So, in Part II we promised to provoke discussion on how we can utilize and turn the FISP money into a win-win situation. Let’s now assume we are spending ±US$500 million per year on FISP, that’s US$2.5 billion to be spent in the next five PF years.
Soil scientists have always told me that currently there’s wastage on fertilizer due to using the same formula fertilizer for every soil type in Zambia. Therefore, we need to find money to beef up research for new improved fertilizers suitable for different soils in each region/district with the added advantage that we shall now be subsidizing FISP via advanced R&D at NCZ not forgetting the valuable contribution from research scientists already at Mount Makulu and I’m told Golden Valley Research Station in local formulation and production of selective fertilizers and the net effect will be the number Zambians and number of the bags of fertilizer per farmer can now not only be locally produced but increased or even decreased should research prove newer more effective fertilizers suitable for various specific Zambian soils are effective in reducing the quantity of fertilizers used while producing the same quantity bags of maize.
Similar to costs on petroleum, current fertilizer costs include several stages from fixed refinery and plant costs, refinery and plant margins, sea and inland freight from the various ports of discharge to Lusaka and don’t forget we’ve the local middleman (trader) margins.
Mr President, you may have by now guessed that just by removing the sea and inland freight costs and middlemen margins from the local fertilizer production costs at NCZ can reduce the cost to Government and private commercial farmer without affecting the NCZ plant profitability.
In Part II I pointed out that: I’m awake to the fact that many experts in this field may immediately cast doubt on the use of this technology at NCZ due to the real costs involved in using coal gasification technology Vs, natural gas for methanol fertilizer production.
And I said at face value this is correct because similar doubt was cast by world renowned metallurgists and chemical engineers when while at (NCCM/RST) we embarked to become the largest copper solvent extraction operator country in the world in the early 70s.
Unfortunately despite this disclosure, some expert colleagues are still doubtful. So, let’s quickly and generally without going into too much scientific detail expand on this. Of the world’s nitrogen demand, 85% is for fertilizer primarily derived from ammonia in the form of urea, ammonium nitrate, phosphate and sulphate. Of course other uses of ammonia include fibres, resins, industrial refrigeration, pulp and paper industries that can in fact be profitably set up in Zambia but only when the chemical raw materials are locally and cheaply made available. “Cheap” starting chemical raw material feedstock is the catch word in all these industrial chemical processes especially if we are to compete in the regional export markets.
So, we are aware ammonia (NH3) which is made up of one part Nitrogen and three parts Hydrogen is the base chemical raw material and it can be produced from different feedstock starting with complex multi-electron transfer reaction of our everyday drinking Water (H2O) which is made up of two parts Hydrogen and one part Oxygen with Air which as we ‘know’ consist 78% Nitrogen. But we cannot at present use this sophisticated complex process reaction of Water with Air to produce our ammonia because the science is still very far away from being able to replicate nature’s efficiency at converting nitrogen from the air to useful chemicals, which is done by nitrogen fixing bacteria.
We are left with natural gas, crude oil and the case for Zambia, at least for now until we discover natural gas or crude oil in the allotted exploration blocks; the only feedstock readily available to us for ammonia production is our local coal. But every scientist talks and knows that Natural gas is the preferred feedstock because it accounts for more than 95% of ammonia tonnage primarily because:
It is intrinsically the most hydrogen rich and therefore contributes more hydrogen compared with other feedstock on a unit weight basis (remember the term is-UNIT WEIGHT BASIS). Also the heavier feedstock like coal and crude oil are more complex to process and therefore the capital costs are higher compared to natural gas.
Again remember by using our local coal deposits it’s the higher CAPITAL COSTS that are of concern– right?
So, the major constraint in using our VERY CHEAP local coal as the feedstock raw material of first choice will be the higher plant capital cost. But coal as a raw material feedstock in developed economies where comparative advantage in feedstock raw material choice comes into play is not necessarily cheaper than natural gas which is readily available or can be cheaply imported via pipeline and in for our case- comparative advantage favours our cheap local coal costs.
