India’s FACT halts ammonia production on high LNG prices

30 January 2014 09:27 Source:ICIS News

KOLKATA (ICIS)--India’s Fertilizer and Chemicals Travancore Ltd (FACT) has stopped producing ammonia and will rely on importing the raw material for fertilizer production, citing high cost of feedstock liquefied natural gas (LNG), a company official said on Thursday.

The company has secured import supply of 15,000 tonnes of ammonia, with half the consignment received at Kochi port in southern India on Tuesday, while the second shipment is scheduled to arrive next week, the official said.

FACT had completed last year the switch to using LNG as feedstock for fertilizer production from naphtha.

With imported LNG prices touching $24.35 per million metric British thermal unit (mmBtu), using it as feedstock had become economically unviable for fertilizer production, the FACT official said.

The Indian government is also not willing to ensure supplies of domestic natural gas at $4.2 per mmBtu to fertilizer producers, leaving FACT no other option but to import ammonia to continue production, the official said.

FACT will have to import ammonia until domestic LNG prices settle to “comfortable” levels, he said.

The company would require around 70,000-80,000 tonnes/month of imported ammonia to feed into its 225,000 tonne/year ammonium sulphate fertilizer plant, the official said.

Ammonia would be sourced from west Asian countries, he said, but declined to identify contracted sellers.

Apart from high prices, LNG’s availability is also a problem.

FACT was unable to source LNG from a terminal operated at Kochi, as the terminal operator – LNG Petronet – is insisting on contracting no less than a full shipload of LNG, which would be far in excess of what the company requires, the official said.

Hoping to bring down the cost of feedstock LNG, FACT had filed a petition to the government early this month seeking exemption from the 14.4% value-added tax (VAT) that applies to the gas.

In case of a favourable decision, the company would review its production cost structure, as well as its dependence on imported ammonia, the official said.

By Ajoy K Das