study on private-initiative infrastructure projects in developing ...

STUDY ON PRIVATE-INITIATIVE INFRASTRUCTURE

PROJECTS

IN DEVELOPING COUNTRIES IN FY2011

STUDY ON THE UREA FERTILIZER COMPLEX PROJECT

IN

THE REPUBLIC OF MOZAMBIQUE

FINAL REPORT

February 2012

Prepared for:

The Ministry of Economy, Trade and Industry

Prepared by:

Toyo Engineering Corporation

Sumitomo Corporation

Reproduction Prohibited

Preface

This report is written as a result of Study on the Urea Fertilizer Complex Project in The Republic of

Mozambique, which was implemented by Toyo Engineering Corporation and Sumitomo Corporation

as a “Study on Private-Initiative Infrastructure Projects in Developing Countries in FY 2011”,

commissioned by The Ministry of Economy, Trade and Industry.

This report is organized research to determine feasibility of fertilizer plant construction, by 1 billion

and 173 million US dollars, in an industrial area of Beira city in Mozambique, in order to supply

fertilizer both in Mozambique and in neighboring countries.

We believe that this report will contribute to implement the project and will be useful information for

interested specialists in Japan.

February, 2012

Toyo Engineering Corporation

Sumitomo Corporation

TABLE OF CONTENT

Executive Summary

1. Background and necessity of the project 2

2. Basic policy on the contents determination of the project 3

3. Outline of the project 4

4. Implementation schedule 7

5. Feasibility study 7

6. Technological superiority of Japanese enterprises 7

7. Concrete Schedule Up to Project Realization and Risk to Hamper Realization 9

8. Map indicating the project site in the surveyed country 10

Chapter 1 Overview of the Host Country and Sector

1.1 Economy and financial situation in the host country 2

1.2 Outline of project sector 3

1.3 Situations in the region 4

Chapter 2 Study methodology

2.1 Summary of the study 2

2.2 Study measures -structure 3

2.3 Schedule for the study 6

Chapter 3 Justification, Objectives and Technical Feasibility of the Project

3.1 Project background with necessity 2

3.2 Examinations required for the contents of projects 8

3.3 Plan outline of the project 33

Chapter 4 Consideration of Environmental and Social Impacts

4.1 Current situation of environmental social aspects 2

4.2 Environmental improvement effect of Project implementation 3

4.3 Environmental and social impact of project execution 3

4.4 Outline of Regulations related environmental and social considerations in Mozambique

4

4.5 Required actions of Mozambique side 8

Chapter 5 Financial and Economic Feasibility

5.1 Project cost estimation 2

5.2 Financial and Economic Evaluation 4

5.3 Economical Analysis 10

Chapter 6 Planned Project Schedule

6.1 Planned project schedule 2

6.2 EIA schedule 3

Chapter 7 Implementing Organization

Chapter 8 Technical Advantages of Japanese Company

8.1 Envisaged of participation by Japanese companies 2

8.2 Superiority of project implementation 5

8.3 Measures to be taken to assist Japanese enterprises in receiving order 6

Chapter 9 Financial Outlook

9.1 Funding Source and Funding Plan for the Project 2

9.2 Bankability of the Project 3

9.3 Cash Flow Analysis 4

Chapter 10 Action Plan and Issues

10.1 Current situation of the project 2

10.2 Current situation of the project by implementation organization 2

10.3 Legal and financial framework 3

10.4 Additional Study Requirement 7

Abbreviation

ACES Advanced process for Cost and Energy Saving

ACES21 Advanced process for Cost and Energy Saving 21

AfDB African Development Bank

AMI Mozambique Cotton Institute

aMDEA BASF Company patent MDEA (Methyl Diethanolamine)

BFW Boiler Feed Water

BOD Biochemical Oxygen Demand

BOG Boil-Off-Gas

BP British Petroleum

BWRO Brackish Water Reverse Osmosis

CCTV closed-circuit television

CEPAGRI Agriculture Promotion Centre

CIF China International Fund Ltd

COD Chemical Oxygen Demand

COMESA Common Market for Eastern and Southern Africa

CPI Investment Promotion Center

CRIP Certificate of Registered Investment of Private

DNSA National Direction of Agricultural Services

DSCR Debt Service Coverage Ratio

DPA Provincial Directorate for Agriculture

EAC East African Community

EIA Environmental Impact Assessment

EIU Economist Intelligence Unit’s

ENH Empresa Nacional de Hidrocarbonetos E.P.

EPC Engineering, Procurement, and Construction

ESHIA Environmental and Socioeconomic and Health Impact Assessment

FAO Food and Agriculture Organization's

FDI Foreign Direct Investment

FSU Floating Storage Unit

FTA Free Trade Agreement

GDP Gross Domestic Product

GTG Gas Turbine Generators

H2S Hydrogen sulfide

HMDA Hexamethylene Diamine

HP High Pressure

HRSG Heat Recovery Steam Generation

IA Instrument Air

IDA International Development Association

IEA International Energy Agency

IIAM Mozambique Agriculture Research Institute

IMF International Monetary Fund

INCAJU National Cashew Institute

INP Institute National Petroleum

IRRI International Rice Research Institute

IUCN International Union for Conservation of Nature

JETRO Japan External Trade Organization

JICA Japan International Cooperation Agency

KR2 Food Production Support

LDA Limited Liability Company

LHV Lower heating value

LNG Liquefied Natural Gas

LP Low Pressure

MBP Mixed Bed Polisher

MDEA Methyl Diethanolamine

MDGs Millennium Development Goals

MOA Ministry of Agriculture

METI Ministry of Economy and Trade Industry, Japan

MINAG Ministry of Agriculture

MIREM Ministry of Mineral Resources

MMBTU Million British Thermal Unit

MOU Memorandum Of Understanding

MP Middle Pressure

MPHE Marine Plate Heat Exchanger

MT/D Metric Ton per Day

MTPD Metric Ton Per Day

N/C NH3(Ammonia)/CO2 mole ratio

NGO Non-Governmental Organizations

NPK Nitrogen, Phosphorus, Potassium

O&M Operation and Maintenance

OPEC Organization of the Petroleum Exporting Countries

OSBL Outside of Battery Limit

PA Plant Air

PEDSA Strategic Plan for Agricultural Development

PIL Private Investment Law

PSA Pressure Swing Adsorption

RG Reformed Gas

RO Reverse Osmosis

RSH General formula of sulfur containing organic compound

SA Joint Stock Company

SADC South African Development Community

SASOL South Africa Synthetic Oil Limited

SBA Stand By Arrangement

SG Synthesis Gas

SGU Super Granule Urea

SMEs Small and Medium Size Enterprises

SPE Special Purpose Entity

SS Suspended Solids

SWI Sea Water Intake

SWRO Sea Water Reverse Osmosis

Tcf Trillion cubic feet

TIA Trabalho de Inquerito Agricola ( Agro Inquiry Work )

TSP Total Suspended Particles

UFC Urea Formaldehyde Concentrate

UNDP United Nations Development Program

VSCC Vertical Submerged Carbamate Condenser

WB World Bank

WHB Waste Heat Boiler

1

Executive Summary

2

1. Background and necessity of the project

Agriculture is the main industry of Mozambique, with 81% of the workforce engaged in agriculture,

and accounts for 28.8% of the GDP. Mozambique’s agricultural products include cotton, cashew nuts,

sugarcane, tea, cassava (tapioca), corn, coconuts, sisal, citrus fruits, tropical fruits, potatoes,

sunflower, beef, and poultry.

Mozambican agriculture can be summarized as follows:

1. Dryland farming characterized by self-consumption and low productivity and production

2. Weak market-orientation

3. Primitive farming techniques involving environmentally inappropriate practices

4. Low quality and small-scale production

In Mozambique, there are only three fertilizer importers: Agrifocus, Agrochemical and Agrotech.

These importers import urea mainly from South Africa. They receive 3% of the import prices as a

commission from the Government. Wholesalers buy the fertilizer at 70 to 80 US dollars per 50 kg

and sell it to farmers at 100 US dollars per 50 kg. This is not necessary a competitive price from the

perspective of the GDP of Mozambique. The fertilizer is sold at 10 US dollars per 5 kg in the

market.

The Government of Mozambique seeks development in agriculture. While the potential annual

fertilizer demand is 100,000t, the annual fertilizer consumption has increased from 18,000 to 51,000t

over the last decade. If urea is produced domestically, the demand will expand and is expected to

further increase. Fertilizer consumption in Mozambique is low compared to other African countries.

○ Africa: 20 kg / ha

○ Africa south of the Sahara: 8 kg / ha

○ Mozambique: 5 kg / ha

○ Abuja Declaration: 50 kg / ha (until 2015)

Southern African Development Community (SADC) countries, such as Zambia, Mallawi, Zimbabwe

and Congo, are fertilizer importing countries and are expected to have a growing demand for urea as

shown in the table below. This supports the need for the project.

3

Table 1 Comparison of current consumption and forecast for fertilizer for SADC countries

(2007-2011 and 2011-2017)

Year Mozambique Zambia Mallawi Total

2007 28,000 180,000 270,000 478,000

2008 32,000 192,600 283,500 508,300

2009 33,000 206,100 297,700 540,800

2010 51,400 220,500 312,600 575,700

2011 50,000 235,900 328,200 613,100

2012 53,900 247,700 338,000 639,600

2013 59,300 260,000 348,200 667,500

2014 62,200 273,000 358,600 693,800

2015 71,700 286,700 369,400 727,800

2016 78,900 301,000 380,500 760,400

2017 86,800 316,000 391,900 794,700

Source: Mozambican Ministry of Agriculture document “Comparison of Current Consumption

and Forecast for Fertilizer between SADC Countries (2007-2011 and 2011-2017)”

The table above does not include an increase in fertilizer demand due to the increase in farmland and

productivity brought by the Mozambique Tropical Savannah Agricultural Development Project

“ProSavana” being developed by JICA under Japan-Brazil cooperation. Therefore, the demand is

likely to be higher than the figure released by the Mozambican Ministry of Agriculture.

The Abuja Declaration aims to achieve a fertilizer consumption of 50 kg/ha, 10 times the current

consumption in Mozambique, by 2015, and the demand is expected to further expand. Therefore,

this justifies the necessity of implementing the project.

2. Basic policy on the contents determination of the project

The Government of Mozambique has been eager to have a domestic fertilizer project for 80 years,

and we see no basic obstacles to its implementation. Respecting the plan of Mozambique,

understanding its needs and reviewing the contents of the project, we will proceed with the survey.

1 Securing of natural gas

This investigation assumes that 33 million cubic feet/d of gas is secured out of increased production

in Pande/Temane gas fields.

2 Construction site

Considering urea shipment and environment, Beira New Industry Area is the site for this

investigation.

3 Determination of production quantity based on the urea demand

The Mozambique government plans to sell its urea not only to SADC countries, such as

Mozambique at home, Malawi, Zambia and Zimbabwe, but also to South Africa where urea is traded

with high prices. Actual demand that urea production quantity in Mozambique, Malawi and Zambia

in 2011 is 613,000t. Potential production quantity is 33 million cubic feet/day, which is equivalent to

nearly ten percent of the amount of gas production in Mozambique. Moreover, 1,725 MTPD, which

is a global standard run quantity, will be the urea production capacity as a first step in the

Sub-Sahara.

4

3. Outline of the project

The outline of the project is as follows.

Construction site : Beira new industrial area

Product : Urea 1,725 MTPD

Destination : Mozambique at home, Zambia, Zimbabwe, Malawi, etc.

Raw material : 33 mmscfd of production increase in Pande/Temane gas fields

Process : Ammonia is based on KBR’s technology.

Urea is based on Toyo Engineering’s ACES21.

Utility facilities : The whole quantity of power is to be generated in-house.

Industrial water is to be obtained from sea water.

Offsite facilities : Ammonia tank, urea tank, and 50 km bagging equipment

Figure 1 General view of the plant

Source: Made By the Study team

AMMONIA PLANT

1,000 MTPD

Urea Product

STEAM

GENERATION

FACILITY

UREA PLANT

1,725 MTPD

Granular Urea

Liquid NH3

PROCESS PLANT & OFF-SITE

UREA STORAGE

&

BAGGING

FACILITY

Sea

Water

Natural Gas

SEA WATER &

CW FACILITY

IA/PA

FACILITY

IGG FACILITY

Polished Water

Polished Water

WATER

TREATMENT

FACILITY

Sea Water & CW

UTILITY FACILITY

CW Make-up Water

Instrument Air Plant Air N2 Gas

AMMO

NIA

STOR

WASTE WATER

TREATMENT

FACILITY

ELECT.

POWER

GENERATION

FACILITY

Return Condensate

Sea Water Make-up

Sea Water

intake facility

Pande

Temane Gas

Field

5

(1) Project costs estimation

Plant costs and the owner’s costs are as follows:

Table 2: Project costs estimation

Item Amount of money

EPC cost

-Ammonia/Urea plant

-Utility/Offsite facilities

-Total

505 Million USD

495 Million USD

1,000 Million USD

Owner’s costs

Operation start-up cost

IDC

Contingency costs, etc.

-Total

67 Million USD

51 Million USD

55 Million USD

173 Million USD

Made By the Study team

(2) Outline of the result of preliminary financial and economic analysis

The assumptions for preliminary financial and economic analysis are as follows:

• Revenues are calculated based on the urea revenue at the international market price as of

December 2011; inflation is added to these prices only during the construction period.

• Urea production quantity is based on the calculation with 1,725t of urea production per day for

330 days/y. The total production of urea is 569,250t per year.

• Cash flows are discounted over a 20-year period.

• Interest rates: Base rate 4%, plus a CIRR (Commercial Interest Reference Rate) of 4.26%

• Depreciation is calculated under straight-line of at around 10% per year.

• Unit price for gas input is 3.16 USD per MMBTU.

• Income tax will be exempted for five years; however, after that the income tax of 32% per year is

applied. Import duty and VAT are assumed to be exempted throughout the project period.

• The project site is leased as part of the national property. According to Beira state officials with

jurisdiction over industrial complexes, one-time MZN 10 per 1 m2 is required for land use. The

amount for 20 ha of land is included in the estimation.

• The debt repayment period is assumed to be 8.5 years.

Financial analysis based on the above assumptions shows that FIRR is 15.31% with funds recovery

period of six years.

i. Agricultural production increase due to urea supply

Mozambique’s GDP will be 10 billion USD and agriculture will represent 25% or 2.5 billion USD.

Thanks to urea supply, agricultural GDP will increase by 5% (0.125 billion USD).

ii. Creation of job opportunities

600 persons will be employed by the operational companies of urea plants. Out of wages in

Mozambique at home, 20% is taxed at source. Mozambique’s average wage is MZN 4,000 to 5,000 a

month. The economic effect per year will be MZN 4,500 x 0.2 x 600 x 12 / 27 = nearly 240,000

dollars.

iii. Others

The economic effect of the technology transfer to Mozambique will be enormous.

iv. Economic effect

If this project is implemented, EIRR is estimated at 25.26% with a sufficient economic effect.

6

(3) Examination of environmental social dimension

EIA process, stage and period under Category A based on the Environmental Assessment Act (EIA

Regulations 45/2004) in Mozambique are as follows:

Figure 2: EIA process, stage and period

Source: Made By the Study Team

7

4. Implementation schedule

The schedule negotiated between the investigation team and the Mozambique government is as

follows. The detail design, bidding and project implementation are indicated below.

Table 3: Implementation schedule

Work DescriptionYear/

Months2011 2012 2013 2014 2015 2016

1 Feasibility Study (FS) 3

2

Basic and Front End

Engineering Design

(FEED) with EPC offer

7

3EPC Price Verification and

Final Investment Dicision2

4Environmental Social

Health Impact Assessment12

5 Finance Arrangement 6

6 EPC Execution 32

7Commercial Operation

(Operation & Maintenance)

11/18

6/1 12/31

1/31

5/1 4/30

8/1 3/31

4/1

2/23

2/1 7/31

EPC Contract

O&M Contract

Timing for increased


5. Feasibility study

Mozambique has a plenty of demand in urea as a means for promoting agriculture, and also a large

amount of urea demand is expected to exist in the regions including the Southern African

Development Community. FIRR and EIRR have also cleared the hurdle rate, thus showing potential

economical efficiency. As a future measure to be taken in connection with the construction of

pipeline, close consultation with the Government of Mozambique is required for realizing the

necessary conditions as a joint project of gas allocation and site selection. Our study will also be

made on the details of the project while respecting the intention of Mozambique, and also on

collaboration with JICA's ProSavana Project related to the development of fertilizer.

6. Technological superiority of Japanese enterprises

Fund procurement covers debt financing on one hand, and capital stock financing on the other hand.

The former closely concerns plant construction and financial contribution by Japanese enterprises,

which requires further investigation including the menu on accommodation loan by the Japan Bank

for International Cooperation which occupies an important portion of this project.

In addition to the fund procurement of this project, there is a high possibility for Japanese enterprises

to be participated in financing with an intention of being involved in the agricultural business and in

the petrochemical business. In the first place, participation in the nitrogen-based fertilizer business is

contemplated, where capital participation in the project with a view to exporting surplus

nitrogen-based fertilizer to India, Australia, China and Japan having high demand recently will

ensure preferential handling of products.

8

In addition to the transactions involving nitrogen-based fertilizer, Japanese enterprises have a chance

for capital injection to ensure participation in the petrochemical business. Nitrogen-based fertilizer is

made of natural gas, while basic chemical products such as ammonia and methanol can also be

produced through similar processes. There remains also a high possibility for capital injection to

supply urea as a raw material to high value-added chemical products made from these products. In

such a case, however, the product configuration and plant configuration shall be reviewed.

Apart from business participation in the above-mentioned area and others for the purpose of

handling exportation-based products, participation in agriculture-related business in the South

African regions, where dramatic increase in fertilizer demand is expected will be attracting to

Japanese enterprises. It is true that the consumption of fertilizer in this area at present is far smaller

compared to that in other regions; a significant growth is expected in future, thus probably providing

us with a big business chance.

As for plant construction, materials & equipment will be procured in China, Europe, Japan, Korea

and the Southeast Asia. Equipment to be procured in Japan will include rotating machinery such as

compressors, packaged equipment such as heat exchangers and boilers, chemicals units, gas turbines

and compressors, material transporting equipments such as reclaimers, as well as pipe and special

valves.

As for ACES 21 by Toyo Engineering, the sole urea license holder in Japan, the urea synthesis

system is simplified with reduced plant construction cost, where operating conditions are optimized

to minimize the operation cost, with the following features:

A. Cost saving (compact and equipment installed at a lower position)

Reduction in construction cost. Installation of synthesis pipe on the ground due to forced liquid feed

using a high pressure ejector, Vertical Submerged Carbamate Condenser (VSCC), simplification of

synthesis loop, reduction of equipment cost, equipment downsizing by means of two-layer system,

and decrease in the number of equipment in synthesis loop.

B. Energy saving (reduction of operation cost)

Reduction of operation cost will be achieved by realizing low synthesis pressure with the adoption of

optimum process conditions.

C. Ease in operation and stability

Forced circulation within high pressure loop by means of high pressure ejector (no gravitational

flow)

D. Reduction in maintenance cost

Prevention of corrosion by adopting low synthesis system temperature and highly reliable materials.

9

7. Concrete Schedule Up to Project Realization and Risk to

Hamper Realization

Since Mozambique has long desired to establish domestic fertilizer business, it is considered that

there is no political and technical problem related to the implementation of the project. Each

governmental organization has a fairly good understanding of the importance of domestic production

of fertilizer for the purpose of promoting agriculture, and the necessity of enhanced agricultural

production to follow. It is also said that the agriculture promotion program is already put in place to

increase agricultural production.

After receiving an interest letter from the Ministry of Mineral Resources of Mozambique, Toyo

Engineering Corporation and Sumitomo Corporation submitted to this Ministry in June 2011 an

MoM (Memorandum of Understanding) focusing on the exclusive study of this project as a fertilizer

project to make use of domestic natural gas to be supplied from Pande/Temane in the territory of

Mozambique. In this connection, Toyo and Sumitomo are requesting the Minister to sign the MoM,

but they are currently discussing in the Government of Mozambique on the pros and cons for signing

it.

Securing gas supply is a key point for implementation of the project. The Pande/Temane gas fields

are currently under exploration, while this study assumes that production in these gas fields will be

increased in 2016. Thus, securing of gas constitutes a vital prerequisite for implementing the project.

