OMAN - Sohar Aluminium Smelter.

The Abu Dhabi Water and Electricity Authority (ADWEA), OOC and Alcan Inc. of Canada (a unit of Alcan Group of the US) on Feb. 23, 2005, finalised a shareholders agreement signed in 2004 to have a $2.2 bn aluminium smelter built in Sohar. The agreement was signed by Shaikh Diab bin Zayed al-Nahyan, chairman of ADWEA; OOC Chairman and Minister bin-Sultan; and Cynthia Carroll, chief executive of the Alcan Group.

"This strategic project represents a landmark stage in the path of bilateral brotherly joint co-operation between the Abu Dhabi government and the Sultanate of Oman. The signing of this agreement marks the launch towards the construction of the Sohar Aluminium Smelter", said Shaikh Diab, adding: "The Sohar Aluminium Smelter is dependent on a power plant and ADWEA is presently involved in joint projects with other countries in the region which will set the preliminary platform for the prospective GCC economic integration".

Production is pegged at 325,000 t/d in the first phase in 2008, to be doubled after the second potline comes on stream two or three years later. A joint venture firm, Sohar Aluminium Co. LLC, has been formed to own and operate the smelter to be adjacent to the Sohar Industrial Area. The company will have a single AP35 potline together with associated carbon and casting facilities. The smelter will have its own 1,400 MW gas-fired power plant.

Minister bin-Sultan said: "With this joint venture, Alcan will provide the finest technology services to implement AP35 technology for the smelter. The project will put forward employment opportunities and bring added value to Oman".

Under a technology transfer agreement finalised on Feb. 23, 2005, Alcan will provide the smelter with a licence and related technical services to implement Alcan's AP35 technology. ADWEA will invest in the project and provide technical services and management support for the power plant.

Bechtel of the US has the EPCM contract for the $2.2 bn smelter. Tony Kinsman, chief executive of Sohar Aluminium Company (SAC), said the smelter will produce P1020 pure aluminium ingots and the primary offtaker is Alcan. He added: "The products are aimed at the North American and Asian markets, and I don't think we are in competition with Dubai or Bahrain".

Financing for the project will be a combination of debt and equity. "We expect financial close in the second half of 2005. The debt-equity ratio could be 50:50". Construction of the smelter was to begin soon after financial close and full production will begin by 2008.

SAC is owned 40% by OOC, 40% by ADWEA and 20% by Alcan. Alcan will have the option to acquire up to 60% of the second potline.

When the shareholders' agreement was signed in mid-2004, Ms Carroll said: "The project would offer Alcan an excellent opportunity to enhance its position as a leading low-cost aluminium producer and create further value for our Metal Group. It will utilize Alcan's most advanced version of its highly efficient AP30 technology".

Pertinent approvals have already been achieved such as the initial environmental approval. White and Case is the legal advisor and Citigroup is the financial adviser.

A 250,000 t/y calcined coke plant, with the product used to make anodes for aluminium smelting, has been promoted since mid-1998 by al-Baraka Economic Consultancy which is a private Omani firm. It is to be built in Sohar near the refinery and aluminium smelter.

Al-Baraka has said it intends to lead a consortium which would own this project and should include an international technology provider and a machinery supplier. A detailed feasibility study on the project has been done (see background in Vol. 62, DT No. 6).