s president Mohamed Morsi broadened his political powers. The renewed political unrest wiped $5bn off the Egyptian stock market on Sunday.
This latest deal, however, is long-term and based on the view that Egypt’s energy subsidies are unsustainable.
“As the subsidy is being given in a different format or alleviated, what opportunities will that create?” asks Abdalla Elebiary, managing director of Citadel Capital. “We saw the opportunity arise, we were quick to move.”
Although still in the early stages, the joint venture – 51 per cent held by QInvest, Qatar’s state-backed investment bank, and the remainder held by Citadel – has already applied for an import licence.
Ahmed Heikal, Citadel chairman, told the Financial Times last week that if given the green light, the venture could be operational by next summer and could supply up 10 per cent of Egypt’s consumption.
The announcement comes as Egypt is poised to allow increased private sector involvement in the gas business, which has been historically dominated by the state.
The latest joint venture is Qatar’s second recent investment into Egypt’s energy sector after it took part in Citadel’s $3.7bn refinery project in June.
State-run Qatar Petroleum International committed more than $362m for a 27.9 per cent stake in the refinery. The Gulf country has also been active in Egypt’s financial services. In October, Egypt’s regulator approved a plan to create a jointly-held investment bank of EFG-Hermes and QInvest of Qatar.
The two agreed in May that QInvest would take a 60 per cent stake in a joint venture that included EFG-Hermes’ investment banking business.
Qatar, through state-backed Qatar National Bank, is also considering the purchase of Société Générale’s 77.17 per cent stake in NSGB, the Egyptian lender.
Source: Financial Times
