Four in the run to set up urea plant, bidding next month

Posted on 10.18.06 by StockPK Team @ 2:43 pm    

Four parties including Engro, Fauji Fertilizer Company (FFC), International Petroleum Investment Co (IPIC) and Orascom are interested in installing a new urea plant in view of growing demand of fertilizers in local market.

Currently, Engro and FFC are the major urea producers in the country while remaining two companies are comparatively new in urea production business.

“Engro Chemical wants to install urea plant in Deharki with an annual production capacity of around one million tonnes, while FFC intends to install urea plant at Kotmachi with a production capacity of around 0.75 to 0.8 million tonnes,” an inside sources, privy to developments, told on the condition of anonymity.

However, the construction of new urea plant is subject to success in bidding for provision of 100 MMCFD gas from Qadirpur (some 20 km away from Ghotki District) gas field that to be allocated to new urea plant.

Though October 31, 2006 has been fixed as tentative date for bidding of 100MMCFD gas from Qadirpur gas field in order to choose the party which would build a new urea plant but an internal source anticipated that bidding might further delay for two weeks as prospective bidders are yet to make full preparation for this multi-million project.

Earlier, September 25 was fixed as bidding date, which was rescheduled to October 31, 2006 as majority of main players sought extension in last date for bidding for unknown reasons.

It would be for the first time in the history of Pakistan that bidding would be held in order to choose the party, which would build a new urea plant. Due to the shortage of gas in the country where government cannot allocate more than one gas field to the industry on account of its growing energy needs.

Total urea production in the country is around 4.4 to 4.5 million tonnes as compared to demand of around 5.3 million tonnes. FFC is producing around 2.5 million tonnes in its three plants located in Kotmachi and Mirpur Mathelo. While Engro is second largest producer of urea with total annual production of some 9.5 million tonnes whereas Fauji Fertilizer, Bin Qasim, produces around 0.6 million tonnes and Dawood Hercules is producing around 0.45 million tonnes besides Schon Group which produces 0.1 million tonnes only. In order to bridge gap between demand and supply in domestic market, the country last year had to import around 0.7 million tonnes urea. Average urea consumption is growing by 1.5 per cent in the country.

It was in Sep 2005, after 2 years of continuously importing urea in order to fulfill local demand that the government decided to allocate 100MMCFD gas from Qadirpur gas field for the setup of a new urea plant. Statements of Qualification (SOQs) for this purpose were called in July 2006, in response to which 13 parties showed their interest.

However, 4 parties have been pre-qualified. “We expect all 4 parties, due to their strong financial standing, to bid aggressively for the gas with the bid amount likely to be in the range of US$30-100mn,” a research said and added that besides the bid money, for the actual plant construction, we expect cost for existing players, FFC & Engro, to be around US$700-750mn since this would be a brown field project for them as they already had related infrastructure and engineering services. However, for new entrants, IPIC & Orascom, the cost of the project is likely to be US$1,000 million. Construction period, on the other hand, is estimated to be three years after financial closure.

Source: The News