Beira new industrial area located in the center of Mozambique is the No.1 candidate site for this

project. This area has a commercial port and railways, thus providing easy access to neighboring

countries. This commercial port allows importation of plant equipment, heavy machinery required

for plant construction and chemicals as raw materials for producing fertilizer. Thus, exportation of

products can also be facilitated. The Beira new industrial area is under the control of the government

of Sofala Province, but requiring approach to both the central and the local governments. Close

consultation with Mozambique is also necessary from the viewpoint of pipeline construction.

As a result of consultation between the Ministry of Mineral Resources and our survey mission, INP

has been appointed as the responsible section in charge. However, INP is the organization for

controlling the information on petroleum gas in this country, while National Enterprise of

Hydrocarbon (ENH) is nominated a candidate as a responsible section in Mozambique in charge of

promoting the urea production business in future. It is thus necessary to consult with various

organizations concerned including the Ministry of Agriculture, the Ministry of Industry and Trade,

and the Ministry of Industry and Commerce.

As Mozambique is regarded as a resource rich country because of the presence of a huge gas field in

Rovuma in the north, future consultation with the Japan Bank for International Cooperation will be

promoted on the basis of the result of this study to ensure financing. As for capital injection, future

consultation will be necessary with National Enterprise of Hydrocarbon (ENH), Mozambican

Hydrocarbon Company (CMH) that shows interest in fertilizer and the related government ministries

of Mozambique (Ministry of Mineral Resources, Ministry of Agriculture, Ministry of Industry and

Trade, as well as Ministry of Industry and Commerce).

As for the above issues, our survey mission will make approach to leaders of the Government of

Mozambique, so as to proceed with the project execution.

10

8. Map indicating the project site in the surveyed country

Figure 3: Overall map of Mozambique

Source: Google

11

Figure 4: Proposed construction site

Source: Google

1

Chapter 1 Overview of the Host Country and Sector

2

1.1 Economy and financial situation in the host country

Mozambique has emerged from decades of armed conflict to become one of Africa’s

best-performing economies. The country has enjoyed a remarkable recovery, achieving an average

annual rate of economic growth of 6 percent between 1996 and 2010, the highest growth rate among

African oil-importers.

Table 1-1 Economy and financial situation in Mozambique

2005 2006 2007 2008 2009 2010

Nominal GDP (USD million) 6636 7296 7868.63 9728 10468 9901

Growth rate (%) 8.4 8.7 7.3 6.8 6.4 6.5

GDP per capita 305.5 362.8 398.7 478.1 454 429.6

Annual average inflation (%) 13.1 8.1 12.1 11.8 2.3 12.7

Exports (USD million) 1745 2412 2412 2688 2147 2243.1

Imports (USD million) 2408 2869 3050 3765 3422 3240.2

Sources: Facts about Mozambique published by CPI

Table 1-2 GDP sector chart

Source: Authors’ estimates based on National Institute of Statistics date

The contribution of agriculture to the economy of Mozambique is one over fourth of GDP.

Mozambique government always tries to improve the conditions of agricultural practices. But still

much of it is still carried on in primitive ways.

The climate and soil of Mozambique are ideal for the growth of a number of crops. The major cash

crops grown here are sugarcane, copra, sesame seeds, sugar beans, sunflower, rice, millet and maize.

Besides these, the vegetables grown are soybeans, potato, cucumber, sweet potato, pumpkin,

3

cabbage and tomatoes.

Mozambique government aims to become world leader in the rice, horticulture vegetables and

livestock industries, among others. However, agricultural productivity and productivity growth is

weak at this moment.

For improvement of agricultural productivity, several international organizations are also supporting

to Mozambique`s effort in large scale, among others especially JICA. JICA is now contributing to its

development through ProSavana project at Northern part of Mozambique, which involves the

collaboration of Brazil as well. Supply of competitive fertilizer would be one of the key factors of

success of such aims of Mozambique government.

1.2 Outline of project sector

1.2.1 Ministry of Mineral Resources (Minister of Mineral Resources – Ms. Esperanca Bias)

Ministry of Mineral Resources is responsible for the management of oil, gas and mineral

concessions for exploration. The Ministry is responsible for dealing with relating to petroleum, gas

and mineral affairs.

1.2.2 INP Chairman (Chairman Mr. Arsenio Mabote)

The National Petroleum Institute is the Institution with the mission to administrate and manage the

petroleum operations in Mozambique for the benefit of the society.

Table 1-3 INP organization structure

Source: INP website

1.2.3 Ministry of Agriculture Minister of Agriculture - Mr. Soares Nhaca

Ministry of Agriculture is in charge of agriculture policy in Mozambique.

4

1.3 Situations in the region

Beira is the second largest city in Mozambique. It lies in the central region of the country in Sofala

Province, where the Pungue River meets the Indian Ocean. It is significantly important that Beira

port acts as a gateway for both the central interior portion of the country as well as the land-locked

nations of Zimbabwe, Zambia and Malawi. Beira has long been a major trade point for exports

coming in and out of Zimbabwe, Malawi, Zambia and other Southern African nations.

Table 1-4 Climate data for Beira

Recently, the Mozambique government is planning on modernizing the Beira and more northern

Nacala ports. The government has also stated to plan modernizing surrounding railway and highway

infrastructure. There is also a ferry service in Beira, linking the city to neighboring cities, including

Nova Sofala and other coastal towns. Beira is served by an airport to the northeast of the city, with

both domestic and international flights.

Beira new industrial area is 10Km north from center of Beira. It is an expected project site and site

improvement has been implemented. The road from site to Beira port will be constructed.

Climate data for Beira ( Source: Weatherbase)

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year

Average

high °C (°F)

31

(87)

30

(86)

29

(85)

28

(83)

26

(79)

24

(76)

24

(75)

25

(77)

27

(80)

28

(82)

29

(84)

29

(85)

27.5

(81.6)

Average

low °C (°F)

26

(79)

26

(79)

26

(78)

24

(75)

21

(70)

19

(66)

18

(64)

19

(66)

21

(70)

23

(73)

24

(76)

26

(78)

22.7

(72.8)

Precipitation

mm (inches)

267

(10.5)

259

(10.2)

264

(10.4)

117

(4.6)

66

(2.6)

41

(1.6)

33

(1.3)

33

(1.3)

25

(1)

33

(1.3)

122

(4.8)

244

(9.6)

1,504

(59.2)

5

Figure 1-1 <Mozambique map> Figure 1-2 <Site Map>

Source: CIA World Fact Book Source: Google earth

1

Chapter 2 Study methodology

2

2.1 Summary of the study

2.1.1 Procedure to determine the content of the study report

The study report is composed of the following steps.

1) Based on the request from the Government of Mozambique

2) To propose the project scheme definition

3) To confirm the project scheme from the Government of Mozambique

4) To summarize solutions for some problems of the project scheme

5) To ask the Government of Mozambique to understand the proposal and to embody it

2.1.2 Study scope

The scope of this study is based on the request from the Government of Mozambique.

(Chapter3.2.3)

The study scope is determined as following based on the above request conditions.

1) Market study on product and material

-Domestic product price in Mozambique

-Supplier of material and its cost

2) Plant Facility

-Block flow and material balance

-Content of process facility

-Utility consumption

-Utility facility and off-site facility

3) Project Cost

4) Finance arrangement

5) Financial and Economic analysis

6) Evaluation of Environmental and Social aspects

7) Project schedule

8) Study team proposal

-From the technical aspect

-From the financial aspect

-From the Mozambique government policy aspect

3

2.2 Study measures - structure

2.2.1 Study measures

(1) Conducted local survey and local report in order to communicate with the Government of

Mozambique.

Table 2-1：Purpose of local survey

Local Survey Main purpose Communication Tools

First trip To understand requests from the government of

Mozambique

・Presentation

・Questionnaire

Second trip To discuss with the government of Mozambique on

project scheme

・Presentation

・Report draft

(2) Local survey items and measures are as following.

Table 2-2：Survey items and measures

Survey items Measures

1. Situation of fertilizer consumption in Mozambique

【Purpose】To clarify the necessity of fertilizer and situation both in

downstream and upstream of targeted products.

1.1 The government policy and plan for fertilizer.

1.2 Import and export situation of fertilizer.

1.3 Local price and market system of fertilizer.

1.4 Production situation of crude oil and gas, raw materials for targeted

fertilizer products.

Hearing

Hearing

Hearing

Hearing

2. Site location

【Purpose】To improve the study accuracy by visiting site.

2.1 Condition of site location (current utility and offsite situation, Availability

of utility supply）

2.2 Current situation of infrastructure for fertilizer transport（ terminals,

railways, and other transport measures）

Visitation

Hearing

3. Environmental and Social impact

【Purpose】To obtain available information/data for environmental and social

influence.

3.1 Administration and/or institution for environment regulation

3.2 Procedures for application and approval of EIA

3.3 Consideration for influence on environment and social aspects during

Hearing

Hearing

Hearing

4

plant construction.

3.4 Items to be considered other than pollution control （Environmental

approval, explanation for local residents, consideration for natural and

social environment, and other considerations）

Hearing

4. Basic conditions for the project implementation

【Purpose】To clarify the essential conditions to implement this project

4.1 The government’s functions for local legislation

4.2 Preparation for Infrastructures

4.3 Financial resource for the government of Mozambique

4.4 Functions of Government of Mozambique

4.5 Structure for the project development

Hearing

Hearing

Hearing

Hearing

5. Basic information

【Purpose】To obtain enough information for the project implementation.

5.1 Related governmental organization and its function

5.2 Related organization and its function

5.3 Applications and those procedures which are essential for the construction

5.4 Trade and investment situation

5.5 Economic situation

5.6 Financial situation

5.7 Tax system

5.8 Transportation for construction

Hearing

Hearing

Hearing

Data

Data

Data

Hearing

Hearing

*”Hearing” means to have obtained information/data by interviewing related personnel.

“Visitation” means to have studied the circumstances by visiting the local site and interviewing

related personnel.

“Data” means to have obtained related data from related institution/organization through the

government of Mozambique or from literature.

(3) Measures for domestic study

1) Interviewed specialists to hear the current situation on some of the items written below.

-Mozambique government organization (Ministry of Agriculture)

2) Utilizing not only from books/materials but also from internet web sites for data.

5

2.2.2 Organization structure for the study

Organization structure is as following.

Figure 2-1 Organization structure for the study

Project Manager

Mitsutoshi SUZUKI

Technical Analysis

H. NAKAMURA

T. TOMITA

Financial Analysis

A. NATSUBORI

Environmental / Social

Analysis

Y. KATO

Cost Estimation

S. KAWAKAMI

Civil cost estimation

Y. SARUWATARI

Business Analysis

M. TANIMOTO

T. OTA

(Sumitomo Corporation)

Technical Analysis

G. NISHIKAWA

Secretary

Makiko SAITO Coordinater

Tasuku HORIUCHI Assistant

6

2.3 Schedule for the study

2-3-1 Overall schedule

Overall schedule is as following.

2-3-2 Schedule for the local survey trip

1) The first trip（November 28th to December 8

th, to be reported on survey which were

conducted without days for transfer.）

Table 2-3 The first trip schedule

Date Time Place Item

29-Nov

Tue

AM 6:35

Johannesburg

↓

Maputo

Arrive at Johannesburg

8:40 Departure from Johannesburg

9:40 Arrive at Maputo

PM Departure from Hotel

15:00 Meeting with JICA

16:00 Meeting with embassy of Japan

Hotel Polana Serena Hotel

30-Nov

Wed

AM 7:40

Maputo

Departure from Hotel

8:00 Ministry of Agriculture

10:00

CPI (Investment Promotion

Center)

PM 11:00 IMPACTO

14:00

IRRI (International Rice Research

Institute)

16:00 BG/Bioglobal

17:30 Kentz


1-Dec

Thu

AM 8:00

Maputo


8:30

Ministry of Coordination and

Environment Affair

10:00 Ministry of Industry & Trade

PM 14:30

INP (Instituto National de

Petroleo)

17:00 SDV Mozambique


7

2-Dec

Fri

AM 8:30

Maputo

Departure from hotel

10:30 3AB

11:00

MaquiTrade Lda Extraczao e

Comercio de Inertes

12:00 ENH

14:30 MOTAENGIL

16:00

INP (Instituto National de

Petroleo)

17:30 MoCargo


3-Dec

Sat AM 8:00

Maputo

Departure from hotel

11:00 Meeting with CCESCC

PM 13:00

CCESCC's cement plant in

Bela-vista

14:00 Departure from Bela-vista

17:00 Arrive at hotel

18:00 F.H. Bertling


4-Dec

Sun

AM

Maputo

PM


5-Dec Mon AM 8:00

Maputo


8:30 Metelology

10:30

Deloitte & Touche (Mozambique),

Lda

PM 15:00 Odebrecht

17:30 Capital Outsourcing Group


6-Dec

Tue

AM 5:30

Maputo


6:00 Arrive at Maputo airport

7:00 Departure from maputo

8:30 Arriving at Beira

Meet at airaport with coodinater

Mr.Pio

PM 10:00 Port Authority

8

12:00

Municipal office in Dondo & site

visit

14:00

Site visit with Beila Municipal

Office

16:30 Departure from Beira


Polana Serena Hotel

7-Dec

Wed

AM 8:30

Maputo


9:00

Ministerio da Planificazao e

Desenbolvimento

10:00 Grant Thornton

11:00 INE ( National Statistical Institute )

PM 12:00

SMS ( Sociedade Mozambicana de

Servicos, S.A.

14:00

Ministry of Mineral Resources /

INP ( MoU submission )

16:00 TREVI SpA

Polana Serena Hotel

2) The second trip (February 8th to February 12

th, to be reported on survey which were

conducted without days for transfer.)

Table 2-4 The second trip schedule

Date Time Place Item

8-Feb

Wed

AM 7:10

Johannesburg

↓

Maputo

Arrive at Johannesburg

9:40 Departure from Johannesburg


PM Departure from Hotel

15:00

-16:00

Meeting with JICA


9-Feb

-

Thu

AM

10:00

-10:30 Maputo

Meeting with the director of

Ministry of Agriculture

PM

17:00

-18:00

Meeting with the Japanese

ambassador

9

18:30

-19:30

Meeting with the chairman of

CMH


10-Feb

Fri

PM

12:00

-12:30

Maputo

Meeting with ENP

13:00

-14:00

Meeting with the subordinate

officer of the Ministry of

Agriculture

14:30

-15:15

Meeting with the vice minister of

the Ministry of Mineral Resources

and project manager of INP

11-Feb Sat

AM 11:45

In flight

Departure from Maputo

12:55 Arrival at Johannesburg

PM 17:05 Departure from Johannesburg

12-Feb Sun PM 12:15

In flight

Arrival at Hong Kong

14:25 Departure from Hong Kong

19:15 Arrival at Haneda, Japan

1

Chapter 3 Justification, Objectives and Technical Feasibility of the Project

2

3.1 Project background with necessity 3.1.1 Mozambique fertilizer current situation Agriculture is main GDP sector in Mozambique which is consist of 28.8%. Total 81% of labor population in Mozambique is engaged in Agriculture. Cotton, cashew nuts, sugarcane, tea, cassava (tapioca), corn, coconuts, sisal, citrus and tropical fruits, potatoes, sunflowers; beef, poultry are agriculture product in Mozambique. In such circumstance, Mozambique government plans to increase domestic urea production which is 46% of fertilizer in Mozambique. � Ministry of Agriculture’s analysis Agriculture situation in Mozambique is summarized as follows. 1. Subsistence, dry farming, characterized by low productivity and production 2. Weakly market-oriented 3. Based on rudimentary technologies with environmentally inappropriate practices 4. Low quality and small scale production Ministry of Agriculture analyzes the Mozambique fertilizer situation shown as follows.

Table 3-1: Status of fertilizers in Mozambique

Domestic situation External situation

Strengths Weaknesses Opportunities Threats

Approval of PEDSA which advocates the need to increase agricultural productivity;

Lack of a domestic fertilizer industry;

Availability of raw material stocks for the fertilizer industry (hydrocarbons, limestone, organic fertilizers, etc.);

Lack of hydrocarbons shares for the fertilizer industry in the short and medium term,

Low demand for fertilizers;

High potential of producers who do not use fertilizers

The low levels of demand make the fertilizer business less attractive in the rural areas

Distribution of registration and control of agro-chemicals in the DNSA (National Direction of Agricultural Services);

High prices of fertilizers; Increased loss of soil quality in many areas of the country

Lack of a regulatory framework in the area of fertilizers

Existence of agrochemical stores in the rural areas

High fertilizer costs arising from import duties

Poor sales network, not wide enough to manage the handling and sale of fertilizers in the rural areas

Existence of the Department of Land and Water in the IIAM (Mozambique Institute of Agricultural Research)

Source: Prepared by the survey mission

3

� Urea price in Mozambique Agrifocus, Agrochemical and Agrotech are only 3 fertilizer importers in Mozambique. They import urea mainly from South Africa. Importer receives 3% of import price as a commission from government. Dealer purchases fertilizer USD 70 to 80 per 50 KG and then sell it to farmer USD 100 per 50 KG which is far from the competitive price considering GDP in Mozambique. There is a 5 KG fertilizer sold USD 10 in downtown. 3.1.2 Mozambique government development plan for fertilizer � Agricultural strategy statement Mozambique government’s agricultural strategy statements are shown as follows. 1. Adoption of the Green Revolution Strategy in 2007 2. Implementation of the Action Plan for Food Production 3. Adoption of PEDSA (Strategic Plan for the Development of the Agricultural Sector) Purpose for above plans are doubling annual production in 10 years, increased agricultural productivity with average annual growth of 7%, increased number of farmers adopting improved technologies and expanding the network of input providers (market). � Agricultural strategy by Mozambique government Mozambique government overview "A thriving, competitive and sustainable agricultural sector, able to meet the challenges of food and nutrition security and achieve global agricultural markets" Mission "Contributing to food and nutrition security and to the income of farmers in a competitive manner ensuring social and gender equality" General Objective:

� Stimulating demand and supply of fertilizers by the productive sector in order to improve soil and crop productivity ensuring environmental quality.

Specific Objectives:

� Ensuring various actors of the production process the availability and the access to the market of fertilizers;

� Strengthening research in the field of fertilizers; � Facilitating the fertilizer industry access to raw materials; � Developing a tax incentive package for the fertilizer industry and marketing; � Training technicians and service providers on fertilizers; � Developing institutional assets (regulation, laboratories, and inspectorate).

Expected Results:

� Increased availability and consumption of fertilizers; � An established quality control system for fertilizers; � Trained technicians, producers and development workers regarding the use and handling of

fertilizers; � A favorable environment for the establishment of the fertilizer industry; � An updated mapping of soils in the country; � Increased number of farmers who use fertilizers; � New production technologies for organic fertilizers;

4

� An approved and implemented Fertilizer Regulation Strategic Actions: R1: Increased availability and consumption of fertilizers:

AE-1.1: Creating easier access to credit for inputs; AE-1.2: Facilitating the importation in "bulk"; AE-1.3: Revising the import rate on fertilizers;

R2: Established system of quality control of fertilizers:

AE-2.1: Installing regional laboratories for the quality testing of fertilizers; AE-2.2: Recruiting and training fertilizer inspectors;

R3: Technicians, producers and development workers trained in the use and handling of fertilizers:

AE-3.1: Training technicians and development workers in the handling and use of fertilizers; AE-3.2: Disseminating technologies to producers; AE-3.3: Training inspectors and laboratory technicians in quality control of fertilizers;

R4: A favorable environment for the establishment of the fertilizer industry:

AE-4.1: MINAG involvement in the negotiation of hydrocarbons shares in the fertilizer industry;

R5: An updated mapping of soils in the country;

AE-5.1: Doing lab tests in order to determine the quality of soils; AE-5.2: Preparing maps on the fertility of soils in the country;

R6: New production technologies for organic fertilizers;

AE-6.1: Generating alternative technologies to the use of inorganic fertilizers; AE-6.2: Updating the technical guidelines regarding the use of fertilizers or crops;

R7: Fertilizer Regulation approved and implemented;

AE-7.1: Drawing up the Fertilizer Regulation; AE-7.2: Disseminating and implementing the regulation

Aspects of the Strategy:

� Institutional capacity building: ○ Setting up a regulation for the fertilizer chain; ○ Training producers and providers in the use, management and market of fertilizers;

� Creation of a program of incentives for the fertilizer chain:

○ Facilitating access to cheap raw materials (domestic hydrocarbons); ○ Facilitating the establishment of accessible credit lines to producers; ○ Facilitating the importation in bulk;

� Market:

○ Setting up at least two fertilizer plants by 2014; ○ Creating a rural, commercial network of input supply;

� Study:

○ Updating the mapping of soils in Mozambique; Monitoring and Evaluation:

� Coordination: DNSA, in collaboration with: ○ IIAM, INCAJU, AMI, CEPAGRI, DPA's

� Framework survey to determine:

5

○ Initial data on production, imports, prices, quantities sold, quantities used, installed institutional capacity, etc.

