EGYPTIAN REFINING COMPANY

PROJECT OVERVIEW

2009

2

PROJECT OVERVIEW

In response to increasing demand for refined oil products in Egypt, the Egyptian Refining Company (ERC) will expand the existing Cairo Oil Refining Company (CORC) Refinery with additional product processing units. ERC will refine products received from the existing CORC refinery to pro-duce additional high-quality petroleum products essential to Cairo and Upper Egypt consumers.

This Project, which is to be located in the Mostorod Dis-trict in the Qalyoubia Governorate 40 km outside Cairo, will be built within the existing Mostorod Petroleum Com-plex. In addition to the facility site, a site west of the Is-mailia Canal has been leased for equipment storage and material fabrication during the construction phase.

Construction activity will be over a three-year period. The operational lifespan of the facility is expected to be ap-proximately 25 years.

Private Egyptian and Arab investors, led by Citadel Capital, own 85% of the shares. The Egyptian General Petroleum Corporation (EGPC) owns the remaining 15% of shares.

PROJECT RATIONALE

With the expansion and development of the Egyptian economy, the domestic demand for refined petroleum products, especially diesel, has increased. In addition, as more natural gas is utilized to meet Egypt’s expanding re-quirements for electricity, the demand for fuel oil de-creases. The technology in most of Egypt’s refineries pro-duces large amounts of fuel oil, but the growing demand is for lighter products such as diesel. The increased demand for lighter petroleum products is one of the most impor-tant challenges Egypt’s oil and gas industry faces.

Egypt has nine refineries operating in five governorates; however, with the growing demand for refined petroleum products, these refineries cannot supply all the products Egypt requires. Therefore, Egypt increasingly relies upon imports to satisfy domestic needs.

To address Egypt’s increasing need, the Egyptian Refining Company (ERC) was incorporated in July 2007 as a Law 8 Company to upgrade the existing CORC Refinery in Mostorod to provide Egypt with additional lighter petro-leum products such as diesel and LPG which will be deliv-ered to the heart of the consumption market—Cairo. ERC’s products will reduce Egypt’s dependency on petroleum imports.

Refinery Start-Up Date Location Capacity (Barrels/Day)

AMOC 2002 Alexandria 34,447

MIDOR 2001 Alexandria 100,000

Assuit 1987 Assuit 47,000

Tanta 1973 Tanta 35,000

Ameriya 1972 Alexandria 78,000

CAIRO 1969 CAIRO 160,000

Alexandria 1957 Alexandria 100,000

El Suez 1921 Suez 64,400

El-Nasr 1913 Suez 146,300

Refineries in Egypt

EGYPTIAN REFINING COMPANY PROJECT

3

PROJECT PROCESS AND PRODUCTS The ERC Project will largely utilise feedstock from the CORC facilities’ existing units and will sell its refined prod-ucts to EGPC at international prices. ERC will produce European (EU V) grade diesel and IATA worldwide specifi-cation jet fuel for use solely in the domestic market of Egypt.

The main products from ERC will include:

European Grade (EU V) Diesel

IATA Worldwide Specification Jet fuel

Kerosene

Reformate

Naphtha

Liquefied Petroleum Gas (LPG)

Fuel Oil.

By-products of the ERC Project include coke and sulphur, both of which are valuable products that will be sold to the local and international markets.

ERC Refining Process: Using Atmospheric Residue from CORC, ERC will produce lighter petroleum products for use in the Cairo market.

CRUDE OIL

ERC PROJECT CORC

67% Atmospheric Residue which

includes Light Products and

Fuel Oil

CORC PRODUCTS LPG

Light Distillates: Naphtha, Gasoline

Middle Distillates: Diesel, Jet, Kerosene, Gasoil

FEEDSTOCK Atmospheric Residue

HEATER

Light Products

Coke,

EGPC

Local

and

Interna-

tional

Markets

NATIONAL ECONOMIC BENEFITS OF THE ERC REFINING PROJECT

A demonstration of a Public/Private Partnership: The Project is adjacent to a government refinery and the private sector is providing the capital and debt-financing for a much-needed expansion.

