Detailed engineering work on Salalah ammonia project begins

Venture: Strong lending appetite underscores confidence in Oman’s downstream sector

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Conrad Prabhu –
Muscat, APRIL 12 –
Detailed engineering design work has commenced on a major ammonia plant being built adjacent to the methanol scheme of Salalah Methanol Company (SMC), according to a key official of the wholly government owned entity.
Abdullah al Habsi (pictured), Project Director — Salalah Methanol Company, said the new investment will improve the efficiency of SMC’s methanol operations, add further value to the overall venture, as well as open the way for businesses further downstream of the value chain.
Last month, international engineering and construction giant SNC-Lavalin said it had been awarded a contract by SMC to build a 1,000 metric tonnes per day (MTPD) capacity ammonia plant at Salalah Free Zone in Dhofar Governorate at a cost of around $750 million.
SMC is a subsidiary of Takamul Investment Company, a downstream petrochemicals-focused vertical of Oman Oil Company (OOC), the energy investment arm of the Omani Government.
Integration with SMC’s existing 1 million tonnes per year (tpy) capacity methanol scheme will result in, among other things, reducing investment costs, sustaining profitability, enhancing operational efficiency, ensuring healthier returns to the shareholders, and making the overall project appealing to international lenders, said Al Habsi.
An integrated project underpinned by proven technology, the Project Director said, also helped distribute the risk suitably between all of the various stakeholders involved in the scheme, from the feedstock suppliers, to the offtakers, technology providers, and the Engineering-Procurement-Construction (EPC) contractors.
Consequently, on the financing side, the project was oversubscribed nearly 2.5 times, underscoring the lenders’ confidence in the Sultanate, as well as in the nation’s downstream sector, said Al Habsi.
Significantly, this was achieved at a time when international prices of commodities like ammonia and methanol were at 15-year lows, the Project Manager pointed out, thus necessitating an improvement in the overall economics of the project to make it more attractive to the shareholders as well as to the lenders, he said.
Also as part of this goal, SMC worked with Oman Trading International (OTI), the petroleum marketing arm of Oman Oil Company, to gain access to markets that assured a higher netback for the company’s ammonia product, Al Habsi said.
It is anticipated that the ammonia project will catalyse investments in a wider value-added chemicals cluster at the free zone.
Ammonia which, besides being used as an ingredient in the production of fertilizers, is also an important intermediate chemical in the manufacture of synthetic resins (urea based), synthetic fibres (acrylics and nylons, and polyurethanes, among other applications.