Rashtriya Chemicals and Fertilizers Ltd negotiating urea pacts in Iran and Ghana.

 Indian fertilizer companies are scouting for overseas partners as low domestic gas availability, along with a shortage of key fertilizer inputs, puts pressure on fertilizer production in the country. 
Photo: Hindustan Times
Pushed by the low availability of natural gas in India, state-owned Rashtriya Chemicals and Fertilizers Ltd (RCF) is seeking joint venture (JV) partners in gas-rich Iran and Ghana.

Natural gas is the primary raw material required in making urea, but India faces a shortage mainly due to low output from the Krishna-Godavari basin.
Iran had tentatively offered gas at $3 per million metric British thermal unit (mmBtu), and RCF is awaiting a price quotation from Ghana, a fertilizer ministry official said.
“We are fine with the gas price that Iran is offering. But other logistics such as land and infrastructure needs to still be worked out,” the official said, declining to be identified.
R.G. Rajan, chairman and managing director, RCF, confirmed the company is in talks with the governments of Ghana and Iran for setting up urea plants through JVs with local companies. RCF is also looking at sourcing phosphate fertilizers from Togo, he added.
The talks with Ghana are progressing well with both sides signing a memorandum of understanding (MOU), Rajan said. “We have sought long-term gas supply agreements with Ghana, which has discovered rich reserves of gas. As far as Iran is concerned, greater clarity will emerge once the nuclear talks with the West concludes,” he said.
The next round of expert talks over Iran’s contentious nuclear programme will be held in New York next month.
Indian fertilizer companies are scouting for overseas partners as low domestic gas availability, along with a shortage of key fertilizer inputs, puts pressure on fertilizer production in the country.
No new urea capacity has been added in India in the past 13 years due to the lack of a policy framework, resulting in widening demand-supply gap.
Domestic production of urea has stagnated at 22 million tonnes (mt) since 2007-08, while the current consumption is around 30 mt, the remaining 8 mt being imported.
As far as complex fertilizers are concerned, India is 90% dependent on imports either in finished products or raw materials.
Indian Farmers Fertiliser Cooperative Ltd, or IFFCO, India’s largest fertilizer cooperative, last week got a formal go-ahead from the government of Quebec for its proposed $1.2-billion fertilizer plant at Becancour, Quebec, Canada. U.S. Awasthi, managing director of IFFCO, said the 1.3-1.6 mt capacity urea plant expected to be commissioned by 2017 will buy gas at Henry Hub prices that are much lower than liquefied natural gas (LNG) or domestic gas prices.
The US energy information administration forecasts the Henry Hub natural gas spot price, which averaged $3.73 per mmBtu in 2013, will average $4.44 per mmBtu in 2014.
Natural gas accounts for as much as 65% of urea production costs in India, Awasthi said.
A fertilizer sector analyst who did not wish to be named said that administered price mechanism (APM) gas in India, priced at $4.2 mmBtu (effectively $5-5.5/mmBtu if marketing and transport costs are added), is fully allocated and not available for future urea capacity. On the other hand, imported LNG is available at much higher prices of $13-14 per mmBtu, going up to $22 mmBtu.
“However, more than the price of gas, the larger concern for fertilizer companies is the falling availability of gas. The government compensates fertilizer companies through subsidies when gas prices rise. But low availability of gas means that production is hit,” the analyst said.
In 2012-13, the natural gas production in India fell by 14.5% to 40.68 billion cubic metres, petroleum ministry data showed.
“The gas availability and prices in countries like Ghana and Iran are very attractive, while Togo has got good phosphate reserves,” the fertilizer ministry official mentioned earlier said. “Local partners are important as they will help us deal with local issues.”
India’s fertilizer industry consumes 31.5 million standard cubic metre per day (mmscmd) of gas from domestic sources and receives top priority in the allocation of domestic gas.
RCF reported a 28% fall in net profit at Rs.52.90 crore for the third quarter ended on 31 December.
APM gas prices might go up from the current $4.2 per mmBtu if the next government adopts the gas pricing formula recommended by the C. Ranagarajan committee. The price increase was put off because of the ongoing national election that ends next month.


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