Direct Foreign Investment to Egypt of over $3 Billion.

Provision of refined petroleum products which would otherwise have to be imported.

Creation of 700 permanent jobs during plant operation period, additional to the services that will flour-ish around the Project.

Creation of 7,000—8,000 jobs during the three-year construction phase.

EGPC will benefit by approximately $200 million annually through avoided transportation and insur-ance costs, as well as revenues from storage and processing fees and eliminated product shipment losses.

ERC will produce approximately 3.5 million tons of transportation fuels for Cairo, the heart of the larg-est consumption market in Egypt.

4

ERC shares the global concern for the environment and the need to take protective actions to preserve it. ERC is committed to reducing its impact on the environment while respecting the needs of other land users as well as the interests of future generations. Numerous environ-mental assessments contributed to ERC’s Project design.

In June 2009, the Egyptian Environmental Affairs Agency (EEAA) granted ERC approval for the Project based on the stage the Project was in and the Environmental Impact Assessment (ESIA). The EEAA will grant final approval when the ERC facility is operational and EEAA finds it com-pliant with its environmental commitments.

Overall, the assessments establish that the Project will have significant environmental benefits not only for the immediate Project vicinity but for the Greater Cairo area as well.

SURFACE WATER

The main surface water resource in the Project Area is the Ismailia Canal, which is situated west of the ERC plot and

flows from South to North. The canal is an important wa-ter system in Egypt as it transports fresh water from the River Nile North of Cairo to the canal cities of Ismailia, Port Said and Suez. Locally the water within the Ismailia Canal is used for irrigation of the agricultural land, recreational fishing, drinking water (which is treated in a facility in close proximity to ERC) and for the discharge of treated wastewater from industries in the local area.

The water supply for the ERC Project will be surface water from the Ismailia Canal available from CORC. Water from the ERC process will consist of cooling water, process wa-ter and sanitary sewage water. Following treatment by ERC, this water will be directed to CORC for its use in pro-ducing products. ERC will have on-line monitoring using appropriate analysers/instruments to ensure that the quality of wastewater coming from ERC will comply with relevant Egyptian and international standards.

Additionally, ERC has financially committed to develop a plan to improve the overall water discharges from indus-tries in and around the Mostorod Petroleum Complex.

AIR

The ERC Project includes a range of environmental im-provements to CORC, including the reduction of fugitive hydrocarbons emissions. Also, CORC’s heaters which cur-rently run on fuel oil will be switched over to gas when

Ismailia Canal

ENVIRONMENTAL BENEFITS

Wastewater from ERC’s activities will be subject to a three-stage treatment meeting highest world stan-dards.

5

ERC is operational resulting in further emission reductions.

The impacts predicted by the ERC Project, in combination with the CORC change from fuel oil to natural gas, will sig-nificantly reduce air pollutants. Maximum Project contri-butions to ground concentrations of SO2,NO2 and PM10

are predicted to be below the Egyptian, European Union and World Bank standards. The emissions of NO2 will de-crease further as CORC replaces its current burners during routine shutdowns for equipment maintenance.

Further reductions in SO2 emissions in the area will be re-alised by use of the low-sulphur fuel to be produced by ERC. The new fuels will have virtually zero sulphur content leading to an annual sulphur reduction compared to the current level when these fuels are used in vehicle engines.

It is expected that overall the regional air quality of Cairo and Upper Egypt will improve with ERC’s presence. The combination of the direct improvements at the CORC facil-ity in addition to the reduction in sulphur emissions re-gionally can be expected to make a net positive contribu-tion to future air quality, a key environmental benefit of the Project.