� Methodology for the evaluation of the Strategy: ○ Missions for monitoring, auditing and inspection of the different participants in the fertilizer production and value chain ○ TIA - Agricultural Survey

Institutional Framework and Coordination Aspects:

� Responsible institution: DNSA;

� Duties: ○ Preparing and implementing policies and regulations for agricultural resources and inputs; ○ Coordinating its activities with other relevant institutions:

・ In the implementation of the Fertilizer Regulation;

・ In the training program for producers, providers, and

providers' associations;

・ In the implementation of the incentive plan for production

and supply;

・ In the setting up of an Information System about the

production and market of fertilizers; Challenges:

� Revoking of the 2.5% tax on fertilizers for use in Mozambique, and

� Setting up and implementation of the Regulation for the management of the fertilizer production and value chain;

3.1.3 Fertilizer support system in Mozambique In Mozambique, there is no subsidiary from government to farmers. FAO provides voucher program to farmer in Mozambique. Before the agriculture season starts, farmer receives seeds from 25kg up to 50kg without payment. At the end of season, farmer pays two times from original cost of seeds. � Demand target At this moment, urea is used limited to such as tobacco, sugar companies. In Mozambique, there are 4 million farmers. Small farmer which cultivate rice is limited to only from 3 to 6 % only provided from institute which produces urea as experimental. After 10 years, Mozambique government expected to 3.4 Million farmers which is 80% of total farmer will use the fertilizer. SADC countries such as Zambia, Malawi, Zimbabwe, and Congo are all fertilizer importer and therefore, 600,000 Ton per year is still less according to the Ministry of Agriculture. With the view point of distribution, our recommended plant site should be Manica province because it is located in center of Mozambique. � Demand study 1990 - 1999: the market was centralized and the distribution was performed through the KR2 program; ○ It represented about 47% of the total amount of imported fertilizers; ○ Of these 26% came from commercial dealers (Agro-quimicos, Tabacos de Manica, Acucareiras, Boror and Enacomo); The potential annual demand is 100,000 tonnes of fertilizers. Just over the last ten years, there has been an increase in the consumption of fertilizers from 18,000 to 51,000 tonnes per year;

6

The use of domestic fertilizers in comparison with the mainland and the region: ○ Africa: 20 kg / ha ○ Sub-Saharan Africa: 8 kg / ha ○ Mozambique: 5 kg / ha ○ Abuja Declaration: 50 kg / ha (until 2015)

� Present analysis Following table is the “Evolution in the Consumption of Fertilizers (tonnes), 2006-2010” 46% of fertilizer in Mozambique is urea.

Table 3-2: Evolution in the Consumption of Fertilizers (tonnes), 2006-2010

Year Sectors

Tobacco Sugar Others Total Average kg / ha cultivated

2006-2007 13,000 10,000 5,500 28,000

2007-2008 13,000 10,000 5,000 28,000 4.8

2008-2009 15,000 12,000 5,000 32,000 5.3

2009-2010 16,000 12,000 5,000 33,000

2010-2011 31,400 15,000 5,000 51,400

Source: Material released by Ministry of Agriculture of Mozambique “Evolution in the Consumption of Fertilizers (tonnes), 2006-2010” � Future analysis Comparison of Current Consumption and Projections for Fertilizers among some SADC Countries (2007-2011 and 2011-2017)

Table 3-3: Comparison of Current Consumption and Projections for Fertilizers among some SADC Countries (2007-2011 and 2011-2017)

Year Mozambique Zambia Malawi Total

2007 28,000 180,000 270,000 478,000

2008 32,000 192,600 283,500 508,300

2009 33,000 206,100 297,700 540,800

2010 51,400 220,500 312,600 575,700

2011 50,000 235,900 328,200 613,100

2012 53,900 247,700 338,000 639,600

2013 59,300 260,000 348,200 667,500

2014 62,200 273,000 358,600 693,800

2015 71,700 286,700 369,400 727,800

2016 78,900 301,000 380,500 760,400

2017 86,800 316,000 391,900 794,700

Source: Material released by Ministry of Agriculture of Mozambique “Comparison of Current Consumption and Projections for Fertilizers among some SADC Countries (2007-2011 and

2011-2017)”

7

Above table is based on the current situation and it is not included the production increase as a result of JICA’s PROSAVANNA.

8

3.2 Examinations required for the contents of projects

3.2.1 Demand forecast As stated in (3)-2. Analysis of Future Demand, Mozambique and its neighboring nations will see urea demand increase. With farmland expansion and productivity increase as a result of JICA’s current agricultural development project “PROSAVANNA” in Mozambique’s tropical savanna through Japan-Brazil cooperation, fertilizer demand will be increased. Moreover, the Abuja Declaration aims to use 50 kg/ha of fertilizer or 10 times more than the current use in Mozambique, leading to further demand expansion. 3.2.2 Understanding of problems necessary to examine and determine the contents of the project � Securing of natural gas

This investigation assumes that 33 million cubic feet/day of gas is secured out of increased production in Pande/Temane gas fields. For project implementation, it is necessary to talk with the Department of Minerals and Natural Resources which is responsible for gas allocation.

� Site

Considering urea shipment and environment, Beira New Industry Area is the site for this investigation. For project implementation, it is necessary to talk a lot with the Mozambique Investment Promotion Center, Beira city administration and planned project execution agencies.

� Determination of production quantity based on the urea demand

The Mozambique government plans to sell its urea not only to SADC countries, such as Mozambique at home, Malawi, Zambia and Zimbabwe, but also to South Africa. Although urea demand may expand with its production, the first full-scale urea plant in the Sub-Sahara will have a urea production capacity of 1,725 MTPD as a first step.

3.2.3 Examinations of technical method 3.2.3.1 Ammonia plant

The outline of the Ammonia Plant is introduced in this Section.

� Production capacity Ammonia Plant is designed to have a normal production capacity of 1,000 metric tons of Ammonia product per stream day.

� Product specification The Ammonia Product has the following expected value and characteristics.

9

Table 3-4: Specification of ammonia products

Composition (wt%)

Ammonia, wt% 99.9% min.

Water, wt% 0.1 max.

Oil, wt ppm 5 max.

Iron (Fe), wt ppm 5 max.

Pressure at BL, BarG 20

Temperature at BL , °C 20


� Raw material 33MMSCFD natural gas from Pande/Temane gas field increases production. Gas specification is shown as follows.

Table 3-5：Specification of raw material – (1)

TO: CPF

SECTION: CPF

DATE: 2010/12/05

DATAFILE: C:\HPCHEM\1\DATA\05DEC10\SIG15638.D

SAMPLE NAME: DM2001-TEMANE GAS

D

COMPONENT MOL%

Methane 90.89536 Combustion Properties Units Specification Value

Ethane 3.27357

Propane 1.74942 Energy Content (EC) (Gross) MJ/nM3 (101.325 kPa @ 0°C) 38.10-43.50 43.20

iso-Butane 0.44590 Energy Content (EC) (Gross) MJ/nM3 (101.325 kPa @ 15°C) 37.40-42.20 40.72

n-Butane 0.55024 Relative density (RD) 101.325 kPa @ 0°C 0.55-0.70 0.628

neo-Pentane 0.00943 Relative density (RD) 101.325 kPa @ 15°C 0.55-0.70 0.630

iso-Pentane 0.17193 Wobbe Index (WI) MJ/nM3 45.80-56.00 54.51

n-Pentane 0.13892 Hydrocarbon Dewpoint °C @ 6.25 Barg -6.8 15.65

n-Hexane 0.26999 Water Dewpoint lb/mm scf @ 101 kpa 7

n-Heptane 0.15629 Total Inerts (N2, CO2) Vol% 5.0 max 2.28

n-Octane 0.04489 Mr g\mol 18.20

Nonane 0.00787 DMG gram 1820.11

Decanes 0.00675 H2S ppm 4.0 max 0.00

Nitrogen 2.27888

Carbondioxide 0.00057

Total Inerts 2.27945

H2S 0.00000

Oxygen 0.00000

Total 100.00000

Report By: VIOLET

Source: Material provided by the Institute National Petroleum (INP)

10

Table 3-6: Specification of raw material – (2)

TO: CPF

SECTION: CPF

DATE: 2010/12/05

DATAFILE: C:\HPCHEM\1\DATA\05DEC10\SIG15639.D

SAMPLE NAME: DM200PANDE GAS

D

COMPONENT MOL%

Methane 95.22052 Combustion Properties Units Specification Value

Ethane 1.63286

Propane 0.54702 Energy Content (EC) (Gross) MJ/nM3 (101.325 kPa @ 0°C) 38.10-43.50 40.78

iso-Butane 0.13851 Energy Content (EC) (Gross) MJ/nM3 (101.325 kPa @ 15°C) 37.40-42.20 38.49

n-Butane 0.15139 Relative density (RD) 101.325 kPa @ 0°C 0.55-0.70 0.585

neo-Pentane 0.00000 Relative density (RD) 101.325 kPa @ 15°C 0.55-0.70 0.588

iso-Pentane 0.05290 Wobbe Index (WI) MJ/nM3 45.80-56.00 53.32

n-Pentane 0.04607 Hydrocarbon Dewpoint °C @ 6.25 Barg -6.8 14.86

n-Hexane 0.11589 Water Dewpoint lb/mm scf @ 101 kpa 7

n-Heptane 0.07713 Total Inerts (N2, CO2) Vol% 5.0 max 1.97

n-Octane 0.03164 Mr g\mol 17.00

Nonane 0.00989 DMG gram 1699.70

Decanes 0.01045 H2S ppm 4.0 max 0.00

Nitrogen 1.95976

Carbondioxide 0.00596

Total Inerts 1.96572

H2S 0.00000

Oxygen 0.00000

Total 100.00000

Report By: VIOLET

Source: Material provided by the Institute National Petroleum (INP)

The KBR Purifier Ammonia Process has accumulated over 300 plant-years of experience, and has demonstrated both operating and maintenance advantages. The features all of these processes stated here are utilized in the many of ammonia plants in KBR. The key difference is discussed in the following paragraphs.

� Feed Gas Flexibility The KBR Purifier Ammonia Process uses a cryogenic nitrogen wash step to remove impurities from the makeup synthesis gas. This makes the Purifier Process uniquely able to handle variations in the composition of the natural gas feed, including variations in hydrocarbon contents, nitrogen content and carbon dioxide content. The Purifier has the ability to absorb the variations in the raw synthesis gas, and maintain a stable composition of the makeup gas to the synthesis loop. � Mild Primary Reforming In the KBR Purifier Ammonia Process, primary reforming is carried out at about 100oC lower temperature than in conventional ammonia processes. This is because some of the reforming duty is shifted from the primary reformer to the secondary reformer. The shift in duty from the primary to secondary reformer has the following effects: • The radiant duty in the primary reformer is greatly reduced. • The number of reformer tubes and burners is greatly reduced. • The primary reformer catalyst tubes, the outlet manifold, the transfer line and the convection section operate at much lower temperatures. • The capital cost for the primary reformer is much lower than in a non-Purifier plant. • The life of the reformer catalyst and the reformer tubes are improved. � Secondary Reforming With Excess Air In a conventional ammonia plant secondary reformer, the quantity of air is set to produce a 3-to-1 ratio of hydrogen to nitrogen in the synthesis gas. With the Purifier Process, extra nitrogen is needed in the Purifier. Therefore, extra air is used in the secondary reformer. The extra air provides additional reaction heat, allowing the shift of reformer duty from the primary to the secondary

11

reformer. Nearly 100 percent of the heat released in the secondary reformer is used at high temperature, compared to 40 to 50 percent in the radiant zone of the primary reformer. Therefore, the shift of duty from the primary to the secondary reformer makes the plant more efficient. Because of the Purifier downstream, the allowable methane leakage from the secondary reformer is much higher than in conventional ammonia plants. This reduces the required secondary reformer outlet temperature by about 100oC. The result is much milder reforming conditions that are advantageous in terms of both steady and reliable operation and longer equipment life. Fuel savings is an added benefit. The extra un-reformed methane, together with surplus nitrogen and most of the argon are removed in the Purifier later in the process sequence, and returned to the reformer furnace as fuel. � Process Air Compressor with Gas Turbine Drive For plants that export steam to a urea plant the process air compressor is driven by a heavy-duty industrial gas turbine. The hot exhaust from the gas turbine is used as preheated combustion air for the primary reformer. This represents a substantial improvement in efficiency over a steam turbine drive. The need for start-up steam is also substantially reduced, and the cooling water requirement is reduced. If there is no urea plant or other unit to use the steam exported from the ammonia plant, then the process air compressor is usually driven by a steam turbine. The final choice of driver will depend on the overall steam balance considerations. � Cryogenic Purifier The cryogenic Purifier is the heart of the KBR Purifier Ammonia ProcessTM. The Purifier condenses out excess nitrogen from the synthesis gas, leaving a gas with a hydrogen-to-nitrogen ratio of 3/1. The condensed nitrogen takes with it all the methane and most of the argon and other impurities in the gas. The result is a very pure makeup gas to the synthesis loop. This reduces the required synthesis pressure, synthesis catalyst volume and/or purge rate from the synthesis loop. The pure synthesis gas also results in superior life of the synthesis catalyst. The remaining small synloop purge is recycled to the Purifier for hydrogen recovery, thus eliminating the need for a separate purge gas recovery unit. Most of the net cooling required by the Purifier is provided by an expander, which causes a modest pressure drop in the synthesis gas stream. Further cooling is provided by low-pressure vaporization of the reject gas. The reject gas from the Purifier is used as fuel.

Figure 3-1: KBR Purifier


12

The Purifier provides a convenient flexibility to the operation of the ammonia plant. This is because the Purifier can operate with a range of hydrogen-tonitrogen ratios in the feed, while maintaining the required 3/1 ratio in the purified synthesis gas. As a result, the front end of the ammonia plant can be adjusted for steam production, while the synthesis loop is adjusted for ammonia production. The Purifier corrects the interface and stabilizes the synthesis loop. The cryogenic Purifier system has two controls. The energy balance is controlled by varying the work removed by the expander. The material balance is controlled by varying the amount of liquid removed from the bottom of the column. Normal variations in methane slip from the reformer, carbon monoxide slip from the shift section, and carbon dioxide slip from the carbon dioxide removal system will cause variations in the amount of methane reaching the Purifier. The extra methane will be removed in the Purifier, and will not disturb the synthesis loop. This stabilizes the operation of the ammonia plant. During plant start-up, the Purifier can be cooled down during the same time period when the synthesis converter is heated up. Operators of Purifier plants report that the Purifier does not extend the total start-up time of the plant. During a short shutdown, the inventory of liquid nitrogen in the Purifier will keep the system cold, allowing quick restart. � Dry Makeup Gas to the Synthesis Loop The makeup gas contains no carbon oxides or moisture, which are poisons for the synthesis catalyst. Therefore, the makeup gas can be combined directly with the recycle gas, and, after heat exchange, fed to the synthesis converter. This process scheme has two advantages. First, refrigeration requirements are reduced. In other process schemes with no dryers, the moisture containing makeup gas is mixed with converter effluent to pass through the chilling train before going to the converter. Second, the size of the ammonia converter is reduced. This is because mixing of the ammonia-free makeup gas with the recycle gas results in lower ammonia content in the converter feed. � High Pressure Steam Generation in the Synthesis Loop The synloop design incorporates high-pressure steam generation. This maximizes the recovery of high-level heat. The steam generators also help stabilize the operation of the synthesis loop. Changes in production of ammonia are reflected in changes in steam production and do not affect the reactor temperature profile. � Key Mechanical Features KBR’s superior process design is complimented with a number of outstanding mechanical design features. � Reforming Furnace The primary reforming furnace is a KBR top-fired design, which has been used in more than 200 ammonia, hydrogen and methanol plants. The furnace consists of a radiant cell and a convection section. The radiant cell contains catalyst-filled tubes arranged vertically in a series of harps. Flue gas leaves the radiant cell at the bottom and enters the convection section through a refractory lined duct. Coils are located in the convection section to preheat the reformer feed / steam mixture, superheat high pressure steam, preheat boiler feed water, preheat process air and preheat natural gas feed. The furnace is designed to use gas turbine exhaust (GTE) for combustion air. Ducts for GTE distribution and a GTE bypass vent stack, located upstream of the reformer, are provided. Draft for the furnace is provided by one induced-draft fan located at the base of the stack. Flue gas from the furnace is discharged through the stack, which is designed with sufficient height to meet emission

13

requirements. Figure 3-2: Typical radiant section of a KBR primary reformer


The GTE-fired primary reformer furnace used in KBR Purifier AmmoniaTM Plants is a modern low-energy design, with proven service in existing plants producing from 680 to 2200 metric tons per day of ammonia. The process heat duty in the reforming furnace is only about 60 percent of the requirement in a conventional plant. In addition to the lower heat duty, the reformer fuel requirement is reduced by utilizing the sensible heat in the exhaust from the gas turbine. The fuel requirement is further reduced by burning the waste gases from the process in the reformer furnace. The radiant section of the furnace is conservatively designed for long service life. The relatively low primary reformer outlet temperature allows much lower tube metal temperatures than in conventionally designed reformers, where the outlet temperatures are about 100oC higher. The catalyst tubes are centrifugally cast micro alloy tubes with strictly controlled metallurgy, and are bored inside to remove unsound metal. The furnace design uses small heat release burners at the top of the furnace. The burners operate on natural gas, low heating value process waste gases, or any combination. The same burners will be adequate for operation at 100% capacity using only natural gas as fuel. The burners are raw gas type with staged air input for NOx control. The inerts in the process waste gas and GTE also reduce the flame temperature. These special burner design features result in low NOx levels. The GTE supply system is carefully engineered to provide controlled distribution of exhaust gas to each of the burners. Balancing dampers are provided in header ducts and a throttling damper in each burner duct. Plenums are designed to hold noise levels low. The reformer bypass GTE vent stack has a quick-opening tight shutoff damper. This damper is provided with remote control capability. The reformer ID fans, the GTE ducts and vent stack are designed to permit start-up of the reformer on ambient air drawn in through the vent stack, or start-up of the reformer with the gas turbine running and the vent stack open to atmosphere. Either way, sufficient oxygen can be supplied to the reformer to permit an orderly start-up. Similarly, gas turbine shutdown need not result in a complete furnace shutdown. The furnace can be simply turned down and kept warm for early restart. The convection section design incorporates several features to provide operating flexibility and safety. The hydrocarbon feed preheat coil is provided with an external bypass to permit control of the feed temperature to the zinc oxide beds. The steam superheat coil has provision for water injection between the two coil sections. The furnace uses the latest refractory and insulation designs to minimize heat losses. Ceramic fiber linings in the radiant section provide rapid thermal response due to low heat storage, and low radiation losses. Super duty hard refractory is used where burner flames contact sidewalls. Catalyst tube penetrations are provided with ceramic cloth seals which effectively block air leakage while

14

permitting free thermal expansion of the tubes. The combination of tight setting and good combustion control permits operation of the furnace at two volume percent oxygen on a dry basis measured at the radiant section exit. � Secondary Reformer Although the design conditions of the secondary reformer for a Purifier Ammonia PlantTM are less severe than in other plants, the design still calls for special attention. The secondary reformer design incorporates several special features which have provided superior performance in our operating units. A main feature is the dual layer refractory lining. The refractory lining provides for a moderate shell metal temperature, which allows the use of a carbon steel shell. An outside water jacket is provided to assure against overheating in the event of a refractory failure. The refractory lining exposed to the gas stream must be low silica, 0.1 percent maximum, to prevent silica migration and the downstream fouling of heat exchanger tubes. The refractories must be carefully selected, carefully prepared and applied by experienced personnel. The design incorporates an air/gas mixing chamber to provide uniform distribution and good mixing. It is placed well above the catalyst bed for good distribution and to avoid flame impingement on the catalyst bed. A common cause of problems in other designs is failure of their metallic gas distributors. There is no gas distributor in the KBR design. The shape of the secondary reformer, with a long tapered section, allows for even distribution of the gas stream over the catalyst. The catalyst bed is supported by a refractory dome consisting of self-supporting interlocking blocks. An all refractory support system is completely resistant to temperature surges which would lead to failure of any metal parts. � Reformed Gas Waste Heat Boiler High-level heat recovery downstream of the reformer is achieved in a KBR proprietary, natural-circulation, floating-head type waste heat boiler. This is a well proven, mechanically robust design that provides superior reliable performance. It has the following advantages over other designs: • The heat exchanger is less costly. • More qualified vendors are available, both for the original exchanger and for a spare bundle. • The tube bundle is removable and can be repaired easily at the site. • Less plot space is required, because the boiler is installed vertically. The floating-head boiler has a special dual-layer refractory that requires no metal liner. The design incorporates a water jacket on the shell and on the transfer line from the secondary reformer, to assure against overheating in the event of a refractory failure. The waste heat boiler is used together with a steam super heater of similar design. External bypasses are used to adjust the process temperatures. � Synthesis Converter The proposed synthesis converter is KBR’s well-proven horizontal design. This design has been used in numerous KBR plants since 1983. The converter is intercooled and has three equilibrium stages. The converter has been designed to achieve a high conversion of ammonia with very low pressure drop. The converter contains a removable catalyst basket within the pressure shell. Integral with the basket are the two intercoolers. An annular space exists between the cylindrical catalyst basket and the high pressure shell to provide a path for feed gas cooling the shell. The converter primarily uses 1.5 to 3 mm size promoted-magnetite based catalyst. The catalyst volume is chosen for five to ten years life. While there are only three equilibrium stages, there are four catalyst beds as the large third stage is split into two sequential beds. Each catalyst bed is

15

supported on Profile Wire Screens. The process flow is downwards through each bed. All of the feed gas passes through each of the catalyst beds.

