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Egypt’s Orascom Construction Industries (OCI) has signed a preliminary agreement with Algeria’s oil and gas company Sonatrach for the construction of an ammonia and urea plant in Algeria at a cost of US$746mn.

The plant with a capacity of 1mn tons per year is to be built in the industrial zone at the port city of Arzew.

OCI will own 51% in the plant and Sonatrach, 49%. It intends to enter long-term project finance agreements with Algerian and international banks to obtain funding for the venture.

The project will be shortly submitted for approval to the Algerian National Council for Investments. Based on the agreement and necessary approvals, Sonatrach will also enter into a 20-year gas supply agreement with the new plant.

OCI has presented a feasibility study to Sonatrach and will act as lead project developer. Soci&eaute;té Générale is financial advisor and White & Case has been appointed as legal advisor.

“OCI has already received several expressions of interest from international fertiliser traders to enter into long-term offtake agreements for the plant’s output,” OCI chief executive officer, Nassef Sawiris, says.

He affirms that Algeria is a core market for OCI and that the firm has been encouraged by its success in the Algerian construction and cement markets. “We continue to be extremely bullish on the economy and the investment climate in Algeria,” adds Sawiris, adding that OCI has more than 2,000 Algerian employees in its workforce and would continue to tap the country’s pool of talented human resources for future projects.

OCI’s latest investment in Algeria was a US$138mn joint venture project to establish the country’s first white cement plant with a capacity of 1,500 tons per day on a site located 45km south of Arzew. The plant is expected to enter production by mid 2007.

In another large fertiliser project, OCI last October acquired a 30% stake in the Egyptian Basic Industries Company (EBIC), which is constructing a new ammonia plant at a cost of US$540mn in Ain Sokhna, Egypt. The EBIC plant with a production capacity of 2,000 tonnes per day will be operational in early 2009.

OCI, which was founded in 1976, focuses on construction and manufacture of building materials including cement and paints along with infrastructure development in the MENA region.