IMPROVEMENTS TO THE EXISTING FACILITY

As part of the overall Project, ERC has agreed to imple-ment various environmental improvements to the existing operational facilities in Mostorod including:

Providing double seals on PPC floating roof tanks to significantly reduce greenhouse gas emissions (evaporative loss from the floating roof tanks will be reduced by approximately 75 - 93% by retrofitting the existing floating roof tanks with double seals);

Providing low-NOx burners to CORC to replace the existing ones, thus reducing the NOx emissions;

Providing portable gas emission detection measure-ment meters incorporated into the CORC facilities to enable CORC to establish a Leak Detection and Repair Program which will result in a significant reduction of fugitive emissions from flanges, valves, tanks and pump seals;

Incorporating an oil filter into the CORC facilities up-stream of the waste water discharge to reduce oil losses during periods of any malfunctions of the cur-rent CORC treatment units;

Providing CORC with environmental measuring equip-ment, consistent with international standards, to en-able the daily measurement of low concentration pol-lutants, such as volatile organic compounds; and

Providing a tertiary water treatment plant to CORC to support /improve its existing facilities.

ENVIRONMENTAL BENEFITS FROM THE ERC REFINING PROJECT

ERC's processing will remove 93,000 tons of sulfur per year which is currently being released into the environment (as SO2) by burning the atmospheric residue/fuel oil sold into the market; transportation fuels produced by ERC will be low in sulfur (only 10ppm).

ERC’s operations will reduce by 29.1% the amount of SO2 currently emitted in Egypt from burning sul-fur–containing fuels (fuel oil and diesel).

Producing the fuel in Cairo rather than transporting from abroad will avoid the risk of spillages which is a common problem associated with the transportation and storage of petroleum products.

Products will be supplied at the market (Cairo) instead of being imported from abroad resulting in less greenhouse gas emissions by avoiding transportation (not only within Egypt but also from the ships which would otherwise be transporting the products to Egypt).

Using a three-stage process which meets the highest world standards to treat wastewater from both ERC and CORC ensures water quality meets environmental standards.

ERC will produce reformate and naphtha, which EGPC will use to blend with lower octane gasoline to produce a higher grade product, resulting in overall better product quality.

ERC’s use of CORC’s high-sulfur fuel oil as a feedstock enables CORC to use natural gas as fuel, resulting in a very significant reduction in SO2 emissions to the atmosphere.

ERC’s operations will reduce by 29.1% the amount of SO2 currently emitted in Egypt from burning sul-fur–containing fuels (fuel oil and diesel).

6

The ERC Project’s activities have the opportunity to bene-fit the neighboring communities. In the initial stages of the Project, ERC carefully assessed the social impacts the Project would have on the communities in order to ensure that community members receive maximum benefits.

ERC supports initiatives that will increase employment opportunities, economic benefits and the overall health and well being of all Project community members. As a result of the ERC Project, community residents will benefit from:

Vocational training and community activities;

ERC’s local procurement and employment; and

Improved air and water quality.

Working closely with the communities near the Project area, ERC will monitor its impacts on the residents’ quality of life.

COMMUNITY HEALTH

In the long term, due to ERC’s air and water quality con-trols, community health will be positively impacted. Addi-tionally, ERC has put in place dust and noise mitigation measures in its construction plan to reduce disturbances. ERC will periodically monitor the health of Project commu-nity members to ensure that they are not adversely af-fected by Project activities.

TRAFFIC AND TRANSPORT ISSUES

ERC is adopting a variety of measures to reduce traffic im-pacts as advised by an independent traffic survey, as well

as by listening to concerns raised by community members in ongoing consultations.

ERC will provide a Traffic Management Plan, which in-cludes Driver Safety training and a high level vehicle main-tenance plan, to ensure that Project vehicles operate safely with the Project area. Signs will be posted to alert community members to entry and exit points and the po-tential to encounter large trucks.

Employee work shifts will be scheduled to start and end at times different from neighbouring factories in order not to overload the roads during morning and evening rush hours.

ERC will also support paving, upgrading, and maintaining roads around the Project site which will greatly facilitate access and improve traffic safety.

SOCIAL BENEFITS

Children From Project Area.

