Orascom Construction Ind-ustries will today ann-ounce the development of a Dollars 1.8bn facility to produce fertiliser on the Mediterranean coast of Algeria in partnership with Sonatrach, the Algerian state-owned oil and gas company.
Fertiliser production is undergoing a significant structural change as production facilities increasingly move from regions such as the US, Europe and former Warsaw pact countries such as Ukraine and Belarus where gas prices are high, to areas where gas prices are low because of local supply.
Nassef Sawiris, chief executive of OCI, says the trend started with production facilities moving to Venezuela and Trinidad, but he said they were now increasingly moving to the Middle East as well, with new developments in Egypt and Qatar.
"The current cost of gas gives countries where gas is cheap a fundamental advantage," he said. "While demand is as strong as it is at the moment, it is a win-win for everyone, but the low gas costs give us significant downside protection."
He added that the plant’s location in Algeria positioned it perfectly to serve the European market, while the east coast of the US was only six days away by ship.
Sawiris said the cost of gas in the US was about eight times the price in the Middle East, while the cost of shipping accounts for about 10 per cent of the total price of the fertiliser.
Sawiris said the 51:49 joint venture with Sonatrach, called Sofert Algerie, would be ready by 2010.
Uhde, owned by Thyssen-Krupp Technologies, will provide the urea granulation technology while OCI Algeria is expected to perform all on-shore works on the complex.
High gas prices, the booming global demand for agricultural products because of population increase, and the burgeoning demand for biofuels have resulted in a booming market for fertiliser around the world.
"If 2006 was the year of minerals and materials, 2007 is the year of agricultural products," said Mr Sawiris. "People are eating more meat, and more animals means more corn, which has strengthened demand for fertiliser."
Algeria has the third largest reserves of natural gas in the world.
(The Financial Times)