Qatar's private sector United Development Company (UDC) is to partner two foreign companies for setting up an aluminium smelter in the state.

An MoU was signed recently between UDC, Ferrostaal of Germany and Japan's JGC Corporation for establishing a 500,000-tonne project estimated to cost between $1.6 billion and $2 billion depending on capacity, technology and power facilities.

"The project is being undertaken as a 100 per cent private sector venture and UDC holds the exclusive licence from the Qatari authorities for its development," said secretary to the UDC board Izeldin El Saigh. UDC is the largest private sector Qatari shareholding company with a mission to identify and invest in long-term projects that will contribute to Qatar's development and provide good shareholder value.

The aluminium project will be the first major gas-based industrial project to be owned by the private sector in Qatar and has the full backing of the Qatari authorities. "As a result of the extensive project work and contacts made to date, the joint venture partners have decided it will now proceed on a fast-track basis," El Saigh said.

The official said the initial project partnership between UDC and its foreign partners was on an equal-share basis. However, the equity base would be expanded during the next 12 months to include other players from the world aluminium industry.

While Ferrostaal and JGC are well known general contactors and have agreed to co-operate on the development and implementation of the project, most of the work would be tendered out by the development company, said El Saigh. Construction is expected to begin in early 2003 with the construction period being approximately 30 months.

Technology for the project has not been finalised. El Saigh said discussions with various technology partners were in progress and the choice of technology would be a key decision area for the working group during the next few months. The project would use credit financing facilities from the Gulf, the rest of Asia and Europe in the form of export credits and long-term loans. The partners' extensive Gulf and worldwide networks would be tapped to secure suitable financial packages.

About associated facilities, the official said the power generation concept was under detailed discussion with the possibility that a dedicated power plant could be part of the smelter project development. But there were no plans for a coke calcining plant. UDC and its partners were very encouraged by the improved outlook for the supply of raw materials from the region.

El Saigh pointed out there was progress in plans for installing two coke calcining plants in Kuwait and Dubai to the existing capacity in the Gulf and that Kuwait and Saudi Arabia were considering going into alumina refining.

There was also no need for a dedicated jetty as the plant was being located at Ras Laffan, which had a well-developed port and other infrastructure, he said.

UDC founders, who hold 45 per cent of the shares, are among the most successful investors and developers operating in Qatar and the regional economy. The remaining shares are held by a large number of Qataris and investors from the region. The company's initial share capital of QR500 million ($140 million) is to be expanded in line with project implementation.

Priority sectors for UDC are energy-intensive industries, hydrocarbons downstream and construction- and environment-related projects. The company stressed that establishing a primary aluminium smelter in Qatar was the top priority project.

Ferrostaal AG, a member of the German MAN group, is a leading general contractor for industrial projects mainly in the metals and petrochemical industries. It is noted for its project development expertise and project financing.

The company's comprehensive partnership in project development, implementation on a lump-sum turnkey scheme and operation of industrial plants and infrastructures constitute the cornerstone for many of the projects realised. It is located in more than 60 countries worldwide and operates its global network from Essen, Germany.

Yokohama (Japan-based) JGC is an internationally recognised contractor with total engineering, procurement and construction capabilities. Over the past 70 years, it has executed in excess of 20,000 projects, most of them on a lump-sum turnkey basis for a wide range of industries including petroleum refining, gas processing, petrochemicals and the setting up of industrial plants in over 50 countries.