World’s largest urea plant comes online

KARACHI:

Engro Enven, the world’s largest single train urea plant, started commercial production on Friday after a delay of nine months.

The plant will produce 3,467 tons of urea – a type of fertiliser – daily, slightly lower than optimum levels due to shortage of gas supply to the plant. The plant is currently receiving gas at 80 million cubic feet per day (mmcfd) against allotted supply of 100 mmcfd. The plant costing $1.1 billion located in Daharki, Sindh can produce over 3,800 tons of urea in a single day at full capacity, according to official company documents.

Engro Fertiliser will now be equipped with an additional supply of around 425,000 to 475,000 tons of urea from the new plant. The new supply will help satisfy the country’s ever growing demand for urea and decrease excessive imports of the commodity, according to InvestCap analyst.

The Trading Corporation of Pakistan this month issued tenders for import of 100,000 tons of urea due to domestic shortages caused mainly by insufficient gas supply

Currently Engro Fertiliser Limited, a wholly-owned subsidiary of Engro Corporation, holds about 25 per cent of the di-ammonium phosphate (DAP) - another type of fertiliser - market and 16 per cent of the urea market.

The plant, with a capacity to produce 1.3 million tons of urea annually, was supposed to start production nine months back but faced three months delay due to construction and six months due to a gas shortage, which was settled in court.

Stability still a worry for investors

Investors were getting increasingly concerned over the company’s ability to repay its heavy debt, according to an InvestCap research note.

The Corporation’s debt stands at Rs132 billion whereas the total worth of the company stands at Rs168 billion mark, adds the note.

Local and foreign investors recently offloaded their positions in the company’s stock, causing a drop of 12 per cent in the stock price this month.

Vibes were there for Engro Corp that the company has been getting its mammoth debt restructured, says the note. Those fears still stand, although the plant’s is expected to beef up the revenue side of the company.

However, fears can once again be reborn if the world’s largest single train urea plant faces further announced or unannounced gas outages, adds the note.

Such situations can end up pouring further pressure on Engro Corp’s balance sheet as fertiliser is like a life support to the conglomerate and adds more than 60 per cent in the net profits of Engro Corp, says the note.

Unique features to improve efficiency

The new plant is more efficient than most of its competitors as well as Engro’s existing plant as it produces more fertiliser with less amount of gas, according to company documents.

The plant will consume gas 22 million British thermal units (mmbtu) to manufacture one ton urea against the old capacity that required 30 mmbtu for the same amount of production. The plant employs advanced technology for carbon dioxide recovery from flue gas, which results in increase in production by 350 tons per day. It is also the first fertiliser plant of the country that to uses waste gas from ammonia plant for power generation.

A hydrogen recovery unit of ammonia plant, which is in the process of getting commissioned, will add up to 200 tons of urea production.

Published in The Express Tribune, June 25^th, 2011.