KAFCO Karnaphuli Fertilizer Company Limited Model Success Story2011 Board of Investment, Bangladesh Published in April 2011 A PDF version of ‘Model Success Story’ is available for free downloading at the BO! website: www.boi.gov.bd References to and citations from ‘Model Success Story’ is allowed, but must be properly acknowledged. This report is prepared under the guidance of BOI Executive Chairman Dr. Syed A Samad. These contents are contributed, compiled, edited and designed by Touhidur Rahman Khan, Director and Dr. Khandoker Azizul Islam, Deputy Director, Board of Invesment. For further information on ‘Model Success Story’ please contact: Director (R & -2) Board of Investment, Prime Minister's Office Government of the People’s Republic of Bangladesh Jiban Bima Tower (17th Floor), 10 Dilkusha C/A Dhaka 1000, Bangladesh Phone: + 88029563782 Email: service@boi.gov.bd Web: www.boi.gov.bd Design : Md. Billal Hossain Printed : Sadia Printing & PackagingContents Substantial revenues for Government Fertilizer crisis avoided Efficient energy use International recognition KAFCO at present Project History Key Features Shareholding Shareholders Plant: Design Vs Actual Project Milestones Plant Achievement KAFCO Production KAFCO Production & Sales Chittagong Gas: Demand-supply Fertilizer: Energy Efficiency HSE Records Corporate Social Responsibility KAFCO's Strength Future Improvement KAFCO Future Challenge-Major Issues KAFCO's Unit Ceaevanuuunuya W 12 13 14 14 15 15 16 16 7Kasco was established in Bangladesh with the shareholding and support of the governments and private sectors of Bangladesh, Japan, Denmark and the Netherlands, and is the largest joint venture investment in Bangladesh. KAFCO plant is a fully integrated complex, it lies on 55 acres of land, located in Rangadia, Anowara, Chittagong, of Bangladadesh just alongside the Karnaphuli river. KAFCO markets its products to many countries around the world, KAFCO complex produces high-grade granular Urea and anhydrous Ammonia. The facility consists of an ammonia plant, urea plant, and a urea granulation unit, all supported by captive power generation, Substantial revenues for Government Government received from KAFCO a total of about 200 million US dollars as taxes, dividends and for purchase of gas in 2007-2008 and around US 218 million dollars in 2008-2009, including freight savings for the Government for urea imports. From a single fertilizer plant in Bangladesh, this is a unique achievement and a unique contribution to the country. Fertilizer crisis avoided KAFCO has been supplying urea to the Government for use by the farmers of Bangladesh since 1996 and supplied nearly half a million metric tons per year during last two years. This could also continue in coming days. - nt energy use KAFCO uses much less gas per metric ton of ammonia and urea produced than any other fertilizer plant in the country. International recognition KAFCO products are internationally recognized and globally accepted as among the best in the world. KAFCO at present KAFCO's production is halted along with other fertilizer factories in Bangladesh due to gas crisis in recent times. The Government is committed to allocate gas resource rationally and with this stratgy such problem can be overcome in near future. KAFCO was conceived as a 100% export oriented company in the early’ 90s since at that time there was both a surplus of fertilizer and gas. The situation has since changed . The shareholders are the Government of Bangladesh and groups from Japan and Europe, mainly, Denmark. In both the groups of foreign shareholders, there is state participation. KAFCO is a model of public private partnership. KAFCO faced many technical problems initially but these were largely overcome through the help of the foreign shareholders. KAFCO paid all its loans in January 2005. For instance, after repaying its debt KAFCO in recent years contributed some 200 million dollars a year to the economy, and that too from a single factory, which is by any standards a unique achievement. The contribution was through dividends to the Government, payment of income tax, freight savings for BCIC and through payment of the gas price. The gas price is the biggest component and contrary to popular belief is higher than the price paid by the Government to the Marco 5: Model Success Storyinternational oil and gas companies. KAFCO now-a-days supplies approximately 70% of its product to BCIC