Orascom Construction Industries (OCI) recently told analysts that it expects to have final permitting complete for its new Wever, Iowa, nitrogen plant in October. The permitting process has been in the works for the past year. “The regulatory approval is huge,” said Nassef Sawiris, OCI chairman and CEO. “The engineering challenges are very high and it is a five-year process. We’re trying to do it in four. A year has passed and three to go.” OCI believes that its past experience in building nitrogen plants gives it an edge in fast tracking the project.
Sawiris is not worried about potential carbon taxes or environmental concerns from U.S. regulators. “This plant will be years ahead of any existing other plants in the U.S. in terms of emissions, in terms of technology, state-of-the-art and environmental implications. So everything is best in kind. When you look at the most recently constructed similar plant, that dates back more than 30 years from now, so we are coming in with technology that does not even compare to what exists today in the U.S. So any implications will actually mean that this new modern plant will have a significant advantage over the existing peers.”
Finding a site in Iowa, in the heart of the Cornbelt, was pivotal to OCI, and it says logistically the move should save it about $100-plus of logistical cost per ton. “We estimate a significant saving for being in the middle of the market rather than transporting urea from North Africa or the Arab Gulf across the ocean through New Orleans and onto barges and through the Mississippi River and unloading it again at distribution points in the U.S.,” said Sawiris.
On the natural gas front, OCI said the Wever site will connect with a major pipeline and it is evaluating all options for gas supply, which are in advanced discussions. No final hedging or long-term agreement has been signed. OCI said at its Beaumont, Texas, plant it is operating on spot gas, but for the Iowa plant, due to the financing, there will be some component that will have a cap on pricing for that project.
In other news, OCI announced that its Beaumont plant is now producing at capacity, having produced 63,000 mt in the second quarter ending June 30, 2012. Capacity is 250,000 mt/y. The Beaumont methanol plant has also begun production. OCI’s new Sorfert, Algeria, Line I urea plant has produced 48,000 mt and expects to begin exporting this month. Line II will begin testing in October. OCI expects both to be at full production by the end of the year.
Despite the positive news, OCI second-quarter net income was down, pressured by several factors, including high taxes in Europe, startup costs at Beaumont and in Algeria, and Gavilon income being reflected as investment held for sale. OCI-wide net income was off 27.7 percent, to $119.4 million on revenues of $1.35 billion from the year-ago $165.2 million and $1.47 billion, respectively. Six-month net income decreased 42.6 percent to $213.3 million on revenues of $2.63 billion, down from $371.3 million and $2.73 billion, respectively.