Figure 3-3: KBR Horizontal Ammonia Converter


Approximately 60 % of the preheated feed gas passes through the shell/basket annulus and is heated in the first intercooler. Another approximately 30% of the feed is heated in the second intercooler. The last, small part of the feed bypasses the intercoolers. The re-combined feed flows to the first catalyst bed at approximately 379oC (EOR). The ammonia reaction is exothermic, equilibrium governed, and proceeds with a significant temperature rise. Upon leaving the first bed, the partially reacted gas passes through the grid supporting the catalyst and into the space between the bottom of the bed and the basket wall. From here it is routed to the first intercooler and is cooled to the proper feed temperature for the second catalyst bed. The hot effluent from the second bed is similarly passed to the second intercooler for cooling and then flows to the third catalyst bed. There is no heat exchange between the two sections of the third bed. Hot converter effluent from the last catalyst bed exits the converter via a special connection between the basket and the pressure shell. For catalyst replacement, the catalyst basket can be removed by a wheel-and-track arrangement. This way, a heavy-duty crane is not needed. � Unitized Chiller The Unitized Chiller is a specially designed, multi-stream heat exchanger that cools the effluent from the ammonia synthesis converter with recycle gas and with boiling ammonia refrigerant at several temperatures. In doing so, the Unitized Chiller combines several heat exchangers, compressor knock-out drums, and expensive high-pressure piping and fittings into one piece of equipment. This design saves pressure drop in the synthesis loop and reduces capital cost. The basic concept of the Unitized Chiller is the use of concentric tubes and a compartmentalized shell to replace several equipment items with one. The converter effluent flows through the annuli of the concentric tubes, and the recycle gas flows through the inner tubes. Refrigeration ammonia at various temperatures boils on the shell side in several compartments. Thus the converter effluent is simultaneously cooled by two media, the recycle gas and ammonia refrigerant. KBR has used the Unitized Chiller in numerous ammonia plants since 1978. � Gas Turbine KBR often uses a gas turbine to drive the process air compressor. In this design the hot gas turbine exhaust is used as preheated combustion air in the primary reformer. This arrangement improves the overall energy efficiency of the ammonia plant. Gas turbine selection is based on correctly matching the shaft power to the air compressor power, and matching the gas turbine exhaust flow to the

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primary reformer combustion duty. The KBR Purifier Ammonia Process is uniquely suited to achieving this match. KBR’s designs for gas turbine exhaust venting and flow distribution to the reformer burners are fully proven. KBR has used gas turbines in numerous ammonia plants since 1966. Most of them were Purifier Plants. � Compressors All process compressor trains are standard designs available from experienced manufacturers. Special customizing or innovation is not required. � Plant Reliability Ammonia production is a commodity business. Safe and reliable plant operation is crucial to profitability. KBR’s ammonia plants consistently obtain safe and reliable operation. A few statistics underscore this: • A KBR Purifier ammonia plant in the US achieved 1,395 consecutive days of ammonia production, although there were several short shutdowns. • One KBR Purifier ammonia plant in The Netherlands reported an onstream time of 99.3 percent in 2002. • Two KBR Purifier ammonia plants in The Netherlands each reported an average on-stream factor of 97.6 percent for a recent seven-year period. This included downtime for turnarounds. Uninterrupted runs of 960 and 920 days were obtained. • Another KBR Purifier ammonia plant in The Netherlands was shut down after producing more than 15 million tons of ammonia, more than any other single ammonia plant in the world at that time. (2) • Yara’s Unit D Purifier Plant at their Sluiskil, The Netherlands site ran for 1375 consecutive days without a single shutdown. (3) KBR has licensed more than 200 ammonia plants. A significant reason for the success of KBR's ammonia technology is the reliability of our ammonia plants. Reliability considerations originate during the process design and continue throughout the entire engineering effort. Process and equipment designs are evaluated carefully for safety and reliability. Start-up, operating and shutdown procedures are designed to protect personnel and equipment. KBR's work is carried out to meet ISO 9000 requirements. The following paragraphs summarize ammonia plant surveys covering different time periods. The surveys are based on independent third-party information by Plant Surveys International, Inc. The surveys compare 50 plus ammonia plants operated in 20 plus countries. These independent surveys show that: • KBR’s Purifier Ammonia Plants, as a group, demonstrated the highest service factors. A major reason for this is the lower temperatures in the primary and the secondary reformers. • KBR’s Purifier Plants demonstrated the longest sustained run lengths without shutdowns, another measure of reliability. The tables below summarize the data from these surveys for service factor and run lengths, two measures of reliability. � Service Factor For the surveys, the service factor is defined as the percent of time that a plant is available to produce ammonia to satisfy demand. Downtime for maintenance is deducted. Downtime for market reasons is excluded from consideration and not deducted. The reported values are as follows:

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Table 3-7: Service factor value

SURVEY DATES

2000-2001 2005

KBR Purifier Plants 94.2 % 99.5% Non-KBR plants 90.6 % 91.1% All surveyed plants 91.5 % 91.7%


KBR plants have a clear advantage in service factor. Three of the five highest rated plants are KBR plants. For a 1,500 mtpd ammonia plant, and using an ammonia price of $200/mt, a three-percent advantage in service factor corresponds to additional revenue of $3.3 million per year. � Longest Run Time The plants reported the longest run time in their history. Any day that some ammonia was made counted. The average for all of the plants in each group was as follows:

Table 3-8: Plant average

SURVEY DATES

2000-2001 2005

KBR Purifier plants 624 days 788 days Non-KBR plants 385 days 392 days All plants 424 days 408 days


Clearly the average KBR Purifier Plant stays on-line longer than the plants designed by other licensors � Capital Cost The capital cost of a KBR PurifierTM Ammonia Plant is less than the capital cost of a conventional ammonia plant. At first glance this may seem surprising since the cryogenic Purifier is an additional piece of equipment, the air compressor is larger, and a gas turbine is more expensive than a steam turbine. However, in a Purifier plant, the primary reformer radiant section is about 40 percent smaller than in a conventional plant. The primary reformer is the single most expensive piece of equipment in an ammonia plant. Also, the high-purity synthesis gas permits a simplified synthesis loop design and lower loop pressure. In addition, the makeup gas to the synloop is mixed with the recycle and fed directly to the synthesis converter. This increases the conversion per pass and reduces the refrigeration requirements, further reducing capital cost and utility consumption. Also, a separate purge gas recovery unit is eliminated. Further, the gas turbine drive for the air compressor replaces a system that includes a steam turbine, a surface condenser, and condensate pumps. The gas turbine also reduces the size of the cooling tower or other cooling system and of the start-up boiler. The net effect of these savings is to entirely offset the increased cost of the gas turbine over the steam turbine. � Operating Requirements The KBR Purifier Process is renowned for its low energy consumption. The tables below show the energy consumptions measured during the performance tests for two recently commissioned Purifier Plants and compares the measured values with the “expected” values as shown on the process flow diagrams. The CNOOC plant is coupled with a urea plant and uses a gas turbine to drive the process air compressor. The BFPL plant in Australia produces all cold ammonia for export and uses a steam turbine to drive the process air compressor.

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Table 3-9: CNOOC Performance Test Data

Gcal/Metric Ton of NH3

Natural Gas Measured Expected

Feed 6.25 6.32

Fuel 1.93 1.91

Subtotal 8.18 8.23

Export Steam -1.72 -1.75

Net 6.46 6.48

Electricity 0.03 0.03

Total Energy 6.49 6.51 Source: Prepared by the survey mission

Table 3-10: BFPL Performance Test Data

Gcal/Metric Ton of NH3

Natural Gas Measured Expected

Feed 5.76 6.05

Fuel 1.59 1.43

Subtotal 7.35 7.48

Export Steam -0.61 -0.66

Net 6.74 6.82

Electricity 0.04 0.04

Total Energy 6.78 6.86 Source: Prepared by the survey mission

Notes to above two tables: 1) Energy is on a LHV basis. 2) Electricity converted to heat at 2828 kcal/kWh for CNOOC and 2895 kcal/kWh for BFPL and is for the ISBL ammonia plants only. 3) Cooling water circulation rate based on 10 C rise is 170 m3/t for CNOOC and 216 m3/t for BFPL. Difference is due to extra cooling water for the BFPL air compressor turbine surface condenser. 4) CNOOC plant has a 2.1 MW feed gas compressor and produces warm product. 5) BFPL plant has no feed gas compressor and makes all cold ammonia product. The difference in energy consumption for the two plants is about 0.3 Gcal/t and is due mainly to the gas turbine. A gas turbine cycle is much more efficient than a steam turbine cycle and so the CNOOC plant is more efficient. A Purifier Plant currently under design for Jianfeng in China is a replicate of the CNOOC design with some minor efficiency improvements. Its expected energy consumption on the same basis as the above two tables is 6.45 Gcal/t. References

1. Yexin, Yang & James Gosnell: "CNOOC Chemical Ltd. New Fertilizer Plant", AIChE Ammonia Safety Symposium, Denver, Colorado, the United States, September 2004

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2. Verduijin, WD: "Legionella Pneumophilia in an Ammonia Plant Cooling Tower", AIChE

Ammonia Safety Symposium, Montreal, Canada, January 2002

3. de Letter, Jacky: "Over Three Years of Continuous Operation of Unit D in Sluiskil, All-time Record", AIChE Ammonia Safety Symposium, Henderson, Nevada, the United States, September 2007

3.2.3.2 Urea Plant

The outline of the Urea Plant is introduced in this Section.

� Production Capacity Urea Plant is designed to have a normal production capacity of 1,750 metric tons of granular Urea product per stream day.

� Product Specification The Urea Product has the following expected value and characteristics.

Total Nitrogen : minimum 46.3 wt% Moisture : maximum 0.2 wt% Biuret : maximum 0.8 wt% Product size to 4 mm : minimum 95 wt% Average crushing strength : minimum 3.5 kgf at 3 mm

� Raw Materials Raw Materials for the production of urea are ammonia and carbon dioxide produced in the Ammonia Plant having the following specification.

(a) Liquid Ammonia

Composition (wt%)

Ammonia, wt% 99.9% min.

Water, wt% 0.1 max.

Oil, wt ppm 5 max.

Iron (Fe), wt ppm 5 max.

Pressure at BL, BarG 20

Temperature at BL , °C 20

(b) Carbon Dioxide

Composition (dry vol%)

CO2, % min. 99.0

Inerts (CH4, N2, Ar) and H2, % max. 1.0

H2O Saturated at operating conditions

in separator at ammonia unit BL

H2S, mg/Nm3 max. 0.4

Temperature at BL

(Reference Point), °C

nor 45

Pressure at CO2 Regenerator Outlet,

BarG, B/L

min 0.5

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Urea Plant Description � Urea Technology The major technology suppliers of urea plants are Toyo Engineering Corporation (TOYO: Japan), Stamicarbon (Netherlands) and Saipem (Italy). These licensors offer low energy and environmental friendly urea technologies in the market. These companies have supplied their technologies for more than 95% of installed ammonia capacity globally.

These technologies are highly trustworthy and experienced for the 1,750 MTPD urea plant in this project. However, TOYO urea technology is the most efficient process among these urea technologies in comparison of the utility consumption figures introduced in each company’s brochure. The feasibility study of this project proceed based on TOYO urea technology for the urea plant

Table 3-11: Comparison of Raw Materials and Utility Consumption (per ton of Urea Product)

TOYO Stamicarbon Saipem

Raw materials

Ammonia (100%) ton 0.563 0.563 0.563

Carbon Dioxide (100%) ton 0.73 0.73 0.73

Utilities

Case-1

110 bars Steam import case

Steam 110 bars ton 0.69 0.86 0.81

Cooling Water m3 75 88 95

(∆t=10°C)

Electricity

Process only kWh 21 20 23

Granulation kWh

24 (TOYO) 45(Stami)/38

(UFT) 37 (UFT)

Total kWh 45 65/58 60

Case-2

42 Bars Steam import case

Steam 42 bars ton 0.8 n.a.(0.99) n.a (0.94)

Cooling Water m3 81 n.a.(95) n.a. (103)

(∆t=10°C)

Electricity

Process only kWh 21 20 23

Granulation kWh

24 (TOYO) 45(Stami)/38

(UFT) 37 (UFT)

Total kWh 45 65/58 60

Export Steam None None None

Major Process Parameter

CO2 Conversion in Reactor % 63 - 64 58 62 - 64

NH3/CO2 in Reactor 3.7 3.0 3.2 – 3.4

Reactor Temperature oC 182-184 183 188

Reactor Pressure bars 152 140 150

Source: Prepared by the survey mission Note: n.a. means Not Available.

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Since its establishment in 1961, Toyo Engineering Corporation (TOYO) is well known as a global engineering contractor but also as urea process licensor. TOYO has designed, engineered, constructed and commissioned over 100 urea plants based on the TOYO’s own Urea Process including its urea synthesis technologies and urea granulation process. TOYO’s the most advanced process of urea synthesis and granulation technologies are the ACES21

®

(Advanced process for Cost and Energy Saving) and Spout-Fluid Bed Urea Granulation Process.

ACES21®

has been established to achieve the significant energy saving and plant cost reduction from previous modern urea processes, without sidelining reliability, ductility, operability and maintainability. A major feature of this technology is the reduction of the number of components in the urea synthesis loop to simplify the system. This lessens construction costs with the installation of the reactor on the ground in the CO2 stripping process. In addition, the operation conditions of the synthesis section have been optimized under lower operation pressure than in the previous process. As a result, a remarkable reduction in energy consumption has been achieved.

Spout-Fluid Bed Urea Granulation Process has been established to produce large size granular urea by applying a combination of the spouted bed and fluidizing bed with high performance spray nozzles for granulator, which realizes the reduction of energy requirements and improvement of the product quality as major feature.

Urea plant mainly consists of following sections. See block flow in next page.

• Synthesis

• Purification

• Concentration

• Recovery

• Process Condensate Treatment

• Granulation

Figure 3-10: Block Flow Diagram of Urea Plant


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� ACES21® Process

Fig. 3-11 shows a typical process flow diagram for urea plant of ACES21

®. Liquid ammonia is

fed to the reactor via HP Carbamate Ejector which provides the driving force for circulation in the synthesis loop instead of gravity for the original ACES Process. Most of the carbon dioxide with small amount of passivation air is fed to the stripper as a stripping medium and a raw material for urea synthesis, and the rest is fed to the reactor as a raw material and to passivate the lining of reactor. The reactor is operated at N/C ratio of 3.7, 182 - 184°C and 152 barG. The CO2 conversion to urea is as high as 63 - 64% at the exit of the reactor. Carbamate solution from the carbamate condenser is fed to the reactor after being pumped by the HP ejector that is motivated by high pressure liquid ammonia. Urea synthesis solution leaving the reactor is fed to the stripper where unconverted carbamate is thermally decomposed and excess ammonia and CO2 are efficiently separated by CO2 stripping. Stripped urea solution is sent to HP decomposition stage to be purified further. The stripped off gas from the stripper is fed to Vertical Submerged Carbamate Condenser (VSCC), operated at N/C ratio (NH3/CO2 mole ratio) of 2.8 - 3.0, 180 - 182°C and 152 barG. Ammonia and CO2 gas condenses to form ammonium carbamate and subsequently urea is formed by dehydration of the carbamate in the shell side. Reaction heat of carbamate formation is recovered to generate 5 barG steams in the tube side. Packed bed is provided at the top of VSCC to absorb uncondensed ammonia and CO2 gas into recycle carbamate solution from HP absorption stage. Inert gas from the top of the packed bed is sent to MP absorption stage.

The synthesis urea solution is fed to the Purification Section, where ammonium carbamate and excess ammonia contained in the synthesis urea solution are decomposed and separated by pressure reduction and heating. The urea solution is purified, and it is sent to Concentration Section.

After unconverted ammonia and CO2 are separated from the synthesis urea solution in the Purification Section, the urea solution is concentrated to 96 wt% concentration of urea including biuret in Evaporator, before it is sent to Granulation Unit.

The gaseous ammonia and CO2 separated at the Purification Section are absorbed and recovered in the two-stage absorbers, namely, HP Absorber and LP Absorber, using the process condensate as absorbent, and they are finally recycled to the Synthesis Section.

The water vapor separated from the Evaporator is condensed in surface condensers. All ammonia and urea mist contaminated in evaporated water from Evaporator are recovered as the process condensate together with ammonia and urea mist.

The process condensate is sent to Process Condensate Stripper to strip off ammonia and carbon dioxide by steaming. The overhead gas from Process Condensate Stripper is sent back to LP Decomposer to recover ammonia in it and utilize steaming heat in Process Condensate Stripper for decomposition heat in LP Decomposer.

From the middle stage of Process Condensate Stripper is pumped up to Urea Hydrolyzer, where urea is completely hydrolyzed to ammonia and carbon dioxide.

Finally, the clean process condensate from the bottom of Process Condensate Stripper is discharged to the Utility Facilities in OSBL of the urea plant.

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Figure 3-11: Flow Diagram of ACES21® Urea Process


� Urea Granulation Process

Fig. 3-12 shows the process flow of TOYO’s Granulation Process configured this Spout-Fluid type granulator. The urea solution or molten urea is fed on the spouting urea seeds through the multi spray nozzles to enlarge the recycle particles (seeds) in the granulator. The water in the feed urea solution is evaporated by spouting air on the spouted beds in the granulator to produce the urea granules. The enlarged granules are cooled to a suitable temperature by fluidizing air on the internal fluidized beds in the granulator. Coarse urea granules produced in the granulator are screened to separate the product size granules from over and under size granules through the double deck screen. Small sized granules are recycled back to the granulator as the seed and over sized granules are crushed through the double roller type crusher and recycled back to the granulator together with the under sized granules as the seeds. Exhaust air from the granulator and cooler is scrubbed in the wet type dust scrubber to recover the urea dusts in the exhaust air. Recovered urea dusts through the dust scrubber are recycled back to the urea plant for the recovery.

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Figure 3-12: Process Flow Diagrams

Source: Prepared by the survey mission � Raw Materials, Catalyst & Chemicals Consumption The Raw materials and Catalyst & Chemicals Specification and expected Consumption are

summarized below.