particularly at the peak demand season which avoids serious crisis in the agriculture sector. KAFCO supplies some nearly half a million tons to Government of Bangladesh but this is obviously not sufficient to meet all needs. KAFCO is a more energy efficient than other fertilizer factory of the country and uses much less gas to produce a MT of fertilizer. New energy efficient plants are necessary whether in the public or private sector if domestic demand is to be met. Shutting down fertilizer production and importing fertilizer would impose an import bill of 1 billion dollars and would only make fertilizer traders even richer, Practically all the country's gas supply is from the fields discovered decades ago. Hardly any new exploration has taken place. KAFCO has huge high quality coal reserve. Instead of gas, coal can and should be used for power plants and gas should be reserved for those industries where there is a high value added component. Current shortage of fertilizer is approximately 1.8 million metric tons. PROJECT HISTORY 1979 Introduction of concept by IFC Jan 1980 ‘Company Incorporated Nov 1990 Start of Construction Nov 1994 Mechanical Completion Dect994 Operational Commissioning A195 First shipment ammonia/Urea KEY FEATURES Production Ammonia 166,500 tons/yr Urea 666,000 tons/yr Feedstock Natural Gas 64 MMSCFD Land Plant /Housing 102.87 Acres Storage Capacity-Urea 80,000 tons 6 IMkarco Model Success StoryKEY FEATURES Bagged 2,000 + tons/day Bulk 10,000 tons/day Manpower (permanent) Management 278 Non Management 350 Expatriates 2 Workforce Educated & Experienced SHAREHOLDING arco | 7 ‘Model Success StorySHAREHOLDERS GovernmentofBangladesh through Bangladesh Chemical Industries Corporation (BCIC) Kafco Japan, consisting of: + Japan International Cooperation Agency (JICA) + Marubeni corporation, Japan + Chiyoda Corporation, Japan Subcontinent Ammonia Investment Co. a wholly owned subsidiary of Haldor Topsoe A/S of Denmark Industrialization Fund for Developing countries (IFU), Denmark Stamicarbonbv, The Netherlands PLANT: DESIGN VS ACTUAL Design ‘Actual Capacity Product MTD MTD Utilization Ammonia 1,500 1,620 108% Urea 1,725 2,040 118% NATURAL GAS REQUIERD; 63 MMSCFD Bangladesh production: 1800 mmscid 3.5% of total 8 11KaFco Model Success StoryPROJECT MILESTONES 2008-09 Highest Yearly Production 711,064 MT Jan 2008 Highest Monthly Production 63,175 MT. Nov 29, '08 Highest daily urea production 2070 MT 2004-05 Highest Yearly Production 553,326 MT Dec 2007 Highest Monthly Production 50,839 MT. Mar 23, '06 Highest daily urea production 1654 MT PLANT ACHIEVEMENT Continuous Plant Operation Ammonia Plant has a record continuous operation for 699 days i.e. from last turnaround 2008 to turnaround 2010 (in progress now). Available similar record is: 700 days:GPIC, Bahrain, ‘Model Success Story Marco! 9800000 700000 600000 500000 400000 300000 200000 100000 oO 1011¢aFCO. KAFCO PRODUCTION 1994 - 2009 Urea Production MT 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 Model Success StoryKAFCO PRODUCTION & SALES AS OF JULY 2009 900000 Urea, MT 800000 —————<$ 700000 600000 500000 56% 400000 ama 300000 200000 100000 0 Total Production SaletoBICC _ Sale to Overses Marco 111 Model Success StoryCHITTAGONG GAS: DEMAND-SUPPLY DEC 2008 & DEC 2009 250 BY PETROBANGLA 200 150 100 50 Dec-08 Dec-09 Dec-08 Dec-09 Dec08 Dec09 Dec08 Dec-09 SANGU OTHER FIELDS IMPORT SHORTAGE 121KAFCO Model Success StoryFERTILIZER : ENERGY EFFICIENCY 50 45 40 35 30 25 20 15 10 ICOUNTRY KAFCO | JFCL | ZFCL | PUFF | BCIC | Ovegan, IM ENERGY, MSCFIMT | 24 29.5 40 50 39 35 Marco 113, Model Success StoryHSE RECORDS ENVIRONMENT : EFFLUENT AND EMISSIONS WORLD BANK GUIDELINE AND BANGLADESH STANDARD : Liquid Effluent : Parameter Unit WB Bangladesh KAFCO, Guideline Standard Actual pH 69 65-8 Around 7 NH3 as No ppm 10 50 <5 Urea ppm 1 - <1 BOD ppm - 50 <5 cop ppm - 200 <10 Suspended ppm 50 100 <10 solid Corporate Social Responsibility (CSR) + Graduate Trainee engineer Scheme (GTE) and Apprenticeship Scheme. + Health Support for Ma-O-Shishu Hospital, Ctg., for purchase an Ambulance & Appliances and Support for Ahsania Cancer Mission, Dhaka. + Computer Lab for Business Faculty of Chittagong University + Local Schools - Scholarship, Games & Sports. + Environment Issues- Tree plantation + Rehabilitation of local Chaturi Road. + Infrastructure -to build a 200 bed local Hospital in Bottoli, Anwara. 