Tuesday, May 13, 2003
 
MUSCAT. The state-owned Oman Oil Company (OOC) is planning to set up a multimillion-dollar plant for manufacturing urea formaldehyde. The plant is likely to come up at the Sur Industrial Estate, adjacent to the $960 million Oman-India fertiliser project, according to sources.

The cost of the project is estimated at $10 million. It is learnt that the principal promoter of the urea formaldehyde plant Oman Oil Company is likely to pick 20 per cent stake in the equity of Urea Formaldehyde LLC, and the rest by local investors.

Informal sources told Times Business that Oman-India Fertiliser Company (Omifco) would purchase the entire urea formaldehyde produced by the urea formaldehyde plant, and the two parties have already reached an initial agreement.

The nearly $1 billion Oman-India fertiliser project, which is expected to go on stream before the end of 2005, will produce 3,500 metric tonnes per day (mtpd) of ammonia and 5,060 mtpd of urea. India has committed to purchasing the entire urea produced by Omifco for a period of 15 years. The project, which is one of the first gas-based projects in Oman, will sell 1.6 mtpa of urea.

The plant will be operated and maintained by Omifco. Technical and managerial services, including personnel, to be provided by the Indian promoters such as Kribhco and Iffco. In the $316.5 million Omifco equity, OOC holds 50 per cent, and the Indian promoters  Kribhco and Iffco hold 25 per cent stakes each.

The OOC is engaged in a wide range of energy-related projects. Its activities are funded from the Petroleum Reserve Fund of Oman. Kribhco, a co-operative society incorporated in India, is a major manufacturer and distributor of fertilisers in the Indian subcontinent. Indian government holds 71 per cent stake in Kribhco’s equity. It has two natural gas-based ammonia plants of 1,350 metric tonnes per day capacity and four urea trains of 1,100 metric tonnes per day capacity. Kribhco’s annual production capacity of urea is 1.45 million tonnes.

While, Iffco is the largest producer of fertiliser material in India, Indian government holds more than 69 per cent of its paid-up equity. It has an annual production capacity of more than 3.22 million tonnes of urea and 1.80 million tonnes Npk/Dap.

Lately, Omifco has successfully arranged the $644 million debt facility and the lead-mandated group, comprising three international banks — BNP Paribas, ANZ Investment Bank and Arab Banking Corporation had successfully underwritten the debt facility for the project. Of the total arrangement, $325 million is export credit agency covered loans and $319 million, non-recourse commercial loans.

The repayment period for the export credit agency loan is 10 years from the date of completion and 8.5 years (from completion) for commercial loans. Of the total export credit agency covered loans, Italy’s Sace has committed $210 million and France-based Coface $115 million. The balance $316.5 million will be promoters’ equity. Stand-by facilities include $28 million stand-by equity and $28 million stand-by debt. The debt-equity ratio of the project is 67:33.

The project would significantly benefit from the expertise of Indian promoters — Iffco and Kribhco — the two large cooperative ventures of Indian farmers. The requirement of gas for the project is four million standard cubic metres per day.

OOC was established in 1992 to give the government a vehicle for pursuing investment opportunities in the energy sector both inside and outside Oman and is a commercial company, 100 per cent owned by the government.

Through participation in energy and energy related projects, OOC plays a crucial role in the government’s efforts to diversify the domestic economy and to generate Omani and foreign private sector investment. Maqbool bin Ali Sultan, minister of commerce and industry is the chairman of OOC, and Dr Mohammed bin Hamed Al Rumhy, minister of oil and gas is the vice-chairman.

-Ends-

© Press Release 2003