Dubai Govt., SPIC strike gas supply deal for urea project

By K. T. Jagannathan

CHENNAI, FEB. 23. The uncertainty over the offshore ammonia/urea project of fertilizer major Southern Petrochemical Industries Corporation (SPIC) at Jabel Ali Free Trade Zone has finally ended with the Government of Dubai making a firm commitment on gas supply.

Disclosing this to The Hindu, Mr. A. C. Muthiah, Chairman of SPIC, said the gas supply agreement would cover a 15-year period. The Dubai Government had on Wednesday committed 40,000 mbtu (million British thermal unit) a day of natural gas. The gas would come via the fast coming up Abu Dhabi-Dubai gas pipeline, he added.

SPIC Fertilizers and Chemicals Ltd. (SFCL), which is putting up the project, would soon enter into a gas supply and purchase agreement with the Government of Dubai, he said.

The first offshore urea venture yet by an Indian company, the Jabel Ali project of SPIC-promoted joint venture will be capable of producing four lakh tonnes of urea annually when on full stream. It will produce 2.26 lakh tonnes of ammonia, an intermediate product.

Now that the `gas hitch' was over, Mr. Muthiah expected work - which had been stalled for a while now - would recommence in right earnest. Nearly 60 per cent of construction work had already been completed.

Though conceived as a gas-based project, with gas linkage not coming and falling naphtha prices then, the project authorities had sought to make it naphtha-based.

But with the Government of Dubai committing a long-term gas supply, Mr. Muthiah felt the project could now go back to gas as the main fuel.

MW Kellogg of the U.K. is the engineering contractor. It will also provide technology for the ammonia plant. For the urea plant, the technology will come from Stamicarbon B.V. of the Netherlands.

The entire urea produced at Jabel Ali facility will be exported to India under a buy-back arrangement with the parent company SPIC.

The much delayed project will cost close to $180 million, up from $160 million when it was conceived.

The project is estimated to have a debt-equity ratio of 1.5:1. When conceived, it was a sort of three-way equity arrangement with MCN Energy Corporation of the U.S. holding 39 per cent, SPIC 51 per cent and ETA the balance.

The American company had pulled out somewhere along. ETA has now shown interest to have 15 per cent equity in the company. SPIC sources are confident that they may not find it difficult to identify a new partner now that the gas linkage has been committed.

With urea prices looking up, Mr. Muthiah felt the revival of the Jabel Ali project would give the SPIC group a shot in the arm.

Of late, there has been some good news for SPIC. First was the sale of stake in the seeds venture which fetched sizable sum. Second was the successful roll-over of floating rate notes at reduced rates. Now comes the news about the gas linkage for its overseas project.

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