Tata Chemicals to buy 25% in Gabon urea project

Tata Chemicals, the fertiliser manufacturer that finds itself constrained in augmenting urea capacity in India due to gas crunch and land acquisition issues, is tapping inorganic growth overseas.

The Tata Group company is investing over Rs1,300 crore to pick up a 25.10% stake in an upcoming urea plant in the South African country of Gabon.

The port-based 1.3 million tonnes per annum (mtpa) ammonia-urea complex is being set built by Singapore based agri-food processing company Oram International in collaboration with the Republic of Gabon.

After Tata Chemicals’ investment, Oram’s shareholding in the fertiliser complex would stand at 62.90% while that of Republic of Gabon would be 12%.

The plant will have a capacity to manufacture 2,200 metric tonnes of ammonia and 3,850 metric tonnes of urea per day and is expected to be ready in the next three years. Besides, the complex also offers the scope to double the capacity of the plant.
Analysts said the investment is strategic as Tata Chemicals can look at sourcing urea from the plant for the Indian market.

“Urea comprises almost 50% of the India’s total fertiliser consumption and out of this close to 25% is currently imported,” said an analyst with a leading domestic brokerage house.

In 2009, India consumed 49.6 mt of fertiliser with urea accounting almost 50% at 26.6 mt. Out of this, up to 5.7 mt was imported, he said.

He said of late companies have been finding it very difficult to go ahead with greenfield urea facilities in the country due to issues such as gas availability and land acquisition.

“Tata Chemicals too has found it difficult to expand urea capacity here because of similar reasons,” he said.

However, these issues will not haunt the company in Gabon as both land and gas for the plant have been assured by that country.

“Strategically located (plant) near Gabon’s main seaport, it also enables efficient and cost-effective material handling and proximity to target markets i.e. Africa, North America, Latin America and India,” said the company. On March 28, Singapore-based

Oram said the company has entered into an agreement for a “definitive gas supply contract” with Republic of Gabon for a quantity of 0.75 trillion cubic feet for 25 years at competitive price.