7

SOCIO-ECONOMIC BENEFITS OF THE ERC REFINING PROJECT

ERC is enhancing Positive Impacts by:

Creating over 7000 jobs during the three-year Construction phase;

Creating 700 permanent jobs;

Increasing opportunities for ancillary services such as food services and transportation;

Providing skills training to equip community members with Project-required skills;

Investing in community social / health programs for women and children;

Working with community NGOs and organizations to ensure socio-economic development;

Providing capacity building for community NGOs;

Deploying Community Liaison Officers to manage community expectations and concerns and build positive relationships; and

Establishing Community Development Centers as focal points of Project activities in the communi-ties.

Access Route across the site to be used for equipment fabrication and storage.

ACCESS ISSUES

Currently, an informal foot path cuts through the area where ERC will fabricate and store equipment. ERC will provide a paved, lighted route through this area to ac-commodate people, bikes and/or motorcycles. Therefore, pedestrians and cyclists will retain their pathway and have protection from vehicular traffic. The farming family’s access to their agricultural land, which lies between the two sections of ERC-leased land, will also be maintained.

EMPLOYMENT

The Project will create over 7,000 jobs during construction and 700 direct employment opportunities as well as indi-rect opportunities during operation. Whenever feasible, residents from the Project Area will fill the job vacancies. ERC will work actively to promote local access to Project employment in both the construction and operations

phases.

SKILLS TRAINING

Vocational training in the skills and trades required by the ERC Project is provided as part of a community skills de-velopment program to ensure that community members have access to Project employment.

ERC recognizes that many positions will be filled with males from the community; therefore, the Project will seek appropriate programs for women and children.

Training local workers will lead to the community’s social and economic development and will provide community members with lifelong , employable skills.

In addition to training in Project skills, ERC will also spon-sor basic life skills programs in the communities through its Community Relations Centers.

Welding trainees in ERC-sponsored training.

8

Engaging the communities in the vicinity of the Project area plays a vital role in building positive relationships. ERC is committed to listening and responding to its neighbors to learn from their experiences, concerns and ideas.

COMMUNITY RELATIONS TEAM

ERC’s Community Relations Team is dedicated to estab-lishing ongoing communications with neighboring commu-nities. The team will convey Project updates and informa-tion about Project-sponsored programs as well as develop programs and projects in response to community needs.

The Community Relations Team consists of the ERC Com-munity Relations Manager, the Communications / Corpo-

rate Social Responsibility Manager, the Government Rela-tions Manager, Social and Environmental Scientists, and Community Liaison Officers (CLOs). The CLOs, recruited from the local communities, will play a vital role in engag-ing community members throughout the life of the Pro-ject. They serve as the link between the Project and the communities.

COMMUNITY RELATIONS OFFICE

ERC plans to open a Community Relations Center after financial close. Until that time, ERC has opened a Commu-nity Relations Office on the ground floor of the CORC Ten-ant Apartment Building to provide community members with Project information and updates. ERC’s Community Relations Manager, Government Relations Manager and three Community Liaison Officers staff the office week days from 9 AM – 5 PM. Announcements of Project activi-ties, including training opportunities, and Project updates are posted in the office.

Community members may reach ERC personnel by:

Visiting ERC’s Community Relations Office located in the CORC Tenant Apartment Building, Ground Floor, Apt. 1;

calling 0800 700 0000 (without charge) or 016-663-4365; or

sending an email to ERCCLO@ERCEGYPT.com.

COMMUNITY RELATIONS

ERC’s CLOs: Mohamed Sobhy, Mohamed Youssef and Dr. Heba Sayed.

ERC’s Consultation Process enables all community members to voice their ideas and concerns, ask questions or clarify issues.

9

GRIEVANCE MECHANISM

ERC works actively to prevent grievances through manag-ing Project impacts and through pre-emptive community liaison activities designed to anticipate and address poten-tial Project impacts. The Grievance Mechanism is the process by which people affected by the Project can bring their comments, concerns and grievances to ERC.

The Grievance Mechanism will be posted on the ERC web-

site (www.ercegypt.com) shortly before Project construc-tion begins and will be explained to community members by the Community Relations Team.

