International agriculture company invests big in Gabon

Global agriculture company Olam International recently announced two significant investments in Gabon – a fertiliser complex and an oil palm plantation.

The company has entered into an 80/20 joint venture (JV) agreement with the government of the Republic of Gabon to construct a port-based ammonia-urea fertiliser complex for a total investment of US$1.3 billion.

In addition, Olam has also entered into a JV agreement with Gabon’s government to initially develop in Phase I, 50,000 hectares of palm plantation, an investment of $236 million. Olam will hold 70% interest in the joint venture company to be set up, and the remaining 30% will be held by the government.

It is anticipated that planting would start in early 2012 and be completed by 2016. The plantation is expected to achieve peak yields of up to 26 metric tonnes of fresh fruit bunches per hectare. The investment includes setting up milling plants to extract crude palm oil, which will be sold in Africa and exported to the EU.

The fertilser complex is targeted to commence operations by the first half of 2014 and run at a full capacity of 2,200 metric tonnes of ammonia and 3,850 metric tonnes of urea per day by 2015, producing a total of 1.3 million metric tonnes of urea per annum.

Olam has signed a 25-year competitive natural gas fixed-price contract with the government to secure a guaranteed quantity and quality of gas as feedstock for the urea plant.

The President of Gabon, Ali Bongo Ondimba, who was in Singapore on a state visit said: “We are excited about the prospects of partnering Olam, one of the world’s leading agri-commodity companies, to build one of the most competitive fertiliser businesses in the world in Gabon. Our country is an attractive location for foreign investments in industries beyond the traditional oil & gas sector and we welcome Olam investing jointly with us to add value in Gabon to our natural resources and help achieve our country’s full economic potential.”

Responding to the Gabonese President’s comments, Olam’s group managing director and CEO Sunny Verghese said: “One of the key strategic thrusts in our corporate strategic plan announced in August 2009 was to build on our latent assets and capabilities to enter into adjacent new businesses. As announced, we had identified fertiliser manufacturing and distribution as a new area for expansion, leveraging the strong relationships we have built with growers and farmers in the producing countries coupled with our own direct investments in upstream plantations and farming assets in Africa and other parts of the world.

“We believe that Africa, and Gabon in particular, offer the best prospects to set up a urea manufacturing facility due to long term availability of natural gas at competitive prices and access to key end-user markets. We have found Gabon to be the ideal location for putting up a new urea plant mainly because Gabon has one of the lowest cost natural gas reserves in the world, offers a strategic port-based location, and has a stable government with pro-business policies,” he added.