Qatar Fertilizer in Talks with Saipem for $3.2 Billion Fertilizer Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Qatar Fertilizer Company SAQ (Qafco) (Messaied, Qatar) has reportedly opened direct negotiations with Saipem SpA (BIT:SPM) (Milan, Italy) about the $3.2 billion fertilizer plant Qafco VI, which is planned to be built about 30 kilometers south of Doha.

Saipem is already heavily involved in the Qafco V project, with staff onsite who are familiar with Qafco's operations. Qafco intends to talk directly with Saipem rather than call for full, open tenders for Qafco VI. The firm hopes to trim project costs to about $3 billion and fast-track the project. Calling for open tenders could delay the project for six months to a year.

In December 2007, Saipem was awarded the engineering, procurement and construction (EPC) turnkey contract to develop the Qafco V project as part of a consortium with the Hyundai Engineering and Construction Company (SEO:000720) (Seoul, South Korea).

Qafco V consists of ammonia and urea production plants located in the Qafco Industrial Complex in Messaied City. When the contract was signed, Saipem's share was about $2 billion. Saipem was directly involved in the engineering and procurement activities for two ammonia plants, each with a production capacity of 2,300 tons per day, and a urea plant with a capacity of 3,850 tons per day of granulated urea. Construction of Qafco V is scheduled to be completed by early 2011.

Qafco is keen to develop the proposed Qafco VI complex as soon as it can in order to take advantage of excess ammonia produced by Qafco V. Upon completion, Qafco VI will have the capacity to produce up to 3.1 million tons per year of granular urea.

Qafco was formed in 1969 as a joint venture between the government of Qatar and Norsk Hydro ASA (OSL:NHL) (Oslo, Norway), among others. It is now part of Industries Qatar QSC (DOH:IQCD) (Doha, Qatar) and produces ammonia, urea and urea-formaldehyde.

The first plant was inaugurated in 1973 and had a capacity of 900 tons per day of ammonia and 1,000 tons per day of urea. Subsequently, the firm developed Qafco II in 1979, Qafco III in 1997, and Qafco IV in 2004. The completion of Qafco V and VI will make the Qafco Industrial Complex the largest ammonia and urea production facility in the world.

About 90% of the world's production of urea is used as a fertilizer, although it can be used in numerous other applications such as an alternative to salt for de-icing of roads and airport runways; as a flavor-enhancing additive to cigarettes; and as an ingredient in some bath oils, hair conditioners and facial cleansers.

Saipem was formed in 1953 and now has over 30,000 employees worldwide from about 100 different countries. It has large service bases in Croatia, India, Indonesia and Romania, and is 43% owned by Eni SpA (BIT:ENI) (Rome, Italy).

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