Fertil to award $1bn Ruwais expansion

11 September 2009

Three groups bid for delayed construction and technology contract to expand fertilisers capacity

Abu Dhabi’s state-run Ruwais Fertilisers Industries (Fertil) is to award a $1bn-plus contract to expand its fertilisers capacity after months of delays.

The contract covers the construction of a 2,000-tonne-a-day (t/d) ammonia plant and a 3,500-t/d urea train next to Fertil’s existing complex in Ruwais.

The winner will build the facilities under an engineering, procurement and construction (EPC) contract and will also provide the technology used at the plant.

Two Italian contractors, Tecnimont and Saipem, are bidding independently and are competing for the deal with a consortium of South Korea’s Samsung Engineering and Germany’s Uhde.

All three groups submitted cost proposals to the fertilisers producer on 7 September, nine months after handing in technical bids outlining their work plans.

“Everyone put their bids in on Monday, and we expect an award within the next week or so,” says a senior executive at one of the consortiums bidding for the contract.

Tecnimont and Saipem both plan to use Saipem’s technology for urea and license the ammonia technology from Haldor Topsoe of Denmark. The Samsung/Uhde consortium will use Uhde’s technology for producing ammonia and will license the urea process from Holland’s Stamicarobon.

The deal is of particular interest to contractors as it will mark the first major award in the sector in the Middle East so far this year.

Plans for fresh fertiliser capacity have faced delays in recent years across the region due to the rise in construction costs and the subsequent fall in demand after the financial crisis hit Western markets in the summer of 2008.

“EPC costs really went up a lot in 2006-08 and, with the financial crisis, Fertil was not keen to move until it could see where the market was for its products, or it could see that costs were coming down,” says a source at another contractor bidding on the deal.

Demand for fertilisers fell significantly in 2008 as prices for key food commodities such as corn, sugar and cocoa fell as a result of the global financial crisis.

The US, one of the world’s largest consumers of corn, reported that demand for fertilisers had fallen more than 30 per cent between January 2008 and January 2009.

This led to worries that existing fertilisers plants could become unprofitable and new projects could become unfeasible.

When a budget was originally drawn up for the new plants in 2006, Fertil valued the scheme at $700m, but estimates soared to as much as $1.5bn in 2008.

The interested firms had expected a commercial bidding round in the first quarter of 2009 following technical discussions with Fertil. Sources close to the deal say Fertil wants to get a price lower than $1.2bn.

Fertil currently produces 1,050 t/d of ammonia and 1,500 t/d of urea at its Ruwais plant.

Pakistan’s Descon won a contract to expand the existing facilities to produce 2,700 t/d of urea in 2007.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications