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Mashreq Petroleum has signed a 30-year concession agreement with East Port Said Port Authority that will allow it to build the first independent tank terminal in Egypt.

The EGP 3 billion (USD 427 million) facility will have the capacity to handle up to 800,000 metric tonnes of liquid bulk products, including bunker fuel, fuel oil, gasoil, naphtha and jet fuel.

The facility will primarily serve the liquid bulk market in the Far East, the Middle East and the broader Mediterranean region. Mashreq will also provide fuel bunkering services for ships transiting the Suez Canal, to capitalize on the unique location of the world's busiest maritime route, with more than 20,000 vessels transiting annually.

According to estimates, total traffic through the Canal represents 10 percent of global maritime transport and approximately 22 percent of container trade worldwide. An estimated 110 million tonnes of petroleum products passed through the Canal in 2012, and the figure has been growing at a rate of 19 percent annually over the previous eight years.

Mashreq will have an annual storage capacity of 10 million metric tonnes per year and an annual bunkering capacity of 2-3 million tonnes. Three berths will accommodate tankers up to 120,000 deadweight tonnage (dwt) and four berths for bunkering barges. The project will be completed in several phases.

The concession is based on a build-operate-transfer (BOT) system for 25 years, extendable by one year for every five years during which the project achieves at least 90% of its operational targets. In total this will result in a 30-year concession in addition to a three-year grace period for construction.

Commenting on the news, Dr. Tamer Abubakr, Mashreq Petroleum Chairman and Managing Director, said: "Coming on the heels of Cabinet-level approval for the project yesterday, the concession agreement between Mashreq and the Port Said Port Authority clears the way for the fast-tracking of this critical project, which stands as a backup to Egypt's national energy security."

Mashreq Petroleum was established in 2004 to build and operate the first tank terminal and logistics hub of its kind in the region. The original contract for Mashreq was signed on December 10, 2005.

According to Citadel Capital - an investment company that holds a 25 percent ownership stake in Mashreq - Mashreq's growth prospects in the storage market are based on both the fast-rising rate at which petroleum products are transiting the Suez Canal as well as the Middle East and Mediterranean regions' status as deficit markets for diesel and gasoil.

The project is expected to help attract global companies and large shipping lines to operate at the port and simultaneously help ease the nation's shortage of refined products by facilitating imports. In cooperation with the Egyptian General Petroleum Corporation (EGPC), the facility will be linked to the national petroleum pipeline grid at a junction point located 17 kilometers south of the project.

Mashreq will also help stimulate the growth of additional sectors in East Port Said, including the establishment of new power generation facilities and industrial zones.

All necessary regulatory and governmental approvals are said to have been obtained, including approved environmental impact assessment reports. Mashreq has also completed the design of the tank farm.