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Yara delays $2B expansion project at Belle Plaine
Jun. 27, 2013
Yara International is postponing the planned $2-billion expansion project at its nitrogen fertilizer production plant at Belle Plaine.
Yara, the world’s largest nitrogen fertilizer producer, said the Belle Plaine site is an “optimal location for a future North American nitrogen expansion, but will spend more time evaluating construction cost development and other key project parameters.”
“We are not ready to initiate a Belle Plaine expansion today, primarily due to recent increases in construction cost both in Canada and North America generally,” said Jorgen Ole Haslestad, president and CEO of Yara International. “There is also a significant risk of future nitrogen over-supply in North America as new project initiatives are announced, despite deteriorating project profitability.”
Nitrogen project costs have been rising by 10 to 20 per cent a year over the past several years in North America, as a rash of projects from chemicals to fertilizers have pushed up costs for labour, engineering and construction materials, according to recent media reports.
The new projects will also increase supply faster than demand for several years to come, pulling urea prices to around $320 a tonne, well below the five-year average and creating a downside risk.
Haslestad said Yara is looking at a number of opportunities for investment in value-added product capacity, downstream facilities and plant de-bottlenecking projects. “A future Belle Plaine expansion remains an option for Yara when the construction cost situation improves,” he added.
The Belle Plaine facility has an annual production capacity of 700,000 tonnes of anhydrous ammonia and 1.2 million tonnes of urea and urea ammonium nitrate. The planned expansion project, announced in June 2012, would have more than doubled the plant’s urea capacity by 1.3 million tonnes per year.
At the time, Haslestad said the Belle Plaine expansion will include an “integrated world-scale ammonia and urea line, with urea capacity of approximately 1.3 million tons per annum.”
“Taking advantage of the excellent location of our existing Belle Plaine facility in Canada, we will increase our presence and scale in the North American market by more than doubling our capacity at the site,’’ Haslestad said in the press release.
The expansion project had been approved by Yara’s board of directors for a fast-track process, with expected startup in second half of 2016. The final decision to proceed with the project was said to be contingent on signing an EPC (engineering procurement and construction) contract, and agreements with Saskatchewan authorities related to utilities, environmental impact and other key terms of the project.
Yara International acquired the former Saskferco nitrogen fertilizer plant at Belle Plaine for $1.6 billion in October 2008.
The postponement of the Yara expansion project is just one of a number of delays or cancellations of large-scale capital projects in Saskatchewan, Mosaic Company recently announced it was delaying a $2-billion, two-million-tonne expansion project at its potash facilities at Belle Plaine and Colonsay.
Last year, BHP Billiton said it was postponing making a commercial production decision on its proposed $12-billion, eight-million-tonne per year potash mine at Jansen Lake, while Brazilian mining giant Vale pulled out of $3-billion greenfield solution potash mine project near Kronau.
Source: Yara International
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