141 KaFCO. Model Success StoryKAFCO’S STRENGTH + COMMITMENT OF MANAGEMENT AND STAFFS. + MANPOWER: Experienced Managers, Trained Engineers and Skilled Technicians and Plant Operators + Use of IT Tools: To support Plant Oper. + DCS based Plant Operation + Risk Based Analysis and Inspection-RBI + Computerized maintenance Management System-CMMS. + Electronic Archiving of Technical Documents-e-documentation + Computerized Store and Inventory Control etc n & Maintenance Service Agreement + Process Licensers- Topsoe, Stac and HFT + General Contractor-Chiyoda Corporation + Critical Equipment Suppliers-ABB, Novo Pig none etc. UNIQUE PROCUREMENT RULES: + Qualified Vendor lists + Timely Procurement of Equipment and Services from Qualified Suppliers AUDITS: + Technical Audit on regular Intervals + Benchmarking with International Plants + Safety Audits-British Council + PDCS based Plant Operation + Product Qualifications FUTURE IMPROVEMENT To improve and reinforce Plant reliable Operation on sustainable basis Aiming the following: + APC: Optimized Process Control & Process Monit + OTS: Operatos Training Simulator + ERP System : Suitable for the Plant + KPI: Strategic management tool for the Plant (Key Performance Indicator) + Quality management System : based on ISO ISO-9001; ISO 14001, and OSHAS 18001 Target : July-2011 + Improving Environment ring Utilization of Vent Co 2: Production of additional Urea. Kakco 115, Model Success StoryKAFCO FUTURE Potential Option (Urea Revamp Case) GAS SUPPLY +5 MMSCFD +8% UREA PRODUCTION + 180,000 MT/Year +27% KAFCO-II-an option New gas supply +100 MMSCFD UREA PRODUCTION | +1 million ton New Plant CHALLENGE - MAJOR ISSUES GAS SUPPLY: + Inadequate NG supply. + KAFCO operated at reduced load for considerable period of time since commissioning. + Process plant had 12 shut downs due to stoppage of NG supply since commissioning. + Cumulative down time is 78 days for NG stoppage. LAND: For necessary improvement of the existing facility additional land is required WATER: As a Contingency Source of Surface water is studied to supplement well water. 1611¢aFCO. Model Success StoryMain Units KAFCO'S >-———_ Process Plants — ___,» >-———_ Utilitie |—__> & —> Ancillaries -———> —____> Products : H IN) ammonia x Hl UREA i) rs AMMONIA, UNIT Ammonia Plant Urea Plant Water Treatment Steam Generation Power Generation Ammonia Storage Urea Storage & Bagging NH3-995% H20-0.5% max AMMONIA, PLANT PRODUCES we CARBON DIOXIDE AS BY PRODUCT [> UREA {______» | EXPORT Model Success Story Marco 17KAFCO UREA PLANT PRODUCES , GRANULAR UREA - BULK EXPORT BAG EXPORT FOREIGN COUNTRIES BCIC + USES OF AMMONIA + As Raw Materials For DAP Product + As Raw Materials For Ammonium Sulfate + As Raw Materials For UREA + Anhydrous Ammonia uses as Fertilizer + Various Other Uses + USES OF UREA + As Fertilizer + Melamine Production + Urea-Formaldehyde Resins Nutrient For Ruminant Animal + Various Other Uses 1811¢aFCO, Model Success StoryAMMONIA PLANT AT A GLANCE Process : Haldor Tops @ e Rati Anhydrous Liq. -Used in UREA Plant Ammonia (NH3) as Raw material -1000 MT to Urea Plant Design Capacity 1500 MT/Day “500 MI for Export By - Product earontiencen con) See ReaD as Raw material RAW MATERIALS > Hz —» Ammonia (NH2) Natural Gas (CH,) ——» CO2—> Urea (NH2 - CO - NH2) CH4 - 94%, C2 - Cs - 5% Other (COz + Ar + No etc) -1% Total Sulfur - 7 ppm Max Steam (HO, g) |=———» _ For CH Cracking in 1RE —> N2 —» Ammonia (NH3) Air (O2 & N2) ——> 0) —>® CH4 Combustion in 2RF KARO 11 Model Success Story Karo 119Apart from economic growth and development in the private sector in Bangladesh KAFCO contributes in environment preservation, occupational health & safety, respect for human rights, empowerment and community life. These policy themes are vital in achieving success and in articulation of strength of relationships with key stakeholders and managing operations responsibly in an increasingly complex environment, KAFCO believes social responsibility efforts are embodied in consistent application of its core values which outline its commitment to conduct business in a socially responsible and ethical manner, support universal human rights, protect environment, maximize positive impact of its business on community, respect culture in which it operates and integrate social, environmental and economic considerations in its decision making process is and actions. KAFCO represents a model of successful joint venture in Bangladesh. 201KAFCO Model Success Story