Plans for $1.5bn ammonia plant in Algeria back on track, gas deal

12 May 2014 15:06 Source:ICIS News

An ammonia plantLONDON (ICIS)--Ambitious plans for a $1.5bn export-oriented ammonia plant in Algeria that were first revealed in 2007 are back on track following the signing of a crucial gas deal and investment agreement, a local market source confirmed on Monday.

Proposals for the El Bahia fertilizer project were derailed several years ago because of a dispute between the two joint venture partners: a subsidiary of state-owned energy giant Sonatrach and Spanish fertilizer group Fertiberia, owned by Grupo Villar Mir (GVM).

However, the pair recently shook hands on a new gas and investment deal that has given fresh impetus to the huge nitrogen manufacturing project that will be constructed at Arzew and comprise a facilty producing 1.1m tonnes/year of ammonia for sale overseas.

The 3,300 tonne/day El Bahia plant is still at the design stage and an exact location for the facility near the coastal city has yet to be disclosed, the source added.

"The facility will produce around 1.1m tonnes/year of ammonia for export," the source confirmed. "Building such a plant normally takes 3-4 years but this is Algeria so who knows when it may actually start production."

The agreement, which was reached on 30 April after a lengthy impasse, also included a new gas deal for leading ammonia producer Fertial that will see the company invest $300m in additional fertilizer capacity over the next few years.

Fertial is owned by Asmidal whose parent is Sonatrach and Fertiberia and the new investment will allow the firm to increase its ammonia capacity by 40% to 1.1m tonnes/year from the existing 850,000 tonnes/year.

The majority of the extra capacity from expansion work at Fertial's existing plants at Arzew and Annaba will be shipped abroad, although a portion will be consumed by a new 250,000 tonne/year nitrogen phosphorous potassium (NPK) line at Annaba.

The company, which currently operates a 200,000 tonne/year NPK unit at the facility, expects the extra NPK product to be sold abroad rather than domestically.

However, none of the extra capacity is likely to come online before 2018 as Fertial's expansion plans are still at an early stage and Algeria's planning process turns slowly.

The source, who also revealed Fertial's gas supply rates have returned to normal after several months of curtailments, declined to disclose any details of the new gas deal, apart from saying it had increased.

He added that while some internal changes to top management had taken place, the shareholdings remains the same with Madrid-based GVM maintaining its 66% stake and Asmidal its 34% share.

In a short statement late last month, Sonatrach said the signing of the agreement in the capital, Algiers, will "give new impetus to the country's fertilizer industry".

It added part of the deal involved a "review of certain provisions of the partnership agreement between Fertial and Asmidal" and included a "rebalancing of the economic and operational interests of the parties".

Algeria has recently become a leading exporter of nitrogen fertilizers following the late 2013 start-up of the $2bn Sorfert plant in Arzew.

Sorfert has the capacity to produce 800,000 tonnes/year of merchant ammonia and 1.3m tonnes/year of granular urea for export.

Both Fertial and Sorfert have been loading ammonia cargoes on a more frequent basis in recent weeks following the introduction of a controversial export licensing process by the government in late 2013 that impacted and delayed shipments for several months.

By Richard Ewing