(1) Liquid Ammonia Consumption Rate Max. 41,270 Kg/h as 100% Ammonia

(2) Carbon Dioxide Consumption Rate Max. 53,670 kg/h as 100% CO2

(3) Catalyst Dehydrogenation Catalyst for CO2 gas is provided for removal of hydrogen in the carbon dioxide. The catalyst volume and expected life is as follows:

Quantity for evaluation : Approx. 1.1 m3

Life : More than 5 years (Expected)

(4) Chemicals

Urea plant will use following chemicals as follows:

1) Methanol

Quality : Grade A or similar

Max. quantity for evaluation : Approx. 7 kg/t-product

2) Caustic Soda

Quality : Industry Grade

Max. quantity for evaluation : Approx. 0.02 kg/t-product

Fig.-13: Process Flow Diagram

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3) Sulfuric Acid Composition:

H2SO4 98 %wt

H2O 2 %wt Max. quantity for evaluation : Approx. 3 kg/t-product

� Anticipated Emission and Effluents

The typical expected quantities and composition of continuous gaseous emissions from the Urea Plant is as follows.

Table 3-12: Exhaust air from Dust Scrubber

Flow Rate Approx. 600,000 Nm3/h

Water Saturated

Temperature 40°C *1)

Pressure Atm.

Composition Urea dust less than 30 mg/Nm3

NH3 less than 30 mg/Nm3


Notes: *1) Temperature of this stream varies depending on the ambient condition.

� Utility and Offsite Facilities Utility and Offsite Facilities are designed to supply enough utilities for continuous and stable operation of the Fertilizer Complex. The design philosophy and capacity are described in this Section. � Utility Facilities Description a. Natural Gas Receiving and Fuel Gas Facility

The Natural Gas is supplied to the Fertilizer Complex through the pipeline.

The received Natural Gas is delivered to Natural Gas Metering System which consists of metering skid and flow computer cabinet.

The metering skid consists of three streams of retractable assemblies and transmitters including upstream filters and isolation valves. Pneumatic operated valves with buffer tanks are applied to reduce the maintenance of the related equipments such as gas filter and dryer. These three streams will be skid mounted.

One flow computer cabinet is installed in the inter connection room. Inside this cabinet, one flow computer is installed. The measured flow rate is compensated by temperature and pressure in flow computer. Total amount of the receiving flow rate can be monitored and will be recorded at flow computer. One report printer will also be installed in the flow computer cabinet.

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b. Sea Water Intake Facility

In this Fertilizer Complex, sea water is used as a thermal exchange medium and feed water to Desalination System. Sea water is distributed for sea water cooling system, feed for on-site chlorination, and feed for desalination system with sea water pumps. For such purposes, a system to draw sea water to the plant which is called Sea Water Intake (SWI) Facility is provided.

The type of SWI Facility is a submersible Intake Head structure which is placed on seabed at EL – 5 meters from mean sea level, connected by a buried sub-marine pipeline to the Sea Water Intake Basin laid on a sea shore.

The intake head is equipped with sufficient screen, designed to prevent any solids and debris from entering into the subsequent sea water cooling system.

Sea water flowing from intake head into the Sea Water Intake Basin will be activated by siphon effect, in which a Vacuum Pump installed in the Sea Water Intake Basin will withdraw air pocket inside the protrude intake line over the sea water level.

Traveling Screens are installed in Sea Water Intake Basin to remove and catch the entrained and un-trapped floating debris, sea organism and lives. For maintenance of Sea Water Intake Basin, Stop Logs are installed at the upstream and downstream of the Traveling Screen. The function of Stop Logs is stopping the flow of sea water into the Traveling Screen during the maintenance time. Screen Wash Pumps are provided to clean the clogged screen panels. The pumps are designed to have sufficient pressure to sweep out all debris or trashed that stick-in the screen panels.

To prevent and inhibit the growth of micro organism in the sea water cooling system a series of chlorination is applied by injecting chlorine solution (sodium hypochlorite) in both sea water intake head and sea water intake basin

The design capacity of Sea Water Intake Facility is 2,700 m3/h.

c. Cooling Water Facility

Cooling water is provided as a cooling medium to process plants and Utility Facilities. Cooling water system consists of two system; Sea Water Cooling Circulation and Sweet Water Cooling Circulation.

Sea water from Sea Water Intake Basis is supplied to Cooling Tower Basin as a make-up cooling water. The total flow of sea water is continuously re-circulated by Sea Water Circulation Pump. From Cooing Tower Basin, sea cooling water is circulated to a number of turbine’s surface condensers in the Ammonia, Urea Plants and Utility Facilities and to the number of Marine Plate Heat Exchanger (MPHE) for cooling the closed Sea Water Cooling Circulation.

A chemical Injection facility that comprises some chemical injection system is provided. The chemical injection facility shall at least to cover continuous injection of sulfuric acid, biocide, dispersant, and shock dosing of bromine.

Side Filter for sea water is installed at discharge of Sea Water Circulation Pump to maintain cleanliness of sea water. In order to maintain the accumulated water pollutant of Sea Water Cooling Circulation System in acceptable concentration, blow down of sea water is transferred continuously to sea water outfall.

27

Sweet Water Cooling Circulation System is a closed system, circulated by Sweet Water Circulation Pumps. Sweet Water Cooling Circulation System consists of Fresh water Circulation and Essential Fresh Cooling Water Circulation. Fresh Water Circulation and Essential Fresh Cooling Water Circulation are in service. In case of power failure, Emergency Sweet Water Pump is backed up with Emergency Power to keep cooling water supply to lube-oil coolers of the critical rotating equipment in Essential Fresh Cooling Water Circulation.

Sweet water warmed up in the users around 45ºC is collected through return header. It is then cooled down to 35ºC by exchanging heat with sea water in MPHEs. After passing MPHE, sweet water will be re-circulated back to the users for cooling, whereas sea water will be returned to Sea Water Cooling Tower.

Side Filter for Sweet Water is installed at the discharge of Sweet Cooling Water Circulation Pumps to maintain cleanliness of sweet water. Chemical Injection System which consists of anti-bacterial and nitrite injections is provided,

One of the main equipment on cooling water system is Sea Water Cooling Tower. The type of tower is induced draft cooling tower with multi cells. The system shall consist of Cooling Tower Basin, circulating water pumps, side filters, make-up, blow down, pit, and chemical treatment. Induced Draft Fans located at the upper section of cooling tower will withdraw the air, passes through the heat transfer fill to exit tat high level via fan stacks at the top of the cells.

Returned warm sea water form MPHE is delivered in the water distribution system at the upper compartment of the cooling tower cells, where it is sprayed over the heat transfer fill surfaces. Water cools as it travels downwards over the surfaces of the heat transfer fill. Cooled water falling from the underside of the fill is collected in a cold water collection basin located at the base of tower. Concrete channel is provided to allow the collected cold water flowing into Sea Water Circulation Pumps.

d. Desalination Facilities

The source of feed water to Desalination System is sea water from SWI. Reverse Osmosis (RO) type is used for Desalination System. The RO Desalination System includes everything required to produce desalinated water from sea water. It consists of Pretreatment System and two main Sea Water Desalination Reverse Osmosis System, namely Sea Water Reverse Osmosis (SWRO) and Brackish Water Reverse Osmosis (BWRO).

Feed water of pretreatment system is pumped from Seawater Intake Basin by Sea Water Pumps. The Pretreatment System consists of Sea Water Micro-Filtration Automatic System, Filtered Water Tank, Ultra-Filtration System with guard filter, Ultra-Filtration Backwash Pump and others required for the system.

The filtered sea water is then boosted to SWRO and partly delivered to Energy Recovery Pressure Exchanger devices for reducing energy consumption. Energy Recovery Pressure Exchanger devices utilize the high pressure of rejected stream form the SWRO or brine stream. The Energy Recovery Pressure Exchanger devices transfer pressure energy in the brine reject stream to the feed stream. Then, the PX Exchanger Circulation Pump which is provided in conjunction with Energy Recovery Pressure Exchanger devices boosts the feed stream to combine with main of SWRO inlet feed, reducing the electrical power required during normal operation.

28

The SWRO product stream is transferred to SWRO Product Tank. From this tank, the SWRO product is pressurized with BWRO Booster Pump and transferred to BWRO. Raw potable water is also delivered from SWRO Product Tank by SWRO Transfer Pumps for potable water. The BWRO product stream is transferred to BRRO Product Tank whereas the rejected stream shall be recovered and altogether with filtered water utilized as SWRO feed water. From the BWRO Product Tank, the desalinated water delivered to Desalinated Water Tank by Desalinated Water Pumps.

e. Portable and Service Water Facility

The source of potable water and service water is SWRO product from Desalination System. Raw Potable Water is also delivered from SWRO Product Tank by SWRO Transfer Pumps. Hypochlorous acid is injected to potable water for sterilization.

f. Water Polishing Facility

The Water Polishing System treats return process condensate, return steam condensate from Ammonia and Urea Plants and desalinated water by ion exchange. The feed to Polishing Facility is transferred to Mixed Bed Polisher (MBP). MBP is filled with cation exchange resin and anion exchange resin to exchange cation and anion ion respectively.

Water outlet is then transferred to Polished Water Storage Tank. Then polished water will be processed to produce BFW for steam generation feed.

g. Fire Water Facility

The source of fire water is SWRO Product Tank from Desalination System. Jockey pump is consistently pressurizing fire water network. When fire happens, one of two Fire Fighting Pumps supplies fire water to the net work. Fire Fighting Pumps are 1 Diesel Engine driven and 1 Motor driven.

h. Steam Generation Facility

Package Boiler and Heat Recovery Steam Generation (HRSG) are provided to supply MP steam. HRSG recovers heat energy of GTG effluent gas.

i. Nitrogen Generation Facility

The air cryogenic separation type of nitrogen gas generator is provided for Nitrogen Generation Facility. Liquid nitrogen is stored in Liquid Nitrogen Reservoir. In normal operation, gaseous nitrogen is distributed to the users in Fertilizer Complex. In emergency case, liquid nitrogen in Liquid Nitrogen Reservoir is vaporized by Nitrogen Vaporizer and distributed.

j. Power Generation Facility

Two Gas Turbine Generators (GTG) are provided for electric generation. In normal operation, both GTG are operated at 50% load. In case of one GTG is failed, the other GTG is operated at 100% load to prevent plant shut down.

k. Emergency Power Generation Facility

Quick start diesel emergency power generator is provided to generate electricity at power failure. This power supply is to be used for all essential loads, such as certain pumps, lube oil pumps, motor operated valves, over head cranes, emergency lightning, receptacle/welding receptacle, elevator/lift, fire alarm and gas detection system, instruments, etc.

29

l. Instrument Air and Plant Air Facility

The normal main source of Instrument Air (IA) and Plant Air (PA) is the Process Air Compressor of Ammonia Plant. A diesel driven stand-by Air Compressor will be provided and automatically started to cover IA and PA requirements in case the Ammonia Plant Process Air Compressor shut-down and fail to supply the required IA and PA.

The Air Receiver is provided to create sufficient volume in the IA system in order to ensure uninterrupted supply of IA to the users in case of upset in the Air Compressor Systems. From the Air Receiver, the air is distributed for both IA and PA requirement. PSA is provided to dry the air to meet the requirement for IA.

m. Waste Water Treatment Facility

The effluent from Ammonia Plant, Urea Plant and Utility Facilities are pre-treated in each Plant and Facility and sent to Treated Water Pit.

The effluent is consist of

a) Effluent to the Treated Water Pit

In normal operation, following effluent will be directly sent to Treated Water Pit.

- Steam Trap Condensate from Ammonia Plant

- Process Air Condensate from Ammonia Plant

- WHB Blow Down from Ammonia Plant

- Others Waste Water from Ammonia Plant

- Brine from Desalination System

- Polisher Blow Down from Water Polishing System

- Cooling Tower Blow Down from Seawater Cooling Tower

The Treated Effluent will be released to the sea.

b) Oily Water Drain to CPI Separator

Oily Water will be collected in CPI separator to separate oil and water. The effluent will be sent to Treated Water Pit. Treated effluent will be released to the sea.

In normal operation, effluent from the WWT is 1,500 t/h.

� Offsite Facilities Description The Offsite Facilities Design is described in this Section. a. Ammonia Storage

Product ammonia is normally transferred to the Urea Plant to produce granular urea product and diverted to Ammonia Storage Tank located at Plant Site when the liquid ammonia is not received in the Urea Plant. The capacity of the Ammonia Storage Tank is 5,000 tons.

b. Urea Storage and Bagging System

Granular urea product is transferred by conveyers to Urea Bulk Storage House located at Plant Site and stored , and/or bagged in 50 Kg Bags. The Storage House and the Bagging/Packing Systems are designed as follows: Urea Bulk Storage House: Granular urea bulk storage for 10 Days Production with Conveyers and Re-claimer Bagging System: 50 Kg Bag x 750/Hr x 3 Trains (Consideration required)

30

c. Bagged Urea Storage and Ship Loading System

Bagged Urea is transferred by bet conveyor to Bagged Urea Storage House located at port side and once stored and loaded on ship. Bagged Urea Storage House: Storage for 30 Days Production with Conveyers Ship Loading System for 50 Kg Bag

d. Flare Stack System

Flare Stacks are provided at Ammonia Plant Site, Ammonia Storage Tank Area and Ammonia Loading Storage Tank Area.

(1) Main Flare Stack The Main Flare Stack treats the VA (Vent Gas with Ammonia), VG (Vent Gas with Natural Gas) and VH (Vent gas with Hydrogen) from Ammonia Plant, Utility Facilities.

(2) Ammonia Storage Flare Stack The Ammonia Storage Flare Stack treats the VA (Vent Gas with Ammonia) from Ammonia Storage Tank Area.

* Ammonia Loading Storage Flare Stack is NOT included. e. Fire Fighting Station

The Fire Fighting Station foreseen by legal requirements for fire fighting regulations is provided for fire monitoring and fire fighting of the Plant and consisting of 2 Fire Trucks, 1 Ambulance, Fire Monitoring System and Offices. Fire Water at Export Jetty area is NOT included.

f. Maintenance Shop

The Maintenance Shop is provided for the purpose of following works:

- Daily Maintenance

- Diagnosis of Equipment and Facilities

- Reconditioning of Equipment and Facilities

- Manufacturing of Small Parts And the Shop consists of Machining Workshop, Fabrication Workshop, Electrical Workshop and Instrument Work Shop.

g. Spare Parts Warehouse Spare Parts Warehouse is provided for store the operation and maintenance spare parts. 5 Fork Lifts and 2 Pick-up Trucks are provided by the contractors.

h. Catalyst and Chemicals Warehouse

Catalyst and Chemicals Warehouse is provided for store the catalyst and chemicals which should be stored in-house.

i. Administration Building

The Administration Building is provided for 200 persons including air conditioning, showers, locker rooms, rest rooms, space for Canteen, First Aids, Conference Rooms and Offices.

j. Fence and CCTV System

The Plant is fenced with Gates, Gates Houses and CCTV System for keeping the security of the Plant.

k. Telephone Communication System

The Telephone Communication System is provided for communicating between buildings, offices and Portside Storage Area

31

� Catalyst and Chemicals Consumption (Delete if it is not necessary, consideration required) Following Catalyst and Chemicals are consumed in Utility Facilities.

1 Sulfuric Acid

Composition:

H2SO4 98 %wt

H2O 2 %wt Expected Quantity: Approx. 1.4 t/day

2 Caustic Soda

Composition: NaOH 45 %wt

H2O 55 %wt

Expected Quantity: Approx. 0.8 m3/day

3 Biocide

Specification Vendor Standard

Consumption Approx 0.5 m3/day

4 Dispersant


Consumption Approx 0.2 m3/day

5 Bromine


Consumption 0.5 m3/day

6 Bisulfite


Consumption 0.1 t/day

7 Antiscalent


Consumption 0.2 t/day

8 Soda Ash Vendor Standard

0.2 t/day

9 Ion Exchange (Anion & Cation) Resin


Initial Charge Anion Resin 6 m3

Cation Resin 6 m3

Consumption 15% Vol. /Year

10 Desalination Membrane


Life 5 Years

32

11 PSA Absorbent


Initial Charge 500 Kg

Life 3 years

� Anticipated Emission and Effluents (Delete if it is not necessary, consideration required)

Following Gaseous Emission and Effluent from Utility Facilities are expected.

a. Flue gas from Gas Turbine Generator

Table 3-13: Flue gas from Gas Turbine Generator

Flow Rate 434000 Nm3/h

Composition

N2 75.29 %

O2 15.24 %

CO2 2.68 %

H2O 5.89 %

Ar 0.91 %

SOx 5 vol ppm

NOx 25 vol ppm (15% O2)


b. Flue gas from Package Boiler

Table 3-14: Flue gas from Package Boiler

Flow Rate 150,890 Nm3/h

Composition

N2 68.62 %

O2 1.65 %

CO2 8.50 %

H2O 21.23 %

SOx 5 vol ppm

NOx 85 vol ppm (3% O2)

CO 100 vol ppm

Dust 50 mg/Nm3


c. Waste Water from Fertilizer Complex

The waste water is treated and finally collected in the Treated Water Pit and released into Sea.

Table 3-15: Waste Water from Fertilizer Complex

Flow Rate 1,500 ton/h

Composition

NH3 0.2 ppm

TDS 54,000 mg/l

pH 6.0 – 8.5

%


33

3.3 Plan outline of the project

3.3.1 Basic conditions for determination of the contents of the project

The Mozambique government has been desiring a fertilizer project for 80 years, and we sees no basic obstacles to its implementation. Respecting the plan of Mozambique, understanding its needs and reviewing the contents of the project, we will make an investigation.

3.3.2 Conceptual design and specification of applicable facilities

Conceptual design and specification of applicable facilities are shown as below.

Figure 3-13:


3.3.3 Contents of the proposed project

(1) Construction site: Beira New Industrial Area is proposed as the site to the Mozambique government.

(2) Product and shipment: 1,725 MTPD of urea to Mozambique at home and its neighboring nations with demand, including Zambia, Zimbabwe and Malawi

(3) Raw material: 33 mmscfd of production increase in Pande/Temane gas fields

AMMONIA PLANT

1,000 MTPD Urea Product

STEAM

GENERATION

FACILITY

UREA PLANT

1,725 MTPD

Granular Urea

Liquid NH3

PROCESS PLANT & OFF-SITE

UREA STORAGE

&

BAGGING

FACILITY

Sea Water

Natural

Gas

SEA WATER &

CW FACILITY

IA/PA

FACILITY

IGG FACILITY

Polished Water

Polished Water

WATER

TREATMENT

FACILITY

Sea Water & CW

UTILITY FACILITY

CW Make-up Water

Instrument Air Plant Air N2 Gas

AMMO

NIA

STOR

WASTE WATER

TREATMENT

FACILITY

ELECT.

POWER

GENERATION

FACILITY

Return Condensate

Sea Water Make-up

Sea

Water intake

facility

Pande

Temane Gas

Field

34

(4) Process: Ammonia is based on KBR’s technology. Urea is based on Toyo Engineering’s ACES21.

(5) Utility facilities: The whole quantity of power is to be generated internally. Industrial water is to be obtained from sea water.

(6) Offsite facilities: Ammonia tank, urea tank, and 50 km bagging equipment.

(7) Plant cost: 1,000 Million USD

(8) Owner’s cost: 173 Million USD

(9) Total project cost: 1,173 Million USD

3.3.4 Issues for adopting the proposal and system and their solutions

In Mozambique, there is demand due to its agriculture promotion; Amount demanded is expected enough, including SADC. However, along with gas allotment and site selection, the issue of cost burden for pipeline construction needs to be discussed well with the Mozambique government for project implementation. Moreover, for review of the contents of the project to respect the plan of Mozambique and training in fertilizer, we would like to consider cooperation with JICA’s PROSAVANNA.

1

Chapter 4 Evaluation of Environmental and Social

Impacts

2

4.1 Current situation of environmental social aspects

4.1.1 Current situation of candidate construction site

� Natural environment

Candidate construction site is in the newly developed industrial area, but there is no

actual plant and facility. Then there is no natural environmental issue for the candidate

construction site.

The candidate site does not include any sensitive ecosystem area. Nevertheless, in

Mozambique, all river courses, streams and drainage lines must be considered

ecologically sensitive areas, and the adequate measures shall be taken as a precautious

measure.

