February 27, 2018

Fertilizer - Plant Visit to Matix Fertilisers and Chemicals in India

By Binny Sabharwal
OTR Global believes Matix Fertilisers and Chemicals' production could be in full force within the next 12 months despite short-term issues, based on a plant visit and industry conversations.

OTR Global recently visited the Matix Fertilisers and Chemicals Ltd. plant -- India’s first greenfield urea expansion in 20 years -- to get a first-hand account of how the Indian government’s aggressive plan for urea self-sufficiency is being implemented and to understand its viability.

In April 2017, the Indian government's announcement of its $8.7 billion plan for achieving self-sufficiency in urea within five years raised many eyebrows. The Indian fertilizer industry had been plagued for years by natural gas shortages, and critics only had to point to the Matix urea plant that sat idle for two years due to gas shortages. At the December 2017 Fertilizer Association of India conference, the fertilizer minister reiterated the government’s plan to achieve urea self-sufficiency. OTR Global's supply chain sources reacted positively in interviews for the Dec. 15 note. The differentiating fact was that the Matix urea plant had started production in October at 40% capacity with plans to scale to 100%.

It became crucial for Matix to start production immediately because the government needed to publicly show progress on its self-sufficiency program. “The government has been announcing elaborate plans to achieve self-sufficiency, but there were always questions about Matix, which was lying idle [due to gas shortages], so it had become important to get the plant off the ground, and that’s what happened,” one source said.

Since then, it has been supplying urea under the brand name Dr. Fasal to the eastern India market. However, questions continue on the viability of the plant achieving 100% capacity utilization in the near future, as gas availability remains an issue.

About the Plant
Matix plantLocated at Panagarh in West Bengal, the Matix plant is India’s first coalbed methane (CBM) urea plant and also one of the world’s largest single-stream plants. The Matix factory is a fully integrated fertilizer complex that houses a 2200 metric tons per day (MTPD) ammonia plant and a 3850 MTPD urea plant. It also has a 54 KW captive power generation unit, and its railway sidings are just about competed. “We will be distributing in the states of West Bengal, Bihar and Jharkhand because of our proximity to these states,” a plant spokesman said.

The Long Wait
The plant was fully completed in 2015-2016 but has been lying idle due to gas shortages. The 1.3 million metric ton per year project was to run on 2.8 million metric standard cubic meter (mmscmd) of CBM to be supplied by Essar Oil Ltd., but because of limited supplies, the plant was not able to start commercial production. A series of deadline postponements followed as the gas issue continued to postpone the plant’s future, which escalated costs; the total investment in the plant stands at $1.2 billion today. “It has been a challenge for the team to preserve all the equipment as the plant was fully ready in 2016,” one senior Matix executive said. “We maintained the equipment to the highest standard on the recommendation of the OEM, even though at that time we were not sure how long we would have to wait.” An international consultant said, “The Matix people have always been very optimistic about the whole scenario; they have patiently waited and looked at alternatives to their gas issues.”

As It Stands Today
The plant was temporarily idled in mid-January due to unreliable CBM gas supplies, after an initial three-month run, during which it produced around 12,000 metric tons of urea. “We were not receiving gas as per our requirements, and by operating at 40% capacity, we were not only increasing our costs but also ruining our machinery. We decided to temporarily halt production and look at alternative sources of gas supply so we can restart with increased capacity utilization,” one executive said. “We expect to resume production from March with at least 65%-70% capacity.”

Matix is now trying other feedstock options to resume production while they await work on the state-owned GAIL (India) Ltd. natural gas pipeline to be completed to the plant. “GAIL has given us assurance that they will have the pipeline ready by the end of the year, and once we start receiving GAIL gas we will ramp up capacity to 100%,” a plant executive said.

Currently, the company is planning to use a mix of feedstock, including propane and CBM, as extra feed. “We are looking at storing 50 tons of propane in liquid form in 12 [tanks],” a company source said. Matix is also developing an electric power plant on the site for additional power. But the plant is a high-cost producer because of using mixed feedstock. One plant official said they will become one of the lowest-cost producers in India once the gas pipeline is connected.

The urea produced by the plant under the brand name Dr. Fasal has been well received by both dealers and farmers alike. “Farmers are actually requesting our product calling it fondly as ‘Doctor Urea’. We have been told by dealers that the quality of our bag is better than the biggest-selling brand in the region,” a senior marketing executive said.

Dr. FasalMatix plant

What Happens Next?
The future of the Matix plant hinges on the pipeline connection. This was underlined by the fact that Essar recently sold its entire production of CBM to GAIL, bypassing other bidders including Matix.  Matix is moving to diversify its feedstock base and expects the current shutdown to be temporary; executives were confident the plant would achieve at least 70%-80% capacity utilization this year with mixed feedstocks and would be ramped up to 100% as soon as the GAIL pipeline is done.

GAIL has the pipeline on a fast-track basis, but Matix is not taking chances. “Propane is in our control, so we will resume production and continue with that even if GAIL gets delayed. They are supposed to deliver gas to us by October 2018, according to the contract.”

Though there are plenty of short-term issues, Matix production should be in full force within the next 12 months, which would mean a 1.3 million metric ton reduction in urea imports. A senior executive said, “I don’t really blame anybody for thinking that the plant was never going to start -- after all it has been idle for so long. CBM availability was not enough, so the plant start-up was delayed. We could not meet expectations; but now we have commissioned [the plant], and the [urea] product has been well accepted, so we see a bright future for us going forward."

Contributors: Jon Gates

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