The decision by the Government of Oman to increase the price of natural gas supplied to urea producer Omifco will lead to cost escalation of about $120 million (about Rs 600 crore) for the company.
Oman India Fertiliser Company (Omifco) is an India-Oman joint venture company that produces urea, a key fertiliser, and ammonia.
Oman has increased the price of gas to $3 per million British thermal unit (mBtu) from January 1 for all the industries including Ominfco, which uses gas as feedstock to produce urea, Fertiliser Ministry sources said.
The earlier price of natural gas supplied by Oman’s Ministry of Oil and Gas was 77 cents per mBtu, sources added.
Oman has given India time till March 31 to respond to its offer on the price increase in natural gas, the Ministry sources said.
According to industry sources, the cost of producing urea will go up by $60 per tonne at the Omifco plant, which produces around 2 million tonne of the nitrogenous crop nutrient. This will lead to a cost escalation of about $120 million if the prices are increased.
The reason behind the increase in prices is being attributed to a drop in oil and gas reserve estimates and street protests for more jobs and reforms in Oman, industry sources added.
The Sur (Oman)-based Omifco is a joint venture between the Indian Farmers’ Fertiliser Cooperative (Iffco) and Krishak Bharati Cooperative (KRIBHCO) and the Oman Government.
While the Oman Government’s investment arm, Oman Oil Company, owns 50 per cent, Iffco and KRIBHCO own 25 per cent each in the joint venture.
Ominfco ships around two million tonnes of urea, which is its entire production, to India under an agreement the country has with the Oman Government.
The company currently sells urea to India at $130 per tonne, while the international prices are hovering in the range of $400-433 per tonne.