� Social environment

There are mainly two dominate population groups in Sofala Province. One is the Ndau

and other is the Sena. Nada is from Beira to the South, and northwards into the Manica

Province, and is part of the Shona Tribe. Sena is from Beira to the North. But neither of

the Ndau nor Sena dominates in the Beira area where two groups coexist and interact

socially. Language spoken in Sofala Province is Cisena, followed by Cindau and

Portugues. Siao/Zione and Catholic are most practiced religions in the Sofala Province.

But half of the population is non-religious. In the rural areas, non-religious people

represent over 50% of the population compared to the urban areas where only 35.3% do

not practice any religion. In the urban areas, the most common religion is Catholic

(27.2%), followed by Protestant/Evangelic (13.7%). In the rural areas, the most

common religions are Siao/Zione, followed by Catholic.

The economy of Sofala Province is characterised by a subsistence sector, with

extremely low levels of productivity and dependent on climatic factors. The industrial

sector is weak, with poor internal economic integration and relations, a relatively large

component of services to neighbouring countries, notably in the use of migrant labour in

ports and railways. The main economic activities of the local inhabitants presently

located within the Beira Corridor are household/subsistence agriculture, charcoal

production, wood collection and selling, fishing, informal commerce and hunting.

Subsistence farming is the mainstay of about 600,000 families. Production of surplus is

low, linked with poor availability of infrastructure for delivery of produce. The most

3

important agricultural products for the farmers are maize, rice sunflower, sorghum and

cashew, which they both consume and sell. Peasant and commercial livestock

production is relatively important in Sofala. It includes cattle, pigs and other smaller

species.

Tourism is poorly developed in Sofala. Hotel capacity is currently about 1,700 beds in

various establishments of different grades. The poor state of repair of instructor and the

scarcity of properly trained staff are the main constraints faced by this sector. The

re-opening of the Gorongosa National Park and several game reserves, and the

rehabilitation of their accommodation facilities represent a major opportunity for

investors.

� Future prediction

In the implementation of Project, it expects to be constructed some of the public sector

such as roads, hospitals, schools, etc. And it also creates new job opportunity. It will

contribute to activate the candidate site area. If this project would not be realized, the

above contribution might become very small.

4.2 Environmental improvement effect of project implementation

Based on the site survey, we acknowledge that there are not any environmental issues in

and around the candidate site, neither environmental improving impact.

4.3 Environmental and social impact of project execution

Based on screening form of the JBIC guideline we considered that the planned project

will be category A of JBIC guideline. And according to the environmental check list we

are required to consider the results of “Environmental and Social Impact of Project

Execution” as Attachment.

Generally there is no big issue of environmental and social impacts of project execution,

but local regulations are basically milder than international standard.

Then the project execution will be required to consider international standard.

4

4.4 Outline of regulations related environmental and social

considerations in Mozambique

4-4-1 Environmental regulation in Mozambique

The related environmental regulation and degrees for each sector are summarized

below:

5

Table 4-1 : Overal law summary of each sector

Water Department of public works New Regulations on

the Parameters for air

quality and Effluent

Emissions (Decree

18/2004)

7

Source: Handbook on Environmental Assessment Legislation in the SADC region

8

4-4-2 Typical EIA process, stages and deadlines

Typical EIA (EIA Regulations 45/2004) process, stages and deadlines for Category A

Project are illustrated below:

Figure 1 : EIA process, stage and deadlines for category A projects

Source : Handbook on Environmental Assessment Legislation in the SADC region

4.5 Required actions of Mozambique side

During this pre-FS including preliminary site-survey, we confirmed there is no critical

issue to implement the project. However, Mozambique side is kindly conducted the

following required actions as below:

- to contact the authorized EIA consultants and select the proper consultant

- to evaluate this pre-FS report under the secrecy agreement basis between the selected

consultant and the Ministry of Mineral Resources

- to conduct the project registration

9

-to confirm the expected cost and time schedule for EIA application

- to deal with the local people’s resettlement, if occur.

10

Appendix - Results of “Environmental and Social Impacts of Project Execution”

1. Permits and Explanation

1.1 EIA and Environmental Permits

EIA report shall be prepared and permitted according to regulatory requirements of

Host Country.

� EIA Process in Host Country Role of Central Authority and Provincial

Directorate

Role of Central Authority and Provincial Directorate in EIA Process is as below.

Table 4-2 : Function of EIA process

Authority Provincial Directorate for the Coordination of the

Environmental Affairs.

a) Manage and coordinate the EIA process a) Manage and coordinate the EIA process in

compliance with the guidelines

b) Issue and release guidelines

c) Make the pre-assessment of each activity

submitted for its appreciation

b) Make the pre-assessment of the activities

submitted to them

d) Designate and chair the Technical Assessment

Commission for each activity of category A,

whenever deemed necessary

c) Designate and chair the Technical Assessment

Commission for each activity of category B,

whenever deemed necessary

e) Begin the proceedings and outline the review

of the EPDA reports, TOR and EIR, as well as

begin the proceedings of their approval, for the

activities of category A

d) Begin the proceedings and guide the review of

the specific TOR for the SERs of the activities of

category B, as well as their approval

f) Request the participation of experts from the

public sector or begin the proceedings of

engaging consultants from the private sector

whenever necessary for the EIA process

g) Conduct audiences and ensure that the public

participation be observed in terms of this

Regulation

e) Ensure the carrying out of the processes of

public consultation and conduct audiences, in

terms of this Regulation

f) Approve the simplified environmental reports

g) Coordinate with the Environmental Impact

Assessment Authority, all the diligences

necessary to the EIA, taking into consideration

the compliance with the provisions of this

Regulation

h) Notify the tenderer for the payment of the taxes

of environmental licensing in terms of this

Regulation

h) Notify the tenderer for the payment of the taxes

of environmental licensing in terms of this

Regulation

i) Notify the tenderer and the public entities,

directly concerned, of the granting of the

environmental license

i) Notify the tenderer and the public entities,

directly concerned, of the granting of the

environmental license

j) Ensure that the information concerning the

environmental licensing be available to the public

k) Issue environmental licenses j) Issue environmental licenses for the activities

of category B

l) Conduct, in coordination with the bodies of

tutelage of the activities, the post-assessment

k) Conduct the post-assessment process

consisting of the analysis of the monitoring

11

Authority Provincial Directorate for the Coordination of the

Environmental Affairs.

process comprising the analysis of the monitoring

reports and the conducting of environmental

audits, promoting the inspection, the control and

the surveillance of the licensed activities

reports and the conducting of audits, inherently or

by delegation of competencies, promoting the

inspection, the control and surveillance of the

licensed activities.

m) Record, keep and release the registration of

the professionals and consultancy companies

qualified for the elaboration of environmental

impact reports

n) Set in motion the legal mechanisms to, in

coordination with the institutions of tutelage, lay

an embargo on or ordain the demolition of works

or cancel the exercise of activities, including

those of environmental consultancy, which by

their nature make an attempt on the

environment’s quality.


� EIA Procedure Framework

As a first step, a proponent must consult with the competent authority to determine

which category our project falls into.

Table 4-3 : EIA category

Category Definition

A Those project which may have a significant impact on the

environment and therefore requires an EIA

B

Those project which do not significantly affect communities or

environmentally sensitive area. Therefore only Simplified

Environmental Report(SER) is required

C

Those project which has a minimal effect on the environment.

Therefore these project do not require either and EIA or SER


The process to be followed is slightly different depend whether the project is Category

A, B or C. as described below;

12

Table 4 – 4 : EIA process of each category


Referring to the article 8 “ Assessment criteria” of the Regulations on the procedure for

the Environmental Impact Assessment as described below, this project is supposed to

fall into category A.

� Procedure of Category A

The EIA procedure of category A is described below;

13

Figure 4 -2 : EIA process flow of category A


The action to be taken by proponent is following;

Application

All proponents (irrespective of which category of project they may be proposing) must

submit the following information to either the central EIA Authority or the respective

DPCA

•Description of the activity

•Need and desirability of the project

•Legal framework for the activity

•Brief description of the biophysical and socio-economic structure of the region

•Current land use on the proposed site

•Environmental information from the site

•Description of each stage of the EIA process (e.g. submission of TOR, EPDA, EIA,

SER, etc.)

•Completion of the preliminary environmental information sheet

(Appendix IV of the regulations and attached as Appendix 10-4 of this chapter).

14

Terms of Reference

The Terms of Reference (TOR) set out the process to be followed in the EIA and should

contain at least:

•Description of the speciatable studies

•Description of reasonable alternatives which will be investigated in the EIA

•Methodology to be used to identify impacts during each stage in the project

life-cycle

•Description of the proposed public participation process

•Name and address of the proponent

•Names of the EIA team

•Any other additional information as necessary

The TOR must be submitted to the EIA Authority for approval prior to commencing

with the EIA.

1.2 Explanation to the Public

First explanation to the public in Mozambique will be held after the application of the

proponent and screening of the authority. During the EIA study stage, public consultant

will be held at least three (3) times.

During the EIA study stage, public consultant will be held at least three (3) times.

2 Mitigation Measures

2.1 Air Quality

� Air Quality Standard of Mozambique

The below table is the air quality standard of Mozambique and refereed by International

Standard.

Generally, Standard of Mozambique is much looser than that of International standard.

Current air quality is seemed to be fine according to site visit. But we have to detail

examination of back ground conditions of candidate site and design the plant

considering International standard.

15

Table 4-5 : Air Quality Standard of Mozambique

Unit: µg/m3

Pollutant Ave Period Value IFC(WHO) Remarks

SO2 10 minute 500

1 h 800

24 h 365 20 (Interim

125, 50)

1 y 80

NO2 1 h 400 200

24 h 200

1 y 100 40

CO 1 h 40,000

8 h 10,000

Ozone 1 h 160

24 h 50 (8h daily)100

1 y 70

TSP 24 h 200 PM10: 50

Lead 1 h 3

1 y 0.5 – 1.5

TSP: Total suspended particles


� Adequate measure to be taken

The below table is the air emission standard of Mozambique

16

Table 4-6 : Emission standard in Mozambique.

Source: Handbook of Environment Assessment Legislation in the SADC Region

Based on our many experiences, the following measures will be taken:

- Using vehicles that have passed emission testing.

- Spraying water on construction site.

- Creation of greenbelt.

17

- (Ammonia plant) Low- NOx burners to be used meet the required emission

standards.

- (Urea plant) Exhaust air containing urea dust and ammonia dust to be treated in the

dust scrubbing system to meet the required standards

- Regular monitoring of air quality to be carried out.

2.2 Water Quality

� (a) Water Effluents from the Project

Standard of Water Effluent

The below table is standards of effluents of domestic liquid effluents of Mozambique.

Table 4-7 : Domestic Effluent Standard of Mozambique


And the below table is Standards of the Receiving Medium (Sea / Ocean).

18

Table 4 – 8 : Standards of the Receiving Medium (Sea/Ocean)


19

Table 4-9 : Standard for human health of water in Japan

Source: Environmental, Health, and Safety Guideline for Nitrogenous Fertilizer

Production / World Bank Group)

20

Standard for conservation of the living environment of coastal water in Japan

Table 4–10 Environmental standard of coastal water in Japan①

A Item

Hydrogen-ion Chemical oxygen Dissolved N-hexane

class concentration (pH) demand (COD) oxygen (DO) Extract (oil, etc.)

AFishery class 1, bathing, conservation of the

natural environment, and uses listed in B-C7.8 ≤ pH ≤ 8.3 ≤ 2 mg/L ≥ 7.5 mg/L ≤ 1,000 MPN/100 mL Not detectable

BFishery class 2, industrial water and the uses

listed in C7.8 ≤ pH ≤ 8.3 ≤ 3 mg/L ≥ 5 mg/L - Not detectable

C Conservation of the environment 7.0 ≤ pH ≤ 8.3 ≤ 8 mg/L ≥ 2 mg/L -

Remark Total coliform should be 70MPN/100ml or less for the fishery class 1 to cultivate oyster to be eaten raw.

Notes: 1. Conservation of the natural environment: Conservation of sightseeing and other environments

2. Fishery class 1: For such marine products as red sea bream, yellowtail, and seaweed, and marine products for fishery class 2

Fishery class 2: Such marine products as mullet and dried seaweed

3. Conservation of the environment: Limit of not disrupting the day-to-day lives of the population (including things likes walks along the beach)

Total coliformWater use

Standard value


Production / World Bank Group)

Table 4 – 1１ Environmental standard of coastal water in Japan②

B Item

class

IConservation of the natural environment and uses listed in

II - IV (except fishery classes 2 and 3)≤ 0.2 mg/L ≤ 0.02 mg/L

IIFishery class 1, bathing, and the uses listed in III - IV (except

fishery classes 2 and 3)≤ 0.3 mg/L ≤ 0.03 mg/L

IIIFishery class 2 and the uses listed in IV (except fishery

class 3)≤ 0.6 mg/L ≤ 0.05 mg/L

IVFishery class 3, industrial water, and conservation of

habitable environments for marine biota≤ 1 mg/L ≤ 0.09 mg/L

Water useStandard value

Total nitrogen Total phosphorus

Remarks: 1. Standard values are set in terms of annual averages.

2.

Notes: Conservation of the natural environment: Conservation of

sightseeing and other environments

Fishery class 1: A large variety of fish, including benthic

fish and shellfish, are taken in good balance and stably

Fishery class 2: Marine products (mainly fish) are taken

with the exception of some benthic fish and shellfish

Fishery class 3: Specific types of marine products highly

resistant to pollution mainly taken

Conservation of habitable environments for marine biota:

Level where bottom-dwelling organisms can habitat year-

round

1.

2.

3.

Standard values are applicable only to marine areas where

marine phytoplankton blooms may occur.


Production / World Bank Group

21

Table 4 – 12 Environmental standard of coastal water in Japan③

C Item

class

Class A

organismsWater areas inhabited by aquatic life

Special

class A

organisms

Of the water areas inhabited by Class A organisms, those should be

conserved as spawning/rearing areas of aquatic life

Adaptability of the habitat status of aquatic lifeStandard value

Total zinc

≤ 0.02 mg/L

≤ 0.01 mg/L



22

� Adequate Measures

Analyzing the effluent of this plant, the below measures for reducing impacts from

effluents will be planned.

� Proper treatment facility / system (process condensate treatment unit) to minimize

fugitive emission

� Gases to be recycled to optimize raw •material utilization and reduce effluents

� Effluent treatment level to meet the international standards

� Pollutants from ships to be restricted accordingly

� Installation of waste water treatment facility

� Regular water quality monitoring at the discharge point

� Adopting good dredging practices to be applied

2.3 Wastes

� Hazardous wastes

Based on the Municipality Law No 2/97, each municipality has the local regulation

regarding the waste. The local regulation adopted will be responded.

The following measures concerning hazardous wastes will be planned.

� Waste management plan

� Dedicated facility / to be stored and use third party for proper treatment

� Nitrogen-containing dust particulates to be recycled to in the plant

� Adequate measures for preventing contamination of soil and groundwater

“Waste management plan” will be established. This plan will include adequate

measures to prevent contamination of soil and groundwater by leach from the waste

storage/disposal sites.

2.4 Soil Contamination

� Contaminated in the past

Project site had been newly developed, and it is not anticipated that the soil of the

project site been contaminated in the past.

(b) Adequate measures to prevent soil contamination by leaked materials will be taken,

such as raw materials and chemical agents. Details will be decided and documented

during the EIA process.

2.5 Noise and Vibration

� Noise and vibrations standard

In this stage we could not find out “Noise and vibrations standards of Mozambique”.

In case of no regulations, the plan has to be designed considering the below

international standards.

23

Table 4 -13 Noise Level Guidelines of IFC



The following measures for reducing Noise and Vibration impacts will be planned.

� Using well managed machines mufflers

� Implementation of proper traffic management

� Operational noise regime to be consistent with international standard

And there is no residential area to be impacted around candidate project site according

to site visit.

� Possibility of noise generated by large vehicle traffic

In this stage transportation method of materials, such as raw materials and products is

not decided. The method considering impact of them will be decided.

2.6 Subsidence

Only sea water will be used and no groundwater will be used as moment. So there will

be no possibility of causing subsidence due to extraction of groundwater.

2.7 Odour

Planned plant will handle odour sources such as ammonia.

The following measures for eliminating odour will be taken.

� (Ammonia plant) All hazardous gasses to be sent to flare stack through a common

header

� (Fertilizer plant) Ammonia to be treated to meet the international standards before

discharged into the atmosphere

� Discharge point to be decided based on the international odour standards

24

3. Natural Environment

3.1 Protected Areas

There is no protected area around candidate site. Gorongoza National Park is about

100km north and Chinizula Forest is about 75km north east.

3.2 Ecosystem and biota

We suppose that the planned site does not include sensitive ecosystem area.

Nevertheless, In Mozambique, all river courses, streams and drainage lines must be

considered ecologically sensitive areas, and the following measures will be taken for a

precautious measure.

� Ecological baseline study should be carried out to specify protected/endangered

species and area

� Adequate engineering design monitoring, feedback system to limit disruption to

ecological process

� Proper waste management plan

3.3 Flora and Fauna

� Vegetation

There are different vegetation types including dune forest, woodland, grassland and

mangroves in and around candidate site of a coastal mosaic. The natural pattern of

vegetation is markedly influenced by urbanisation.

The vegetation of the area crossed by the Beira Corridor comprises a stepped sequence

of dry and moist formations related to the physiography and climate of the area.

Beira northward to Malawi and Moatize the major vegetation types are fringing

Mangroves around the coast and estuaries as well as species of Hyphaena, Phoenix or

Borassus along the sand coast separated from the lower Gorongosa.

� Fauna

There is no protected Fauna in and around candidate site.

3.4 Social Environment

Present situation of around site is following.

There are mainly two dominate population groups in Sofala Province. One is the Ndau

and other is the Sena. Nada is from Beira to the South, and northwards into the

Manica Province, and is part of the Shona Tribe. Sena is from Beira to the North. But

neither of the Ndau nor Sena dominates in the Beira area where two groups coexist and

interact socially.

25

Language spoken in Sofala Province is Cisena, followed by Cindau and Portuguese.

Accordingly we have to investigate whether local public can understand EIA written by

Portuguese

Siao/Zione and Catholic are most practiced religions in the Sofala Province. But half of

the population is non-religious. In the rural areas, non-religious people represent over

50% of the population compared to the urban areas where only 35.3% do not practice

any religion. In the urban areas, the most common religion is Catholic (27.2%),

followed by Protestant/Evangelic (13.7%). In the rural areas, the most common

religions are Siao/Zione, followed by Catholic.

The economy of Sofala Province is characterised by a subsistence sector, with

extremely low levels of productivity and dependent on climatic factors. The industrial

sector is weak, with poor internal economic integration and relations, a relatively large

component of services to neighbouring countries, notably in the use of migrant labour in

ports and railways. The main economic activities of the local inhabitants presently

located within the Beira Corridor are: household/subsistence agriculture, charcoal

production, wood collection and selling, fishing, informal commerce and hunting.

Subsistence farming is the mainstay of about 600,000 families. Production of surplus is

low, linked with poor availability of infrastructure for delivery of produce. The most

important agricultural products for the farmers are maize, rice sunflower, sorghum and

cashew, which they both consume and sell. Peasant and commercial livestock

production is relatively important in Sofala. It includes cattle, pigs and other smaller

species. Tourism is poorly developed in Sofala. Hotel capacity is currently about 1,700

beds in various establishments of different grades. The poor state of repair of instructor

and the scarcity of properly trained staff are the main constraints faced by this sector.

The reopening of the Gorongosa National Park and several Game reserves, and the

rehabilitation of their accommodation facilities, represent a major opportunity for

investors.

We will choose the site which has less impact to the local people, and carefully

attention the conditions of site and take necessary following measures adequately.

� Livelihood support programs for the vulnerable groups should be considered

� Provision of infectious disease (HIV/AIDs) prevention programs to the local

community/ construction workers

� A good coordination with project authorities and local community and their

26

leaders etc

� Explanation to the local people in the public consultant during the EIA study.

4.1 Resettlement

In this stage, there is no residential area within and around the candidate site, and will

be no possibility of involuntary resettlement.