CONSULTATION RECORD

ERC maintains a complete record of all consultations with community members. In addition to stakeholder contact information, the meeting’s key points, actions, and out-comes are recorded. The record has been designed to in-form ERC personnel of issues to be addressed within a specified timeline.

The Consultation Record also enables ERC staff to track the development of community relationships over time and will allow for consistency in ERC’s approach to stake-holders.

REPORTING

An annual report of ERC’s activities will be published on the ERC website and printed copies will be placed in local government and community facilities. The Annual Report will include:

Consultation Statistics and Findings, including those related to the Grievance Mechanism;

An evaluation of stakeholder engagement methods and proposed changes;

The updated plan for the following year with de-tailed activities and Commitments Register.

CONCLUSION

The ERC Project provides economic, environmental, and social benefits for Egypt. Its world-class, environmentally-friendly technology ensures that ERC will be a model refin-ing facility. Technology alone, however, will not ensure ERC’s success. ERC’s relationship with the Project commu-nities is equally as critical. Therefore, ERC is committed not only to providing a clean, efficient and safe facility but also avenues for productive community engagement.

The Project will minimize or avoid potential risks and nega-tive impacts while offering sustainable services and activi-ties which will benefit the Project community. With its innovative technology and environmental and social poli-cies, ERC will enhance positive impacts and benefits for all stakeholders.

ERC Community Relations Office in CORC Tenant Building

ERC ‘s Grievance Process

Information about ERC’s Consultation Process can be found at: www.ercegypt.com.

10

Why isn’t the Project being built in the desert rather than in Mostorod? …………………………………………. The Project is an expansion of the existing CORC Re-finery and is based on further refining the petroleum products which CORC presently produces. The new products will be passed to EGPC for distribution within the Cairo area. It would not be economically feasible to build the Project outside of the Mostorod Petroleum Complex due to the high cost of building many tanks and pipelines from the desert back to Mostorod, which is the distribution location for the refined products.

Where will the Project be located?

The Project’s process infrastructure and related facili-ties will be located on land leased from the Govern-ment product distribution companies which currently occupy the space within the Mostorod Petroleum Complex.

As the Project Area is space-constrained, ERC has leased an additional site to the west of the Ismailia Canal for a three-year period from ESCO, a govern-ment-owned company, for equipment placement, fabricaton and temporary storage during the con-struction phase.

Will the production of the ERC Project be exported abroad? ………………………………………………………... No. ERC’s petroleum products will be used within Egypt and will therefore result in EGPC not having to import these products.

Why didn’t CORC/EGPC build the Project itself rather than asking ERC to build the Project? The Project is an expansion to the existing CORC Re-finery which has been in Mostorod since 1969. The overall cost of the Project will be more than LE 19 billion and CORC/EGPC do not have the funds to build such a large project. Therefore, CORC/EGPC have entered into a Public/ Private partnership with ERC to make it possible to build this much-needed expansion to the CORC Refinery which will provide petroleum products for EGPC to be distributed pri-marily in Cairo and Upper Egypt.

Has the Project received approval from the Egyptian Environmental Affairs Agency?..... Yes. In June 2009 the EEAA gave its preliminary ap-proval for the Project based on its own technical re-views supported by reports from Cairo University.

Has the Project been approved by the Governorate of Qalyoubia?........................................................ Yes. After consultations and public council meetings to discuss the Project and its impact on the environ-ment and nearby communities, Qalyoubia Gover-norate approval was given based on the Project be-ing built to meet Egyptian laws and standards.

How do we know that the Project will live up to its com-mitments regarding the environment? The Project has agreed to provide an LE 50,000,000 letter of guarantee to the Governorate of Qalyoubia to ensure that the Company meets its commitments to build the Project as specified, which was the basis on which EEAA’s approval was given.

FREQUENTLY ASKED QUESTIONS

11

From an environmental standpoint, could this project be built in Europe or the United States?......................... Yes. This Project meets all the World Bank, U.S. and European environmental standards which would be required to allow the Project to be built in Europe or in the United States.

