Reliance Industries to Invest $10 Billion in Egypt

Now this is a news item which you would not usually catch. A foreign government, proudly banging the drum about how an Indian firm is going to invest billions of dollars in Egypt in the basic oil refining and downstream activities!! Indian firms are investing heavily in Africa, both from a governmental as well as corporate perspective. The government is more interested in gathering petroleum reserves but as one can see, even private firms are making a beeline to do so.

It is frankly a one way bet. You get project financing quite easily, there is a very large amount of fixed assets as collateral, Egypt is reasonably safe and the market is guaranteed in India and other places. Plus Egyptian oil is quite sweet. More importantly, what they will do is to use their immense value chain power to drive downstream and generate products ranging from lubricating oil to plastics, fertiliser and other products which need hydrocarbon based raw feedstock. See what Reliance has done in Gujarat and that's what I guess what Reliance will be trying to do in Egypt. Very good move indeed.

But to add a bit of emotion to the story, I was sitting in a hubby bubbly place with Zuhair, a Saudi friend of mine outside Riyadh and we were seeing this story about how somebody is going to take up a franchise of some lubricating oil (I forgot the name of the brand). Zuhair said, quite bitterly as it so happens, "we are the world's biggest petroleum extraction country and we cant even convert it into basic lubricating oil, we are not owners of this country, we are simply one of those old style landlords". That's what I would think as well, with such a huge Arab history, almost floating on a sea of oil, why weren't the Egyptian oil blocks developed by the Egyptian firms? As it so happens, a huge amount of the value addition will simply go back to India. I know that's globalisation for you, but surely the Egyptian Government must have a think about this! It is not like Egyptian entrepreneurs are unable to fund such a large project, they are huge in telecommunications across Europe and the Middle East. Curious.

All this to be taken with a grain of piquant salt!!!