4.2 Living and Livelihood

In this stage, there seems to be no people directly impacted, around the candidate site.

But we will have explanation to the public and execute social survey on such activities

to be carried out and if negative impacts are specified, proper compensation to be

provided to their losses. We plan to execute the followings for improving living and

livelihood.

� To give job priorities to the local community

� Provision of job training and other necessary assistances

� Continues consultation with the local community

4.3 Heritage

There is no designated area within and around the candidate project site.

4.4 Landscape

The candidate project site is in developed as industrial area and there will be no impact

to landscape by the Project.

4.5 Working conditions

Health and Safety program will be prepared / implemented by the project proponent.

We will support them.

5. Others

5.1 Impacts during Construction

Not applying only to construction stage, we plan to take necessary measures described

above.

5.2 Accident Prevention Measures

We plan to take improved enforcement on maritime security and safety measures

5.3 Monitoring

There are no any regulations regarding the monitoring system in Mozambique.

However, if necessary, we will deal with the possibility of impacts with taking measure

27

of monitoring.

1

Chapter 5 Financial and Economic Feasibility

2

5.1 Project cost estimation

As described in Chapter 9, the Project Owner is a Special Purpose Entity (SPE) that is owned by the

Government of Mozambique. The SPE purchases gas, the key input supply produced at the

Pande/Temane gas field. Urea is manufactured and sold by this SPE. The plant plans to produce

1,725 tons of urea per day, about 570,000 tons per year (330 days of operation are assumed). All of

the total production will be sold in the local and Southern African Development Community (SADC)

market. The project period is expected to be 20 years, with a few years prior for construction. Based

on these scenarios, project feasibility is reviewed in this chapter.

Export

Natural Gas

33MMSCFD

Ammonia

1,000MTPD

Urea

1,725 MTPD

Domestic

Results of cost estimate for Fertilizer Plant at Beira, Mozambique are summarized as bellow.

5.1.1 Accuracy

The CAPEX estimation is class 4 in AACE classification which is based on our

in-house data. Accuracy of estimate is ±30%.

The OPEX estimation is based on our in-house data.

5.1.2 Methodology

The cost estimates have been prepared by equipment factored methodology in general, with the assistance of the following databases and methodologies.

Design cost, Equipment and Material cost including transportation, Construction cost

In-house cost database

In-house cost database for location factors

Slide from the recent estimate for the same type of project

Construction cost is reflected in the upper coefficient of the estimated acquisition from

China Chemical Engineering Second Construction Corporation (China), Daewoo (South

Korea), CMC (Italy) and KENTZ LDA (Ireland).

Taxes & Duties

Taxes & duties such as custom duty, corporate tax, withholding tax, personal income tax, and

VAT/Sales tax are not included in the estimate.

3

Contingency & Mark up

Contingency and Mark ups related to EPC contract are not considered.

License Condition

Toyo Engineering Corporation will provide its KBR license for Ammonia production and license for

urea technology.

5.1.3 Plant cost estimation

The plant cost is shown as below.

Table5-1 Plant cost estimation

EPC cost

- Ammonia/Urea plant

- Utility/Offsite facility

- Total

505 MMUSD

495 MMUSD

1,000 MMUSD

Owner’s cost

- Operation start-up cost

- IDC

- Contingency costs, etc.

- Total

67 MMUSD

51 MMUSD

55 MMUSD

173 MMUSD

The above EPC cost includes:

- Cost for civil engineering and construction as covered in the basis for preparing the report

- Execution cost

- Basic design

- Detailed design

- Equipment and materials

- Packaging and transportation of products

- Major spare parts

- Catalyst, chemical products and lubricant for initial filling

- Labor force and assistance for construction

- Construction supervision and vendor supervisor

- Temporary construction facilities

- Electricity, gas and water service for construction

4

However, excluding the following:

- Spare parts required for operation

- Experimental equipment and devices

- Maintenance equipment and tools

- Local taxes and customs necessary for execution of EPC

- Bond cost

In addition, the following owner’s costs are not included:

- Land cost

- Land survey and soil survey

- Land improvement

- EIA and engineering & construction permission by government

- PMC, consultants and third party inspection

- Workers' training and training simulator

- Owner's residence fee in the sales office of EPC contractor

- Project financing cost

- Owner's staff (including workers) and related expenses

- Owner's site office and equipment

- PR activities and site compensation

- Electricity, gas and water service required for pre-commissioning/commissioning

5.2 Financial and Economic Evaluation

The assumptions for the financial and economic evaluations are summarized as follows:

• Revenues are calculated based on the urea revenue at the international market price as of

December, 2011, and inflation is added to these prices only during the construction period.

• The volume of urea to be produced is based on a calculation of 330 days of operation per year,

with urea production at 1,725 tons per day. The total production of urea is 569,250 tons per year.

• Interest rate: base rate 4%, plus a CIRR (Commercial Interest Reference Rate) of 4.26%

• Cash flows are discounted over a 20-year period.

• Depreciation is calculated based on the straight-line basis at around 10 % per year.

• The gas input unit price is assumed as US$ 3.16 per MMBTU.

• Income tax will be exempted for 5 years; however, after that the income tax becomes applicable

with 32% per year. Import duty and VAT are assumed to be exempted throughout the project

period.

• The project site will be part of the government property, and therefore, a lease agreement shall be

concluded. According to Beira state officials with jurisdiction over industrial complexes,

5

one-time MZN 10 per 1 m2 is required for land use. The amount for 20 ha of land is included in

the calculation.

• The debt repayment period is assumed to be 8.5 years.

5.2.1 Capital Investment Cost

It is estimated that the total capital expenditure is around US$ 1 billion. As indicated in the table

below, the total capital expenditure is made up of the two plants, namely ammonia and urea plants.

Apart from these two plant costs, a large proportion of the capital expenditure goes to Utility

Facilities. They include ammonia storage (5,000 tons) and urea storage facilities, warehouses, and

various utility related facilities in the Site.

Table5-2 Capital Investment Cost

EPC cost

- Ammonia/Urea plant

- Utility/Offsite facility

- Total

505 MMUSD

495 MMUSD

1,000 MMUSD

Source: Made By Study team

5.2.2 Non - EPC Cost

On top of these capital expenditures, including plant costs and EPC contract values, the non-EPC

costs should be added to the capital expenditure.

Table 5-3 Non-EPC costs list

Operation start-up cost USD 67 MMUSD

Interest during the construction USD 51 MMUSD

Others USD 55 MMUSD

USD 173 MMUSD


6

Adding the total capital expenditure of US$ 1 billion and the non-EPC cost of US$ 173 million, the

total investment cost is approximately US$ 1.173 billion. Out of this figure, the plant costs and EPC

contract values account for approximately 85 % of the total investment costs.

Table 5-4 Total Investment Costs

Capital expenditure USD 1,000 MMUSD

Non-EPC costs USD 173 MMUSD


5.2.3 Revenue Sources

The plant capacities for urea are 1,725 tons per day. Therefore, assuming 330 days of operation per

year, the total sales volume of urea is estimated to be 569,250 tons per year.

The price of urea is based on the DDP price in Mozambique. The current FOB Middle East price for

urea is US$ 385 and the ocean transport cost is US$ 20. Considering import duty and freight

insurance (2.5% of the above amount), the urea price is assumed to be US$ 415.

7

5.2.4 FIRR

The financial internal rate of return (FIRR) was computed with the DCF method in order to evaluate

the profitability of a project. The result is shown as follows.

Table 5-5 The financial internal rate of return (FIRR)

Before tax After tax

IRR on INVEST 15.3％ 13.8％

IRR on EQUITY 25.3％ 22.6％

INCOME STATEMENTS (Profit and Loss Statements)

Unit :M

US$

YEAR 2,016 2,020 2,023 2,030 2,035

OPERATING INCOME 301,247 301,247 301,247 301,247 301,247

TOTAL SALES REVENUE 301,247 301,247 301,247 301,247 301,247

COST OF SALES 200,554 200,763 200,938 105,310 105,725

VALIABLE COST 36,912 36,912 36,912 36,912 36,912

DIRECT FIXED COST 62,786 62,995 63,170 63,650 64,065

DEPRECIATION AND

AMORTIZATION 100,856 100,856 100,856 4,748 4,748

INCREASE PROD

INVENTORY(MINUS) 0 0 0 0 0

GROSS PROFIT ON SALES 100,693 100,484 100,309 195,937 195,522

SALES EXPENSES (PRODUCT) 0 0 0 0 0

GENERAL AND ADMIN. EXPENSES 0 0 0 0 0

SALES (VALUABLE ADDED) TAX 51,212 51,212 51,212 51,212 51,212

OPERATING PROFIT 49,481 49,272 49,097 144,725 144,310

8

NON-OPERATING EXPENSES 60,184 32,161 11,144 -3,291 -3,291

INTEREST ON LONG TERM DEBT 60,184 32,161 11,144 -3,291 -3,291

INTEREST ON SHORT TERM DEBT 0 0 0 0 0

NET PROFIT OR (LOSS) BEFORE TAX -10,703 17,111 37,954 148,016 147,601

INCOME TAX 0 0 12,145 47,365 47,232

NET PROFIT OR (LOSS) AFTER TAX -10,703 17,111 25,808 100,651 100,369

DIVIDENDS 0 0 0 0 0

RETAINED EARNINGS -10,703 17,111 25,808 100,651 100,369

9

5.2.5 Sensitivity Analysis

A sensitivity analysis evaluates the effects of variations in the key variables on the base model. In

this project, three key variables are chosen to check the sensitivities to the financial effects and to

analyze the effects of commercial and financial risks of the project. Three scenarios are considered

in the analysis:

1. Effects of the production capacity reduction (based on the urea demand) while the other

variable remain constant

2. Effects of urea price while the other variable remain constant

3. Effects of capital expenditure/cost overrun while the other variable remain constant.

The result is shown below. As you can see, the urea price will affect most the project profitability

Figure 5-1 Sensitivity Analysis


10

5.3 Economical Analysis

5.3.1 Creation of employment opportunities

A business corporation operating a urea plant will employ 300 workers. 20% of the salary to be paid

in Mozambique will be deducted as tax. Average wage per month of workers in this country is in the

range of MZN 4,000 to 5,000. Thus, annual economic effect is calculated as MZN 4,500 x 0.2 x 300

x 12/27 = USD 120,000.

5.3.2 Increase in agricultural production due to supply of urea

The No.1 agricultural product in Mozambique is cassava, whose production in 2009 was 567,370

tones, equivalent to USD 592,552,000. Assuming that the supply of urea will increase the production

by 10%, then, USD 592,552,000 x 0.1 = USD 59,255,200

5.3.3 Others

Technology transfer to Mozambique will have a tremendous economic effect.

5.3.4. EIRR

EIRR is estimated to be 25.33%, which has also a significant economic effect.

Table 5-6 EIRR INCOME STATEMENTS (Profit and Loss Statements)

Unit：

MUSD

YEAR 2016 2020 2023 2030 2035

OPERATING INCOME 426487 426487 426487 426487 426487

TOTAL SALES REVENUE 426487 426487 426487 426487 426487

COST OF SALES 200554 200763 200938 105310 105725

VALIABLE COST 36912 36912 36912 36912 36912

DIRECT FIXED COST 62786 62995 63170 63650 64065

DEPRECIATION AND

AMORTIZATION 100856 100856 100856 4748 4748

GROSS PROFIT ON SALES 225933 225724 225549 321177 320762

11

SALES EXPENSES (PRODUCT) 0 0 0 0 0

SALES (VALUABLE ADDED) TAX 72503 72503 72503 72503 72503

OPERATING PROFIT 153430 153222 153047 248674 248259

NON-OPERATING EXPENSES 60184 32161 11144 -3291 -3291

INTEREST ON LONG TERM DEBT 60184 32161 11144 -3291 -3291

INTEREST ON SHORT TERM DEBT 0 0 0 0 0

NET PROFIT OR (LOSS) BEFORE TAX 93246 121061 141903 251965 251550

INCOME TAX 0 0 45409 80629 80496

NET PROFIT OR (LOSS) AFTER TAX 93246 121061 96494 171337 171054

DIVIDENDS 0 0 0 0 0

RETAINED EARNINGS 93246 121061 96494 171337 171054


1

Chapter 6 Planned Project Schedule

2

6.1 Planned project schedule

The schedule discussed at site between the survey mission and the government of Mozambique is

shown below. Description is also provided below on the detail design, bidding and project execution.

Table 6-1 Planned project schedule

Source: Made By Study Team

Work DescriptionYear/

Months2011 2012 2013 2014 2015 2016

1 Feasibility Study (FS) 3

2

Basic and Front End

Engineering Design (FEED)

with EPC offer

7

3EPC Price Verification and

Final Investment Dicision2

4Environmental Social

Health Impact Assessment12

5 Finance Arrangement 6

6 EPC Execution 32

7Commercial Operation

(Operation & Maintenance)

11/18

6/1 12/31

1/31

5/1 4/30

8/1 3/31

4/1

2/23

2/1 7/31

EPC Contract

O&M Contract

Timing for increased

production of gas

3

6.2 EIA schedule

The schedule of Environmental assessment impact is shown as below.

Table 6-2 EIA shcedule

Action Period Remarks

After confirming the economic efficiency of project

Step 1

Entry of application

Since all the

documents

shall be

written in

Portuguese,

translation

work will

take about

one year.

Five business days

Can be handled by the

consultants registered in

Mozambique and foreign capital

business organizations.

Registration the

EIA with MICOA

MICOA Approval Five business days

Step 2

Preparation of scoping

document + TOR for EIS One to two months

(HSE, Pollution, Marine, Risk

assessment, Social & Economic)

About 80 pages. To notify the

local communities through the

internet, newspapers, radio and

the like.

* Public consultation

Notification of the

execution of PC (*)

To be executed

within two weeks

after notification.

To receive

comments within

two weeks after

execution.

Execution of PC

Receipt of comment on PC

Submission of document

together with comment to

MICOA

MICOA Approval 30 business days

Step 3

Preparation of EIS 45 business days

To notify the local communities

of the environmental impact

statement through the internet,

newspapers, radio and the like.

Submission of EIA report

Notification of the

execution of PC

To be executed

within two weeks

after notification.

To receive

comments within

two weeks after

execution.

Execution of PC

Receipt of comment on PC

Submission of document

together with comment to

MICOA

Source: Made By Study Team

1

Chapter 7 Implementing Organization

2

7.1 Executing agency / ministry of mineral resources

Ministry of Mineral Resources is the main implementing organization of the Project in Mozambique,

according to the Minister of Mineral Resources when this study team held the meeting with the

Minister of the Mineral resources July 2011. The study team made a presentation to the Minister

about the construction of fertilizer plant in Mozambique to utilize the outstanding domestic natural

gas. And this produced fertilizer can be supplied to the Mozambique domestic market in order to

drastically increase the agricultural production.

The Minister expressed the strong interest in this presentation to conduct the study of the possibility

of domestic fertilizer production for utilizing domestic natural gas. And the Minister confirmed that

Ministry of Mineral Resources is the responsible organization of this study and INP (Institute of

National Petroleum) who is the organization under the Ministry of Mineral Resources shall be the

counterpart against to this study team.

As the result of this meeting, the Ministry of Mineral Resources has submitted the interest letter on

August in the name of the Minister to support the study of fertilizer project to be conducted by the

study team.

Figure 7-1 Supporting organizational structure in Mozambique


Counterpart

Institute of Nacional De Petroléo

(INP)

Ms. Serafina Mangana,

Head Department of

Plant Protection

Mr. Sidonio dos Santos,

National Director

Ms.Isabel Chuvambe

Project Manager

Ministry of Industry &

Commerce (MOI)

Ministry of Aguriculture (MOA)

Mrs. Jossefa Jussat,

Head Department of

EIA/License

Ministry of Co-ordination and

Environmental Action

(MOCEA)

Counterpart

Ministry of Mineral Resources

(MIREM)

3

7.2 Implementing organization

As mentioned in the paragraph (1) of Chapter 7, the Ministry of Mineral Resources is the responsible

organization and INP is the counterpart of this study.

In order to conduct this project, support of the following organization is needed.

1) Ministry of Agriculture, for the supply system of fertilizer, supply demand balance and

agricultural policy of the Mozambique,

2) Ministry of Transportation,

3) Municipality of Beira, for the project site allocation,

4) Ministry of Energy, for the electricity supply to the project,

5) Ministry of Industry and Trade, for the licensing and registration,

6) ENH (Empresa Nacional de Hidrocarbonetos EP)(National Hydrocarbon Enterprise), for the

natural gas supply system,

7) CPI(Centro de Promocao de Investimentos)(Investment Promotion Centre), for the incentive of

Foreign Direct Investment,

8) Ministry of Environmental, for the permission to EIA (Environmental Impact Assessment) and

9) Ministry of Finance, for the financing structural study to the Project.

7.3 Evaluation for the performance of the implementing

organization

There is no operating fertilizer plant and petrochemical complex in Mozambique, but there are now

some plants under operation of gas processing and cement in Mozambique. In addition, the

Government of Mozambique has remarkable experiences to receive the Foreign Direct Investment to

the Industrial Sector to produce Aluminum and Iron Ore and to achieve the successful completion of

projects as a counterpart to the foreign investors.

Judging from the current situation, the Government of Mozambique has the appropriate organization

to develop the large scale of industrial investment project, such as the said fertilizer project.

On the other hand, in order to make the Project more bankable than the sole investment by the

Government of Mozambique, it is recommended based on the study that there are several investors’

candidates to the Project who are not only the Japanese Investment Company but also 1) offshore

Chemical Company and/or 2) offshore investment fund. As for the offshore Chemical Company

participation,

4

The Government of Mozambique is ready to develop a large scale project judging from the track

records of projects; however there is no experience to construct, operate, and employ the finance to

the fertilizer plant.

Because of the current situation of the Government of Mozambique, following professional

personnel support will be in help of the due project development and implementation; such as 1)

design and engineering of the plant, 2) construction of the plant, 3) operation and maintenance, 4)

financing, 5) marketing, 6) logistics and 7) administration of the corporation.

1

Chapter 8 Technical Advantages of Japanese

Company

2

8.1 Envisaged structure of participation by Japanese companies

(investment, supply, O&M and others)

8.1.1 Funds procurement

As for the participation of the Project by the Japanese Companies, there are several ways of their

participation in the several aspects in order to contribute to increasing for the Project realization. The

fist one is the financial contribution to the Project, as it is mentioned in the Chapter 9 about the

provision of funding, there are two parts; one is the debt financing and the other one is the equity

financing. As for the debt financing, it is deeply related to the Japanese Companies participation to

the construction of the plant and equity investment to the Project, it is mentioned in the Chapter 9 in

order for employing debt financing by the JBIC financing menu.

In addition to the financing to the Project, there are possibilities of Japanese Companies investment

to the Project on the purpose of the participation to the agricultural related business and / or

participation to the chemical related business. One of the business opportunities for Japanese

companies is to handle urea that is to be exported to the third countries. Nowadays fertilizer is

demanded by the certain countries such as Australia, China, India, Japan and other countries.

Other than the fertilizer business, as for the nitric fertilizer’s feed stock point of view, it is natural gas,

and natural gas can be a feedstock of producing basic chemical products such as Ammonia and

Methanol. Japanese companies are interested in handling those kinds of chemical products that is to

be exported to the third countries for the feedstock in order to produce other more value added

chemical products. In such case, plant configuration might be reconsidered.

Other than the trading of products to be produced by the Project, there might be a certain strategy for

Japanese companies to participate into the agricultural business in the area of Southern Africa for

supplying the fertilizer products. Currently, there is less consumption of fertilizer in this area to

compare with other areas except Southern Africa, but because of the possibility of huge demand for

fertilizer, it is simply big opportunity for Japanese companies to be involved in this business.

8.1.2 Procurement of plant equipment and material

For construction of plant, the equipment and material are procured from China, Europe, Japan,

Korea and Southeast Asia.

Japanese companies are candidate as procurement resources for Rotating equipment such as

compressor, Static Equipment such as heat exchanger, Package equipment such as Boiler, Chemical

3

injection unit, Inert gas generator and Air compressor, Material handling equipment such as

Reclaimer, Bulk material such as Piping, special valve and electrical power equipment.

