Addis Fortune (Addis Ababa)
Issayas Mekuria
10 July 2007
A pre-feasibility study made by a Chinese state-owned company on how to produce Urea fertilizer locally from coal deposits revealed a price tag of seven billion Birr. The Prime Minister, who was disappointed with the supposedly overstated estimate, ordered the Coal Phosphate Fertilizer Complex Project Office that was formed to oversee the venture to immediately come up with other options, sources told Fortune.
It is believed that there is over 100 million tonnes of coal stock in the Yayu Wereda of the Illu Ababora Zone, in western Oromia Regional State. It was in March 2006 that the China National Complete Plant Import and Export Corporation (COMPLANT) was hired to undertake the study with a project cost of 12 million Br to avoid further strain on foreign currency reserves used for imports.
The company submitted the first round of its draft pre-feasibility study to the Project Office formed under the Ministry of Trade and Industry (MoTI) at the end of May 2007. The Prime Minister, who is given a progress update every three months by the General Manager and experts of the Project Office, is said to have taken a brief of the latest report of the study in the last week of June.
Baffled by the findings of the study, he threatened to take measures to the extent of closing down the Project Office if it fails to produce better options in the next quarterly report, sources disclosed. He was disappointed the offer did not meet the 300 million dollars to produce 300,000tn of Urea per annum he was informed the local fertilizer could sell for last year.
"Our intention in implementing this project was to provide the farmer with a price of not more than 200 dollars per tonne," Girma Biru, minister of Trade and Industry, told Fortune. Some way of realising this should still be exhaustively explored, he added.
Though Girma did not give further comments on the orders given by Meles at the briefing, he told Fortune that he has given written instructions to the Project Office to come up with other affordable options.
Ethiopian farmers began using Urea and Dap in the last 10 years, thus increasing foreign exchange expenditures. In 2003, the country spent about 24 million dollars for the importation of 150,000tn of fertilizer, half being Urea at 160 dollars a tonne.
It was the Chinese government who hinted at that time that it could be possible to produce the Urea locally with a lower cost. Meles, who at the time paid a working visit to China requested the Chinese for professional assistance in the sector. COMPLANT, thus, came to Ethiopia and confirmed that there is a coal deposit in Illu Ababora. However, even in the pre-feasibility study at that time, a tonne of Urea would cost 250 to 280 dollars if produced locally. On international markets at the time Urea sold for 160 dollars per tonne.
Though the government decided the Ethiopian Electric Power Corporation (EEPCo) should take control of the Yayu coal stock to use it for power generation, however, this plan also failed on the basis of its environmentally unfriendly impacts following the study made by Fitchner, a German company.
As the international price of fertilizer increased, Ethiopia's consumption also shot up, causing it to spend 2.3 billion Br in the 2006/07 fiscal year for 650,000tn of fertilizer.
After forecasting in 2005 that fertilizer prices would rise, the government decided that COMPLANT should make a new study.
Moreover, the Geological Survey Institute has been hired to dig 100 wells that are 400m to 500m deep at a cost of 50 million Br, which could be used for research in COMPLANT's fertilizer study.
"After all this expenditure and effort, though, it has not been finalised, the study has shown that extraction may not be economically feasible," an expert from the Project Office told Fortune.
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