Sonatrach and Suhail Group Secure $2 Billion Financing from Algerian Banks for Arzew Ammonia Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Sonatrach (Algiers), Algeria's state-owned oil and gas firm, and Suhail Bahwan Group Holding LLC (SBGH) (Muscat, Oman) entered into a financing agreement with Algerian banks for a $2 billion project to develop an ammonia and urea manufacturing facility on the coastline of Arzew in western Algeria. Algerian banks that are part of the agreement include Caisse D'epargne et de Prevoyance Banque, Credit Populaire d'Algerie, Exterior Bank of Algeria, Local Development Bank, and National Bank of Algeria.

In March of this year, SBGH and Sonatrach created a joint venture entity, Sharkia El Djazairia El Omani lil Asmida AOA, to develop a state-of-the-art facility for the manufacture of 4,000 tons per day of ammonia and 7,000 tons per day of granulated urea. The ammonia and urea unit will also have offsite facilities including captive power generation, storage facilities for ammonia and urea, and intake and outfall facilities for seawater.

A consortium of Mitsubishi Heavy Industries Limited (TYO:7011) (MHI) (Tokyo, Japan) and Daewoo Engineering & Construction Company (SEO:047040) (Seoul) has been awarded the engineering, procurement and construction contract for the project, which is already under construction. MHI will provide procurement and technical advisory services, while Daewoo will be in charge of construction work. The joint venture between SBGH and Sonatrach will also tap into the process technology expertise of Haldor Topsoe A/S (Kongens Lyngby, Denmark), Snamprogetti S.p.A. (Milan, Italy), and Uhde Fertilizer Technology (Roermond, Netherlands). Produce from the unit, which is completely export-oriented, will be sold in the European and American markets. The unit is expected to commence commercial operations in 2012.

Earlier this month, Sonatrach set up El Bahia Fertilizer, a joint venture with Fertiberia S.A. (Madrid, Spain), for joint production and marketing of ammonia. The venture is developing an ammonia production complex at Arzew with a capacity of 1.1 million tons per year. Sonatrach is also developing a third factory at Arzew for the production of ammonia and urea in collaboration with Orascom Construction Industries (CAI:OCIC) (Cairo, Egypt). The two firms will set up an export-oriented unit with two ammonia-manufacturing lines, one with a capacity of 1.2 million tons per year, and the other with a capacity of 800,000 tons per year, as well as a urea production facility with a capacity of 3,450 tons per day. The project is scheduled to be completed by 2010 at an estimated cost of $1.9 billion.

The petrochemical complex in the industrial region of Arzew is also on the radar of the Algerian Government, which is planning to attract investments to the tune of $28 billion in this sector from 2008 to 2012. Total S.A. (NYSE:TOT) (Paris, France) plans to set up a 1.1-million-ton-per-year ethane cracker unit at Arzew to manufacture 550,000 tons per year of monoethylene glycol, 450,000 tons per year of linear low density polyethylene, and 350,000 tons per year of high density polyethylene. The units are likely to be commissioned in 2012 at an estimated cost of $3 billion.

Earlier this month, Hyundai Engineering & Construction Company Limited (SEO:000720) (Seoul) secured a $400 million deal from Naftec, the refining subsidiary of Sonatrach, to expand a 36-year-old oil refinery in Arzew in partnership with Hanwha Corporation (SEO:000880) (Seoul) and Daewoo International Corporation (SEO:047050) (Seoul). Rehabilitation work on the refinery is expected to be complete in 34 months. The refinery has a processing capacity of 2.5 million tons per year of crude oil and caters to Algeria's domestic requirements in the south and southwest.

Sonatrach is setting up two units for the extraction of ethane from liquefied natural gas and has awarded the front-end engineering design contract to Technip (EPA:TEC) (Paris, France). Sonatrach is also developing a methanol-production facility at Arzew in collaboration with a consortium comprising Qurain Petrochemical Industries Company (KUW:ALQURAIN) (Kuwait), Lurgi GmBH (Frankfurt, Germany), Process Plant Services Limited (Trinidad, West Indies), Mitsui (TYO:8031) (Tokyo, Japan) and Sotraco, owned by the Salhi family of Algeria. Sonatrach will form a 49:51 joint venture with the consortium to develop the facility. The 100%-export-oriented facility entails an investment of $1 billion and will have a production capacity of 1 million tons per year of methanol.

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