Qatar Fertilizer Co. (Qafco) has signed a letter of intent for the construction of the Qafco-5 expansion project. The total cost of the project is estimated at U.S.$3.2 billion.
A letter of intent between Qafco and a consortium of the Italian company Snamprogetti and the Korean company Hyundai has been signed for the construction of the Qafco-5 expansion project. Yara International ASA owns 25 percent of Qafco; the remaining 75 percent is owned by Industries Qatar.
The Qafco-5 project includes the construction of two ammonia plants with a total daily production capacity of 4,600 mt and a urea plant with a total daily production capacity of 3,850 mt. The project also includes upgrades of already existing facilities and infrastructure that will facilitate future expansion.
Upon completion of the Qafco-5 project, Qafco’s total annual production capacity will increase to around 3.8 million mt of ammonia and 4.3 million mt of urea. The project will deliver a 73 percent increase in ammonia capacity and a 43 percent increase in urea capacity. Yara said as a result of the expansion, Qafco will become the world’s largest single site producer of ammonia and will retain its status as the largest single site producer of urea.
“Qafco is a long standing and successful partnership, and the expansion will further strengthen Yara’s production base with competitive gas sourcing. The investment cost has increased substantially compared with previous expansions, reflecting a general cost increase for petrochemical plant projects. However, long-term fertilizer prices will need to reflect the higher construction cost levels to motivate new supply in a tight and growing global fertilizer market. Qafco’s scale and competitive gas sourcing combined with Yara’s global marketing network forms a strong foundation for profitable expansion,” says President and CEO of Yara International, Thorleif Enger.
Construction work on Qafco-5 is set to commence in January 2008, after the signing of the project construction agreement. The construction work is scheduled to take approximately 40 months, with completion around the end of first quarter 2011.
The project will be partially financed with bank loans, with the balance coming from Qafco’s existing reserves and cash flows from its operations.