In addition, Ammonia from clean coal technology has in recent past (2008) via new highly sophisticated commercially proven processes been made more cost efficient- www.schlissel-technical.com/reports. Including additional technological breakthroughs found here: ammoniaindustry.com/ammonia-plants-in-the-pipeline-will-they-wont-they.
The other consideration would now be operating costs that includes wages that are extremely low in Zambia in comparison to the developed economies and plant operational materials such as catalysts and spare parts that will be locally produced in auxiliary industries to be set up to supply NCZ and several other Chemical Industries that’ll now be able to be constructed using local chemical raw materials such as the case for cobalt, copper, cesium, molybdenum and nickel catalysts that are all locally available nonferrous and ferrous metals and the incorporation of industrial scale 3D and 4D printers for plant spare parts production.
I’m sure there many young Zambian metallurgist, chemical, electrical and mechanical engineers, physicists and chemists with the motivation and expertise eagerly waiting to take up these challenges beyond current technological breakthroughs in this science.
These young Zambian men and women will be able to discover patent technologies from their research work and make things that other people in the world will desperately want to buy from us and that other countries have up to date been dreaming of making.
What we must realise is that the ammonia/urea industry is characterized as a commodity producer in a mature market.
The demand for fertilizers is driven by population growth; it is estimated that without mass production of this chemical as many as a third of the world population as we know it wouldn’t exist today-it has helped improve crop yields and sustain large populations- so as the Zambian population grows so will our fertilizer needs and we cannot continue to rely on imported fertilizers for our FISP program – that means, the economics as well as the politics will in the end have to drive our fertilizer and chemical industry project needs.
We said to make ammonia at NCZ we’ll have to begin with coal gasification at high temperature and pressure to get carbon monoxide and hydrogen and then again at high temperature and pressure we’ll be able to get our ammonia from the methane so formed.
Methane is a basic chemical that burns and can directly be used to drive the IGCC plant and the surplus syngas is what can be used as feedstock starting chemical raw material for a wide range of chemical compounds manufacture.
These are the basics. I hope my colleagues are now able to figure this out including the need for a strong R&D division at NCZ. The rest of the technical hullabaloo is beyond the scope of newspaper discussion.
Let’s get back to our main discussion.
So far if the ball park figures are true, government spends ±US$1.224 billion per year on Petroleum and FISP subsidy (I must say this figure looks ridiculously out of the whack bearing in mind this ball park number is based on newspaper and other non-government reports and could therefore be exaggerated especially now that we’ve been able to read even more reports from the same sources that the government will only be negotiating for a US$1.20 billion IMF loan.
But if these numbers are true, then it appears in five years the PF government will have spent US$6.120 billion on subsidies. That’s a lot of money and no wonder the IMF and other economists’ colleagues think its wasteful use of our money that begun during the unpopular regime of late President Levy Mwanawasa.
It means if the IMF should convince government to get rid of subsidies, the money from government that we intend to use for the NCZ-R&D plant will disappear and projects such as these will also disappear. Should that be the case, it’ll be back to imports of fertilizers and fuels with subsidies phased out gradually if not instantly. For now, let’s assume we’ll be borrowing from the IMF to import fertilizers and fuels only as I doubt the IMF will allow any of their money to be used on ambitious value chain addition projects. So what should we do?
The worst case scenario and major problem we shall continue to face is that our government will borrow from the IMF so we can continue to buy foreign made chemical raw materials and goods for our existing agriculture needs, factories and industries and payback using the same money from these same old tired economic activities such as the limited copper export receipts from mining, from tourism and the little agriculture export receipts.
We should not be held back. Next time we’ll attempt to provoke discussion and look at possibilities of growing the economy through these value addition growth chemical industries for local and exports of high value goods and do away with the IMF funding forever.
Just a thought,