8.1.3 Facility operation and maintenance

In order to keep producing the products, all plant facilities shall be operated and maintained properly

by the Special Purpose Entity (SPE). The facilities shall be operated for 24 hours a day without

stoppage other than a regular maintenance period and emergency shutdown. To execute those kinds

of O&M, not only technical staffs but also skilled administrative personnel shall be hired and trained

under appropriate organization of the SPE as follows. Skilled technical staffs and administrative

personnel shall be hired from Japanese experienced engineers.

A. Internal Auditing Commission

This organization of the SPE shall act independently from the company ordinary commercial

operation. The members of the commission check and investigate whether the SPE operates

properly based on the SPE’s company regulation and/or Mozambique regulation. The result of

the investigation shall be reported to BOD and shareholders, if it is required by the contracts, to

the lenders and / or relevant official organization.

B. General Director

General Director (GD) of the SPE shall be responsible for achieving the budget and business

plan to the BOD and to the shareholders. These figures are agreed among GD, BOD and

shareholders beforehand as a budget and business commitment. Based on the result of the SPE

during the certain period (annual), the extent of achievement shall be evaluated as a performance

of GD.

C. Human Resources Department

This department is responsible for the matters of human resources. It includes;

1) To hire domestic, overseas, manual staffs and managers, together with a relevant department

2) To make employment contracts

3) To control the fairness of salary system

4) To aim to keep good health condition for all staffs

5) To control and implement company regulations including applause and penalty

6) To issue company order based on GD’s instruction

7) To take responsibility for the staff training and keeping the standard quality of staffs based

on GD’s requirement, method of the system shall be described below “Staff Training ”

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D. Administration Dept. (including legal)

This department is responsible for administrative matters such as (excluding (4) HR);

1) To arrange entry visa to Mozambique for overseas staff under supports by Angolan

government

2) To arrange expat visa for Mozambique national staff for overseas business trip

3) To arrange accommodation for overseas staff and their family in Mozambique

4) To arrange appropriate commuter system for all staff

5) To arrange appropriate meal system for all staff

6) To arrange appropriate safety program and system for all staff

7) To arrange other necessary supports in order for keep good working conditions for all staff

8) To take care for public relations and general affairs

9) To check and review all legal matter inside the SPE, hiring company lawyer who has

enough knowledge of Mozambique law, most of the contract shall be executed after the review

of legal approval by the authorized legal person in the SPE, such person shall be designated

as Chief Compliance Officer (“CCO”)

E. Purchasing Department

This department is responsible for purchasing tools, consumable material, and equipment and

so on. In case the tools and consumable materials for maintenance and researches, these works

shall be made together with relevant department. Details of the execution shall be regulated in

the company regulation. All purchasing contract shall be reviewed by the CCO or its

empowered person

F. Treasury & Finance Department

This department is responsible for the finance condition of the SPE such as;

1) To implement financial right and obligation to stake holders based on the contracts

2) To make report the financial situation based on the request from stake holders to GD and

BOD, time to time

* Stake holders mean Shareholders, Financial Institutions, ECA/MLA, Governments, Tax

Authority, and CPA and so on

G. Accounting Department

This department is responsible for regular base accounting operation such as

1) To make financial report, including profit loss, balance sheet and cash flow sheet,

production cost and other necessary report required by relevant authority or GD’s

instruction

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2) To handle required tax practice

3) An audit to be executed by the CPA

4) To keep the company accounts to be located inside and outside of Mozambique

H. Sales, Marketing and Logistics Department

This department is responsible for sales activities of the SPE products such as

1) To execute sales contracts including domestic and overseas transportation, custom clearance,

receiving the sales proceeds from customers

2) To make sales promotion to new customers in Mozambique and other courtiers such as

SADC, if it is necessary for the SPE

I. Operation and Maintenance Department

This department is responsible for all production and maintenance matters in the SPE such as

1) To take care for Ammonia and Urea plant (process plant)

2) To take care for Utility / Offsite Facilities including natural gas, seawater intake

3) To implement “Kaizen” or improvement in the plants continuously

4) General mechanical affairs

5) General electrical affairs

J. Technical Department

This department is responsible for all technical matters in the SPE such as

1) To inspect and keep good quality controls (QC)

2) Feedstock and product analysis laboratory

8.2 Advantages of Japanese companies when implementing the

project (on the economic and technology front)

In our country, several companies which the company which holds urea technology can build in

response to the supply of one company and urea technology are located.

The urea technology which this country company holds has ACES(Advanced Process for Cost and

Energy Saving)21 which reduces the energy consumption in a urea plant sharply.

The technology attains energy saving and equipment expense reduction, and the production facility

in one series becomes 3,250 t/d.

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Major features of this technology are given below:

ACES21 has reduced plant construction cost by simplifying the urea synthesis system; additionally,

it has reduced operation cost by further optimizing operating conditions. It has the following

advantages:

A. Low Investment Cost

Reduction of construction cost (Low Elevation and Compact Layout)

B. Low Energy Consumption and running cost saving

The operation condition of synthesis section is optimized under the achievement of lower operation

pressure than the previous process. As a result, a remarkable reduction in energy consumption is

achieved.

C. Easy Operation and High On-stream Factor

Forced flow of synthesis loop circulation by ejector and no gravity flow

D. Maintenance Cost Saving

Milder operating condition in synthesis loop (Less corrosion risk) Advanced and proven material

developed by TEC for high pressure vessel Maintenance support service

8.3 Measures to be taken to assist Japanese enterprises in

receiving order

Enterprises participating in the survey mission will also continue to carry out activities toward

realization of the project. On the other hand, execution of the project requires the provision of

finance from the Japanese official banking establishment, development of the fertilizer industry. Also,

Mozambique attracts attention as a resource-rich country because of its huge Rovuma gas field in the

northern part. Based on these findings, we will discuss the loan from the Japan Bank for

International Cooperation. For investments, it is necessary to talk with Empresa Nacional de

Hidrocarbonetos E.P. (ENH), Moçambicana de Hidrocarbonetos, SA (CMH) which is interested in

fertilizer, and the Government of Mozambique (Ministry of Mineral Resources, Ministry of

Agriculture, Ministry of Industry and Trade, and Ministry of Commerce and Industry).

Concerning the above issues, the study team will lobby the government leaders of Mozambique for

project implementation

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Chapter 9 Financial Outlook

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9.1 Funding Source and Funding Plan for the Project

In order to consider the funding source and funding plant for the project, the ownership of the project

must be considered. There are several opportunities of the ownership for the Project. 1) The first

case is that fertilizer plant will be owned by the Government of Mozambique, 2) the second one is to

be owned by the Joint Venture between the Government of Mozambique and private Capital outside

Mozambique, 3) the third one is to be owned by the private investment inside or outside

Mozambique.

As the precondition of the Study, this plant shall contribute to the agricultural sector under the

governmental strategy plan that includes 1) improve of the production, 2) access information and

marketing, 3)water source management and 4)strong human resources 5) natural gas utilization. If

the fertilizer plant is owned by or controlled by the private capital investment, there will be certain

afraid of the conflict of interest of the benefit between the owner of the fertilizer plant and the

Government of Mozambique.

In this regard, this fertilizer plant must be owned and controlled by the Government of Mozambique

and, in order to support the operation and maintenance of this plant, private investment can be

employed.

This Project requires the cost for capital expenditure for the Plant ant, the cost for working capital,

cost for the interest during construction and other costs, total investment cost will reach to about [US

Dollars billion].

Under those preconditions, funding plant shall be considered based on this required amount.

First of all, required funding shall be divided into 2 parts, one is the equity funding and the other one

is the debt funding. Equity funding amount shall be decided from the balance of debt funding

amount. But usually in those kind of capital oriented projects, debt/(debt + equity) ratio would be

around 60-70%. Debt portion shall be financed from the outside of Mozambique. It might be

financed from the JBIC (Japan Bank for International Cooperation), in case the Japanese companies

are deeply involved in the Project as the EPC (Engineering Procurement and Construction)

contractor and Mozambique government guarantee or as the investor, or as the other substantial role

to the Project. In other words, type of funds from JBIC shall be decided by the type of Japanese

companies’ participation, but in case there is no Japanese Companies’ participation to the Project,

funding from JBIC cannot be expected.

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As for the equity funding, fund providing shall be made by the investors. Investors other than the

Government of Mozambique is required the enough financial strength. And as for the equity

injection by the Government of Mozambique, it must be adopted by the National Congress after

approved by the Cabinet of Ministers. Through this procedure, this Project can become the national

project.

9.2 Bankability of the Project

As for the debt financing, it is subject to the Japanese Companies’ participation, most of the debt

amount might be financed by the JBIC. The other developed countries’ governmental financing

institutions have less possibility to cover this debt portion. The reason is European governmental

financial institution has a function to cover the risk as an insurance but they have no function to

become the fund providers, Provision of fund shall be made by the European commercial banks but

they have least possibility to become the fund providers under the current financial market.

USEXIM has a possibility to become a fund provider to the Project subject to the US companies’

participation. This is a further possibility to seek the fund provider to the project but there must be

more strict rule as for the US companies’ content (100% procurement shall be made from US

companies).

As for the JBIC, their financing policy to the projects in Mozambique is case by case of each project,

but basically, they are watching this market positively. Especially, Mozambique has explored the

huge gas field and there are several plans for utilizing natural gas, and one of them is to produce

LNG (Liquefied Natural Gas) and to export to Japanese utility customers. And also they evaluate

positively about the big success of the MOZAL (Mozambique Aluminum Corporation). In addition,

They highly appreciate the current governmental stability, including the good relationship with

neighboring countries such as South Africa, Tanzania, Zimbabwe, Zambia and Malawi.

Under the current situation, most appropriate financing scheme might be JBIC’s Buyer’s Credit

to be backed up by the Government of Mozambique, such as full support by the Ministry of Finance

or in place of Joint Venture or Governmental Implementing Organization, Ministry of Finance will

be the borrower against JBIC.

Based on the above buyer’s credit base finance between JBIC and the Government of Mozambique,

in order to affirm the bankability for the Project, marketing of the Urea including export to

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neighboring countries, and due operation and maintenance might be considered in further stage.

9.3 Cash Flow Analysis

In a cash flow analysis, the cash flow which this manure project produces analyzes whether it is

sufficient level for principal-and-interest payment using DSCR (debt service coverage ratio) which is

a payment possibility index of a long-term loan.

It calculated as DSCR = (after-tax income + depreciation expense)/(long-term loan this term

amount-repaid + long-term loan interest expense).

In 2023 eight years after setting 2016 when operation of a plant is started and an income enters with

a base year, It is set to 1.43, and generally, since DSCR from 1.4 ～ 1.6 can categorized healthy,

DSCR which is the numerical value which broke the single fiscal year income by the amount of

repayment of principal and interest of the debt (every year) can analyze it as satisfactory on cash

flow.

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Chapter 10 Action Plan and Issues

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10.1 Current situation of the project

After receiving the Interest letter from the Minister of Mineral Resources, on behalf of the

Government of Mozambique, Toyo Engineering Corporation and Sumitomo Corporation requested

again to consider the signing of the Memorandum of Understanding for the study on the possibility

of fertilizer project in Mozambique, to utilize the domestic natural gas to be supplied from

Pande/Temane submitted in the end of June 2011. As for the Memorandum of Understanding, it is

under consideration by the Ministry of Mineral Resources whether it is executed or not among

parties.

As a result of consultation with the Ministry of Mineral Resources, INP has been nominated as a

responsible department as described in Chapter 7. INP is an organ supervising information on

petroleum gas in Mozambique and the study team has requested INP for the data of the nature and

quality of natural gas.

As the first candidate site of the Project is decided Beira where is located in the middle part of

Mozambique, there is a commercial port and railway road access to the neighboring countries.

Because of the commercial port, import of equipment and material for the plant construction for

fertilizer production can be made and export of products can be also made without any trouble.

As for the financing, it is just started the discussion with JBIC, due to the current fund demand over

the world, the member of the Project have to keep in touch with JBIC more closely than before.

10.2 Current situation of the project by implementation

organization

Through the interview and discussion with Governmental Organizations in Mozambique, it is found

that most of the organizations recognizes the necessity of the fertilizer production in the country and

some of them have already started the program to strength the agricultural industries and to increase

the agricultural production through these program.

But, there is no specific governmental program to produce nitric fertilizer from the domestic natural

gas as of today. That is because of the large scale of investment and fund requirement to this. In this

regard, together with Ministry of Mineral Resources, overseas private sector should cooperate to go

forward this action, for the technical and financial point of view.

On the contrary, there are already several foreign direct investments to Mozambique including large

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scale of investment such as aluminum production, coal mining, and petroleum sectors, and there are

lots of foreign direct investments to Mozambique. In case of foreign direct investment, there are

several kinds of permission and organizations for the investors but the Government of Mozambique

has set up the organization for centralization of the investment that is named CPI (Central Policy of

Investment). This organization will support the foreign investors as a guide of the investment.

10.3 Legal and financial framework

Because of the history of Mozambique, there is strong influence from the Portuguese legal

framework. In case of the fertilizer investment, Legal opinion shall be required but as far as this

study concerned, there is no legal obstacle for the fertilizer production and for the foreign direct

investment.

As for the financial framework, large scale of investment and / or otherwise large scale hard

currency based foreign debt, it must be considered there is required the governmental approval for

the FID (Final Investment Decision).

Several world-scale civil engineering and construction contractors have branch offices in

Mozambique. The result of hearing from local contractors shows that, in the case of a large-scale

project, Mozambicans represent 60 percent and foreigners about 40 percent. It is important how

skilled workers are effectively secured including the training of local workers with the acquisition of

foreign skilled workers consisting mainly of South Africans, Filipinos, etc.

As the cranes in Mozambique have a maximum load of 600 tons, fertilizer plant’s heavy loads

include equipment, such as ammonia converters, to be unloaded and assembled by renting cranes.

For construction materials, cement must be imported but sand (river sand), stones, Re-bar, gravel

and lumber can be prepared in Mozambique.

Dependent on the companies, the shipment in the Beira port is limited to a weight of 80 tons, a

length of 17 m, a width of 3.5 m and a height of 4 m. The fertilizer season in June to September is

busy.

Import of the equipment and materials exceeding the above dimensions and weight needs a way of

unloading with a barge, etc. on a temporary jetty near the site.

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10-3-1 The Project Approval Process

In light of the Investment Law and complementary legislation the procedures for the approval of an

investment project in Mozambique are the following;

The investor submits to CPI 3 copies of a Business Plan or 3 copies of the Project Application Form

duly filled. The accompanying documents (copies of ID, company Articles of Association, maps,

proofs of technical and financial capability, investor and/or company profile, useful details or

information, etc.) should be attached to the application at this stage to facilitate the assessment and

decision process.

CPI coordinates with the Sector Authority and the Environment Authority at local and central levels

for their approval while it undertakes the assessment of the Business Proposal and drafts and

negotiates the Terms of Authorization with the investor or their representatives, as part of the

project’s approval process.

Upon agreement between CPI and the Investor on the Terms of Authorization CPI submits the

project for approval by the relevant authority (Provincial Government, Minister of Planning and

Development, or the Council of Ministers).

CPI provides assessment to the Investment for the implementation of the project. The range of

assistance covers business licensing, obtaining entry visas, work and residence permits, customs

exemption authorization, licensing of land, and various other institutional assistance and facilitation

tasks related to government entities.

1) Fiscal System

The taxation System in the Republic of Mozambique integrates national and municipal taxes. The

taxes of the National Taxation System are classified as direct and indirect, acting at various levels,

namely (ⅰ) direct taxation on income and wealth and (ⅱ) indirect taxation on expenditure.

The direct taxation on incomes is made through the following system of taxes: Corporate Income

Tax (IRPC) and Personal Income Tax (IRPS).

The indirect taxation, which comprises taxes on expenditure, integrates: Value Added Tax (VAT),

Specific Consumption Tax (ICE) and Customs Duties.

The Corporate Income Tax (IRPC) – is taxable on gained incomes, during the taxation period, from

tax payers, namely commercial or civil companies, cooperatives, public companies and other

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corporates both public and private, entities with no legal personality, whose incomes are not subject

to taxation in the form of IRPS or IRPC.

� The rate for IRPC is 32%;

� The agricultural and aquaculture will benefit from an 80% rate reduction until 31/12/2015 and

from 2016 top 2025 will receive a 50 % reduction.

The Personal lncome Tax (IRPS) - is taxable on the global annual value of income; is paid by

singular persons residing in the Mozambican territory and by those not residing in the country but

gaining income from it.

The Value Added Tax (VAT) – taxable on the sale of goods and provision of services in the national

territory by a tax payer acting as such, as well as on importation of goods. The applicable rate for

VAT is 17%.

The Specific Consumption Tax (ICE) – is taxable, in a selective manner, on the consumption of

certain goods, produced or imported. The general rate of customs duties on consumption goods is

20%.

Customs Duties – taxable on imported and exported goods in the customs territory, whose values

vary in the following manner:

� 2.5% for raw materials;

� 5% for capital goods (class K);

� 7.5% for Intermediary goods;

� 20% for consumption goods.

Under the SADC trade protocol implementation framework various products from the SADC region

countries benefit from exemptions from payment of customs duties.

The Taxation System is completed by other taxes, namely the Seal Tax, Tax on Successions and

Donations, SISA, Special Tax on Gambling, National Reconstruction Tax, and Vehicle Tax and

other legally established taxes and specific charges.

2) Social Security

The registration of workers and their respective employers with the National Social Security System

is mandatory.

The fee for social security is 7%, being 4% paid by the employer and 3% by the employee.

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3) Investment Guarantees

The guarantees envisaged in the legislation in force comprise:

� Legal protection on property and rights, including industrial property rights;

� No restriction of borrowing and payment of interest abroad;

� Transfer of dividends abroad;

� Arbitration according to ICSID or ICC rules for the resolutions of disputes on investments;

� MIGA and OPIC services on issues related to investment risk insurance.

The investment Law grants certain tax and customs benefits depending on the amount, location and

sector of investment activity. The incentive schemes applicable in Mozambique are as follow:

Generic Fiscal and Customs Benefits

The investments carried out under the Investment Law are exempt from payment of customs duties

and VAT on capital goods classified in Class K of the Customs Tariff and related accompanying

parts and accessories.

Benefits for Industrial Free Zones

The Industrial Free Zone Regime is applicable to two components of Industrial Free Zones, namely:

i. Development and exploration of Industrial Free Zone infrastructures (Industrial Free Zone

Operator); and

ii. Exploration of Industrial activities for export or provision of services within the Industrial Free

Zone (Industrial Free Zone Company).

According to the law in force, the government authorizes for the Industrial Free Zones all activites of

industrial nature as long as at least 70% of their production is for export.

Operators of industrial Free Zones are exempt from payment of customs duties on the importation of

construction materials, machinery, equipment, accompanying spare and accessory parts and other

goods used in the carrying out of the licensed.

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10.4 Additional Study Requirement

The concept of this study is the preliminary study whether the fertilizer project is necessary for the

Government of Mozambique and there are possibilities to make further study on the fertilizer

production in Mozambique.

Those are; 1) is there the demand of fertilizer,

2) is there domestic feed stock of natural gas availability,

3) is there site availability inside Mozambique,

4) is there technical possibility to construct fertilizer plant

(or technical impossibility to construct fertilizer plant)

5) is there possibility to find the funding source

6) is the further optimization of the plant design

Before implantation of the Project, at least the above 1) to 5) shall be made precisely. As for the

Demand, it is investigated domestic demand and its evacuation plan in case of deficit of the demand

in Mozambique (possibility of export to neighbors and other countries). As for the feedstock natural

gas, preliminary this study is agreed with Ministry of Mineral Resources and INP that the study is

made on the base of utilizing Pande/Temane natural gas, and then the further study of natural gas

volume availability shall be confirmed. As for the Project site, preliminary this study is agreed with

Ministry of Mineral Resources and INP that this study is made based on the Beira where the city of

the central Mozambique, and then as the site selection on shore is and offshore site investigation

shall be made before FID. As for the technical point of view of the construction of the fertilizer plan,

optimization of the plant design based on the actual site condition, raw water and electric power

availability in particular, basic engineering work shall be made before FID, especially this

engineering work define the required amount of the investment and period of the construction must

be decided. As for the funding plan of the Project, it is recommended to employ the financial advisor

for the project for the further stage or at least, based on the agreement with foreign investors,

preliminary information memorandum shall be prepared for the investors and financiers.

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