Safco reviews Jubail expansion as contractor costs spiral

07 December 2007
Saudi Arabian Fertilisers Company (Safco) has postponed pre-feasibility studies for a project to increase urea production capacity at Jubail fertiliser complex because of rising costs.

A shortage of skilled contractors and engineers needed to carry out the expansion has driven up project costs and forced a re-evaluation of the project's viability, according to Ahmed al-Qahtani, general manager of operations and planning at the fertiliser strategic business unit of Saudi Basic Industries Corporation (Sabic).

A decision on the project has been delayed while pre-feasibility studies continue.

“We are still convinced this is a good opportunity,” Al-Qahtani said on the sidelines of MEED's Middle East and North Africa Fertilisers conference in Abu Dhabi on 4 December. “But with the cost of projects rising, we need to be sure of prices. It is very difficult to say when the project will go ahead. First we need to conclude the studies.” Safco is proceeding carefully with its plans to ensure the rising costs of expanding the urea plant do not impair the profitability of Safco's fertiliser plant at Jubail.

The company expects to make a decison on the project in the next six to eight months.

The standalone expansion plan is for a urea train to be added to the urea facility, bringing the total number of trains to five.

The train will use excess ammonia from the existing plant as feedstock. Depending on the results of the pre-feasibility study, it may prove more cost-effective to sell the ammonia at market rates.

Increasingly, the impact of rising project costs is being felt across all industrial sectors in the GCC. High oil prices are supporting an impressive economic boom in the region. Spurred by a need to diversify their economies, Gulf governments are using massive energy revenues to invest in industrial projects.

The sheer size and number of these projects has created a lack of capacity in terms of the avail-ability of qualified contractors and specialised equipment, as well as pushing up the price of basic materials.

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