Fertiliser industry-Kenya - President Kibaki recently announced the establishment of a Fertiliser and Seeds Fund to support what now appears to be a programme targeting an "agricultural revolution" driven by the need to make Kenya self-sufficient and secure in food production. It is apparent within the government and across the country that Kenya is determined to prioritise agriculture as an essential component of socio-economic development. To capture Kenyans' minds, hearts and educate them to embrace agriculture, the leadership should come up with a "catch phrase" to orient Kenyans' psyche towards agriculture. A few years ago, Tanzania came up with a national slogan, "Ukulima Kwanza" (Swahili for agriculture first), to guide the national campaign to boost farming. A successful and sustainable agricultural programme requires adequate water (rain and irrigation), inputs (seeds and fertilisers), credit support, effective marketing systems and extension services. The government and NGOs are visibly working on most of these requirements with Kenya Agricultural Research Institute developing appropriate seeds. The issue of fertiliser supply is important because it is a critical agricultural input that is subject to exogenous influences (global commodity prices, exchange rate, among others). Government agencies appear to have recognised the importance of gaining some control in supply of fertiliser since they now directly import a fraction of its requirements.

The Ministry of Agriculture PS, Dr Romano Kiome, recently demonstrated how much cheaper government sourced fertilisers could be compared with the free market commercial imports.

In the 1970s the country had a plan to establish a local fertiliser manufacturing industry. However, this plan was abandoned when the Kenren fertiliser plant project failed to take off. Whatever motivation and justification for a fertiliser factory then still persists today.

To bring supply and cost of the input within our control, we may need to again consider establishing a local fertiliser factory.

A feasibility study for a grassroots fertiliser plant, should establish technical and economic viability to inform interested private investors. A large captive demand for fertilisers exists in Kenya and rest of East African Community (EAC), therefore, providing a strong economic base for such a venture.

Initially, the study should focus on nitrogen based fertilisers (ammoniums, urea and nitrates) whose manufacture requires three raw materials that is air, water and natural gas (methane).

We have plenty of air and water while natural gas is available next door in Tanzania. By coincidence , there are two ongoing feasibility studies to import natural gas.

An EAC sponsored study is looking at the possibility of bringing piped natural gas from Dar es Salaam to Mombasa, while a Ministry of Energy feasibility study also plans to import liquefied natural gas to the port city.

The two studies are mainly targeting power generation, but there is no reason why fertiliser manufacture cannot be added to the natural gas demands.

Why it is opportune to commence "dreaming" of a natural gas based fertiliser industry is the possibility that the ongoing oil and gas exploration along the Kenyan coast could yield natural gas.

Experts argue that our continental shelf is "gas prone" since it has similar geological features as Mozambique and Tanzania coastlines, which are already producing gas.

It is not overly wild to expect that exploration blocks located on the South Coast and adjacent to Tanzanian border will yield natural gas.

If a feasibility study on local fertiliser manufacturing is conducted early enough it would increase available options for monetising potential natural gas finds for investors since they currently see power generation as the only main use for future gas discoveries.

As for the other phosphorous based fertilisers, which require phosphates as a raw material, our mining department should prospect for its deposits.

A simple rule of thumb tells me that if Tororo in Uganda has phosphate deposits, then somewhere in the vicinity of Mt Elgon on our side of the border should have a high probability of finding some phosphate. It is understood that Uganda is considering setting up a phosphates fertiliser plant at Tororo.

Renewed zeal

If we accept, as we should, that a fertiliser manufacturing industry should take a regional approach, then the combined EAC demand is immense and project economics should even be better.

This would then dictate a Tanzania location for the first plant for nitrogen fertilisers as natural gas is already there. Some of the Ugandan oil fields would soon produce natural gas associated with crude oil, providing another avenue for fertiliser manufacturing.

The industry should no longer be a dream but a feasible business proposition that has come of age. We have the raw materials needed and a wide market supported by renewed zeal in agriculture.

Local manufacturing would have a positive impact on our balance of payments, through imports substitution and regional exports. The Agriculture ministry should initiate discussions with its Energy counterpart to explore future joint usage of natural gas.

The aim should be to have a sustainable and affordable fertiliser to support the agriculture for food security and export of produce.

Mr Wachira is the director of Petroleum Focus Consultants.

George Wachira

Business Daily/02/11/2011