How will ERC ensure the Project does not pollute and adversely affect neighbouring communities? ……… ERC will meet Egyptian and International standards, and will set up an environmental monitoring system which will be audited by international environmental and social consultants.

When the Project is operating, will it make the air pollu-tion worse in the Mostorod Area? …………………… No. The Project will actually result in an improvement in the quality of air in Mostorod and the Cairo area. The ERC Project will enable CORC to replace mazout with natural gas as a fuel in its heaters and ERC will provide CORC with low-NOX burners, thereby significantly improving the quality of air in the Mostorod area. On a national level, when the Project is operational, each year the refining process will re-move 93,000 tons of sulfur from fuels which would otherwise pollute Egypt's atmosphere. This removal will result in an annual reduction of 234,400 tons of sulfur dioxide emitted, which represents 29% of the sulfur dioxide currently emitted overall in Egypt from burning sulfur–containing fuels.

Will the Project adversely affect our children’s health? No. The ERC Project is designed to refine the fuels CORC produces making it a cleaner fuel to be used in industries. This results in cleaner air with a positive effect on children’s health. ERC will undertake peri-odic air quality and health monitoring to ensure chil-dren and all exposed groups are protected.

Will the ERC Project take water from the Ismailia Canal with the result that the current public use of the ca-nal water will be limited?

The amount of water consumed by the ERC Project for its processing units will not affect the normal flow of the Canal.

If the Project will be producing 93,000 tons of sulfur from processing petroleum products, will this result in a bad, sulfur smell?.....

No. The Project is being designed using proven inter-national technology and equipment to ensure that noxious smells will not be released into the environ-ment.

........................................

noxious smells will not be released into the environ-ment.

Will any houses around the project be demolished to make land available for the Project?....................... No. The ERC Project is being built on industrial sites within the Mostorod Petroleum Complex. No houses or other structures outside the complex will be de-molished.

What will ERC do about nuisances (noise and dust)? ERC has established a plan to minimize construction nuisance to local residents. For example, construc-tion work will not be carried out at night and sites will be watered and barriers erected to reduce dust.

How will the Project affect traffic in the area? ………….. ERC will provide transport for the project employees to ensure they do not take up space on public trans-port. Employees will work in shifts which start and stop at different times from other industries in the area. ERC will also conduct a road safety campaign for its drivers and will properly maintain its trucks to reduce accidents, noise and traffic fumes.

What will ERC do for me? …………………………………………….. Communities around the Project will benefit from community projects which will be established to im-prove the lives of people in the communities. Voca-tional training and life skills programs will also be of-fered. The Project will generate employment opportu-nities during the three-year construction period when the contractors will be employing more than 7,000 people and over 700 people will be employed during operations. Due to the increased activity in the area, the businesses for local companies are expected to increase.

When will ERC begin hiring people?................................ Some limited work will take place in 2010. However, the main work within the Mostorod Petroleum Com-plex will probably not begin until 2011. During 2011, the Company anticipates that the main contractor will begin hiring.

Will jobs at ERC only go to outsiders? ……………………... No. ERC will give preference to employing Egyptians and specifically people from neighbouring communi-ties who have the skills needed by the Project. ERC has already hired community members to conduct the environmental and social assessment surveys and to serve as Community Liaison Officers. As the Project progresses, ERC will begin hiring additional staff.

12

THE EGYPTIAN REFINING COMPANY

14 Refaa Street Dokki, Giza EGYPT

Telephone: +202 3762 6428 (4 lines)

Mobile: +2010 010 8104 / 8105 FAX: +202 3749 7646 Website: www.ercegypt.com

COMMUNITY RELATIONS

Please contact ERC’s Community Relations Team by:

Visiting ERC’s Community Development Office located in the CORC Tenant Apartment Building, Ground Floor, Apt. 1;

Calling 0800 700 0000 (without charge) or 016-663-4365; or

Sending an email to ERCCLO@ERCEGYPT.com.