Qafco is putting in motion transportation and marketing facilities in anticipation of higher production and exports emanating from an expansion (Qafco 4) that is ongoing and scheduled for completion by the first half of 2004.

The company, owned 75 per cent by Qatar Petroleum and 25 per cent by Norsk Hydro, has signed a five-year contract with the Qatar Shipping Company (Q-Ship) for a long-term charter of a vessel. The vessel will have a capacity of 22,000 cu m and will be used for transporting ammonia from the Qafco jetty in Mesaieed to mainly Asian destinations. The vessel, which will be ready for delivery in 2004, will enable Qafco to sell additional stocks of ammonia in the international spot markets apart from ensuring regular supplies to long-term buyers.

The fertiliser company also signed an agreement with Hydro Asia Trade Ltd, Singapore, a subsidiary of Norsk Hydro, to absorb the additional tonnage from Qafco 4. Qafco is also in the process of working out similar arrangement in various markets for ammonia and urea.

Under the expansion programme, German multinational engineering company Krupp Uhde is building an ammonia unit with a daily capacity of 3,500 tonnes and another unit to produce 2,000 tonnes of urea per day, along with support facilities.

Upon completion, Qafco's annual production capacity will rise to 2 million tonnes of ammonia and 2.8 million tonnes of urea, thereby boosting ammonia production by 50 per cent and urea production by 65 per cent.

Qafco has signed an agreement with a consortium of banks for a loan of $400 million to finance the project. The remainder will come from existing reserves and cash flow from operations.

The expansion plan includes the building of a formaldehyde plant with an estimated daily production capacity of 65 tonnes.

"By raising the company's production capacity and cutting down the unit production cost, the projected production train will be instrumental in boosting Qafco's profitability and placing the company on a stronger footing as a key player in the global fertiliser market," observed Al Sowaidi.

Higher production, enhanced exports and lower costs helped Qatar Fertiliser Company to register substantially higher net profits in 2001 despite a drop in prices.

The company was also able to cut down on accidents and wrap up its planned shutdowns ahead of schedule.

The efforts helped it post a net profit of QR290.87 million ($81.82 million), the fourth largest in its nearly 30 years of production and 16.5 per cent higher than the previous year's. The figure was some 63.1 per cent more than what was targeted.

"Chief among the factors which contributed to this success are enhanced exports and the successful implementation of cost-cutting measures, which helped to bring down the operating expenses to QR366 million - QR33 million below budget estimates," said managing director Khalifa Abdullah Al Sowaidi.

"On the production front, Qafco plants set up new production records. Total urea production reached 1.67 million tonnes and surpassed the budget figure of 1.59 million tonnes by five per cent and the previous year's urea production volume by 1.1 per cent.

"On the other hand ammonia production, the largest ever to be achieved by Qafco, broke the 1999 record by 34,251 tonnes, hitting 1.4 million tonnes against 1.32 million tonnes in the budget plan and 5.5 per cent in excess of ammonia production for 2000," said Al Sowaidi in his report.

Ammonia sales in 2001 rose to 473,307 tonnes, the largest sales volume for the product in Qafco history and higher than the previous year's exports by 26.6 per cent. Urea exports stood at 1.6 million tonnes, which was 1.8 per cent in excess of the set target and 1.8 per cent below 2000 urea exports.

Most ammonia exports went to India (59 per cent). Exports to other countries were Jordan (9 per cent), the US and Australia (7 per cent each), Thailand and Korea (4 per cent each) and the Philippines, Taiwan and South Africa (3 per cent each) and Tunisia 1 per cent.

Viet Nam was the highest importer of Qafco's urea, taking 20 per cent of its overseas sales. The US accounted for 15 per cent and Australia 13 per cent. Other importers were South Africa and Thailand (10 per cent each), the Philippines (9 per cent), Japan (7 per cent), Canada and Sri Lanka (3 per cent each), Sudan (1 per cent) and other countries (9 per cent).

Ammonia prices dipped to $135 per tonne against $157 in 2000 while the fall in the urea price was marginal, $107 per tonne compared with $108 in 2000. New production capacities in Asia, the Middle East and Latin America, a steady supply from the former Soviet republics and lower prices of natural gas in the US contributed to lower fertiliser prices.