MIGA guarantees energy-efficient fertilizer project in Bangladesh
US$1.3 billion Ghorasal Polash plant will reduce carbon emissions and improve the lives of smallholding farmers
Bangladesh is taking steps to promote energy-efficient projects that also provide significant sustainable development benefits, one example being, a new fertilizer plant designed to replace two existing obsolete ones.
The US$1.3 billion Ghorasal Polash urea fertilizer plant project has secured backing from the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group. MIGA announced on March 12 the issuance of US$357 million in guarantees to support the construction, installation and operation of the plant. The guarantees are issued to HSBC and MUFG for up to 14 years against the risk of the non-honouring of sovereign financial obligations.
The two banks, along with Japan Bank for International Co-operation, are providing the facility for the project. This is the largest financing backed by the export credit agency in Bangladesh.
The plant will be owned and operated by the state-owned enterprise Bangladesh Chemical Industries Corporation (BCIC), while the engineering, procurement and construction will be undertaken by a consortium consisting of Mitsubishi Heavy Industries and China National Chemical Engineering No 7 Construction Company. Commercial operations are expected to begin in 2023.
The new plant will have a production capacity of 2,800 metric tonnes per day and replace two existing obsolete facilities run by the Urea Fertilizer Factory Limited and Polash Urea Fertilizer Factory Limited. It will more than triple the combined output of the two existing plants while using the same amount of natural gas. Furthermore, the new plant will produce urea at about US$140 less per metric tonne than it costs to import fertilizer, resulting in significant cost savings and related reductions in the government’s fertilizer subsidy bill.
"This project will help improve the lives of smallholding farmers across Bangladesh while reducing the fiscal burden and boosting domestic production of fertilizer,” says MIGA chief operating officer Vijay Iyer. “Moreover, with cleaner and more efficient technology, the project will increase energy efficiency and reduce emission impacts.”
The project will also be significantly less carbon-intensive than the existing sites, resulting in a greenhouse gas (GHG) emission savings of 433,000 tonnes of carbon dioxide (CO2) per year. The project will be the first fertilizer plant in Bangladesh to use carbon capture technology, which is designed to capture 240 tonnes of CO2 per day.
The project will also have direct development impact, generating around 2,000 jobs for workers during the demolition of the obsolete plants and the preparation and construction of the new one.
Urea fertilizer is an important input in Bangladesh’s agricultural industry, and it is used by small farms, which constitute around 88% of all farms in the country. Increases in farm incomes accounted for 90% of poverty reduction in Bangladesh between 2005 and 2010, and increases in the use of urea fertilizers are likely to sustain this trend. However, the lack of new investment in the fertilizer sector has resulted in a decrease in domestic production, forcing the country to rely on more expensive imports.
The project is expected to contribute towards the transition away from more expensive fertilizer imports and help the sector achieve greater self-sufficiency. Agriculture contributes around 15% of Bangladesh’s annual income and 45% of its total employment.
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