State-run fertilizer factories: the white elephants they are now

“The country cannot afford to waste natural gas or sell it at a lower price as the price of LNG is increasing day by day all over the world.”

Energy expert Dr Ijaz Hossain

Factories consume a lot of natural gas, but produce much less urea-based fertilizer than their modern counterparts.

The wasted gas in these four state-run fertilizer plants in just nine days is enough to produce a day of electricity, around 9,000 MW, for the entire country, according to an estimate in the system’s master plan. government electric.

The four factories in question produced 7.96 lakh tonnes of granular urea in fiscal year 2019-2020, consuming about double the gas required, the key ingredient in making urea.

On average, the four factories consume 43.72 million cubic feet (mcf) of gas to produce 1 ton of urea, while the global standard is 25mcf, according to documents from Bangladesh Chemical Industries Corporation (BCIC).

The factories, which operate under BCIC, are Jamuna Fertilizer Co Ltd (JFCL), Ashuganj Fertilizer and Chemical Company Limited (AFCCL), Chittagong Urea Fertilizer Ltd (CUFL) and Shahjalal Fertilizer Company Ltd (SFCL).

Government officials attributed the low efficiency to old machines that had not been serviced for years, the interruption of gas supplies and a lack of skilled labor.

Of the four factories, AFCCL, CUFL and JFCL have already exhausted their 20-year lifespan. AFCCL and CUFL were commissioned in 1981 and 1987 respectively while JFCL began production in 1991.

SFCL’s performance in Sylhet, which started production just five years ago, is already weak.

In contrast, Karnaphuli Fertilizer Company Limited (KAFCO), the only multinational joint venture in the industry, is almost on par with global consumption-to-output ratio standards.

Commissioned in 1991, KAFCO produced 5.30 tonnes lakh of urea at a yield of 27.97 mcf / tonne in 2019-2020.

Experts have said the low efficiency of state factories has been an open secret for years. The waste has already strained the rapid depletion of the country’s natural gas reserves and caused enormous economic losses.

These factories operate on government subsidies that increase year by year, they added.

In fiscal year 2015-16, the subsidy for these four factories was Tk 235 crore, which nearly tripled to over TK 659 crore in fiscal year 2019-20, according to the 2019-2020 annual report of the Ministry of Industries.

Prominent energy expert Dr Ijaz Hossain said the government was in a big dilemma here.

“Dilapidated factories are like an old model car that needs a lot of fuel but we can’t throw it away because we don’t have the option to buy a new one. If we stop production the country will be faced with to a urea shortage which will be more problematic, ”said Dr Ijaz, former professor at Bangladesh University of Engineering and Technology (Buet).

Bangladesh needs around 24.41 tonnes lakh of urea each year. Of that total, state factories supply around 8.77 lakh tonnes while the remaining 16 lakh tonnes are imported, according to the agriculture ministry.

Dr Ijaz said he was against continued production in old and dilapidated fertilizer factories, adding: “The country cannot afford to waste natural gas or sell it at a lower price because the price of LNG is increasing day by day in the world “.

Old machinery, poor gas supply, responsible for low efficiency; government grants keep increasing year by year

He said: “The factories get gas at a subsidized price. But they must calculate their production cost with the international market price of LNG to be economically viable.

He said an uninterrupted supply of gas was essential to improve efficiency.

Regarding the low efficiency of SFCL in Sylhet, he said: “It is not working efficiently because the proposed design was not followed to build it”.

A senior BCIC official acknowledged that there could be flaws in the design and said the issue is currently under investigation.

THE ENDLESS CYCLE

Over the past five years, gas wastage at the four factories has been around 67,727,250 mcf or about 37,110 mcf per day, according to government estimates.

The government recognized this waste of gas across the country in the Electricity Sector Master Plan (PSMP) 2016.

If the international benchmark were followed, the country could have saved 130 mmscfd of gas per day, which is equivalent to 1,000 MW of power, observed the PSMP 2016.

The report also made various recommendations to improve efficiency, but very little has changed.

Over the past five years, six government-owned fertilizer plants, which also included the Palash Urea Fertilizer Plant and the now-disused Gorashal Urea Fertilizer Plant, produced 42, 80 lakh tonnes of urea at an average efficiency rate of 39.42 mcf / tonne.

The government closed the old Palash urea plant in 2018 and Gorashal the following year.

Of the four factories in question, only the Shahjalal fertilizer factory is operating regularly. Last year, CUFL was out of service for 359 days, Ashuganj for 211 days and JFCL for 206 days, according to BCIC data.

Ashuganj general manager AKM Anowarul Haque said it closed the plant last month for overhaul and maintenance.

“It’s normal that a 40-year-old plant won’t give you optimal performance. We have done overhauls every 10 years. It takes another three months to get back into operation,” he said.

The most recent, the Shahjalal fertilizer plant, was also a waste as it produces urea with a yield of 34.33 mcf / tonne.

Sunil Chandra Das, general manager (operations) of the plant, said they could produce urea at an optimum level if the machine was operated at 100 percent load.

“We can run our machine at 80-82% load and there is no option to increase the load manually. We didn’t even have urea at 25 mcf / ton when the test was done. carried out, “he told the Daily Star recently.

He said the plant’s efficiency was supposed to be 22.5 million cubic feet / tonne.

When asked if the design was followed correctly, Sunil replied, “Maybe there was a problem with the design.”

The government has built the SFCL plant with a capacity of 5.8 lakh tonnes per year for Tk 5,409 crore, according to the 2019-2020 annual report of the Ministry of Industry.

But over the past five years, the average annual output of SFCL, built by a Chinese company using technology from the United States and the Netherlands, has been around 3.4 lakh tonnes.

KAFCO IN BETTER CONDITION

KAFCO, a joint venture with 43.5% government stake, has produced 20.07 lakh tonnes of urea over the past five years with a yield of around 28.76 mcf / tonne.

Its efficiency was calculated with gas distribution data from Karnaphuli Gas Distribution Company Limited (KGDCL).

KAFCO is successful because it invests a lot of money for proper maintenance, officials said.

“The government buys urea from KAFCO at an import price and their income is sufficient to invest in maintenance. A machine should be overhauled every 18 months, which we couldn’t do since 2010, ”said Shaheen Kamal, director (production and research) of the Bangladesh Chemical Industries Corporation (BCIC).

In the case of KAFCO, the government also sells gas at the import price.

WHY THE LOSS?

Shaheen Kamal said they were selling urea to the government for a much cheaper price.

“We charge the government only 14,000 Tk per tonne, whereas the import price is currently around 72,000 Tk. We are saving the government 58,000 Tk per tonne,” he said.

He also blamed age-old machinery and low gas pressure for low output.

“You can’t get the service you want from a 90s machine like modern ones. We try to be efficient, but we need time.”

Citing the example of Jamuna Fertilizer Company, he said the plant operated almost daily but faced low gas pressure for 330 days a year.

“The economic lifespan of these factories has decreased considerably. The machines are almost 30 to 40 years old and we are putting extra pressure on the machines. We need 8-10 days to start a machine, which needs gas equivalent to Tk 3 crore ”he added.

BCIC chairman Shah Md Imdadul Haque said he was not aware of any reports of wasted gas. “We produce a unit of urea at Tk 22 and sell it at Tk 14. That is why we are incurring losses.”


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