KARACHI, Aug 5: Engro Chemicals Pakistan announced that it was considering to set up a new fertilizer plant having capacity of around 0.95 million tons, provided the government allocates gas for such a project, reports prepared by several stock brokerage houses, including Elixir Securities, JS Capital Markets and Arif Habib Securities stated.

The company held an analyst briefing earlier this week. As per company estimates, the government, in order to fill demand supply gap, would have to import 0.5m tons of urea this year. “By selling imported urea in the local market at discounted price the government is likely to incur a loss of roughly Rs7 billion on the urea import,” stated one report.

The expansion would double the current capacity of 930ktpa. The decision to expand is not yet final, and will ultimately be subject to allocation of gas — the primary raw material and fuel source — in sufficient quantity and at a price that will make the investment in a new line feasible. Both Engro and FFC currently receive gas from the Mari (Shallow) field, which is dedicated solely to the two fertilizer manufacturers. “Given the low gas reserves in the country allocating gas for such project in the near future would be difficult task for the government,” observed another analyst. He stated that the government has so far imported 130 Kt of Urea during 1H05 at a price 115 per cent higher than the domestic prices. For CY 2005, the government plans to import 500,000 tons of urea.