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Arab Potash Company contributes to Jordan's national development

Article - January 28, 2015

H.E. Jamal A. Al Sarayrah, Chairman of the Board of Arab Potash Company (APC), outlines his company's work in Jordan.

  • Contribution to national development – Overview of Jordan’s potash industry contribution to the socioeconomic wellbeing of Jordan

The Arab Potash Company is one of the first and most successful examples in attracting foreign direct investment to the Kingdom.  Today APC is one of the Jordan's biggest exporters, one of the largest earners of foreign currencies, and one of the largest providers of work opportunities in the private sector, with a workforce of 2,206 employees at the end of 2013 plus 287 employees in its subsidiary and affiliate companies.  Most of these employees come from local communities in Jordan's highest concentration of pockets of poverty and unemployment.

At the same time, APC pays around 60% of its annual profits to the Treasury in the form of profit dividends, corporate tax, royalties, road tax, port fees, rent of land, and scientific research fees.  In 2013 this amounted to nearly JD 78 million (US $ 111 million).

  • Challenges - Effects of the political turmoil and the region’s instability.

It is well known that political turmoil and instability are bad for business because of their negative effects on the confidence of potential investors and trade partners.  However, Jordan is fortunate in that its wise and far sighted leadership has succeeded in steering a safe course through the troubled waters of the Middle East.  Jordan is and will remain, God willing, an oasis of stability and a beacon for progress in the region.

  • Challenges - Building thedykes of the plan on the unstable sea bed,

APC dykes are located in a complex geological environment and are subjected to various ‘ground-bounded’ risks.  Therefore APC Dykes are considered as a “living structures” as they are subjected to constantly changing boundary conditions.   We monitor continuously the conditions of our dykes, and perform maintenance when necessary and prudent.

The challenges that face the construction at Dead Sea area can be summarized as follows:

  1. Active tectonic setting (ground movement along active fault and salt dome upward movement).  Such an active setting can lead to seepage through faults, formation of cracks and induced earthquakes. To deal with these phenomena, APC adopts high standards in the construction of buildings and plants to resist possible high magnitude earthquakes.
  2. Presence of soluble minerals in the soil of the area such as salts.  Such material can dissolve when it gets in contact with brackish/fresh water, which in turn can lead to the formation of subsurface cavities and sinkholes.
  3. The foundations of the dykesrest on very soft clay that possesses low load-bearing capacity. This required special engineering attention during construction as it would be impossible to raise a 10m-high dyke on such soft material. The dyke needs to be constructed in stages to ensure that the foundation is consolidated (i.e. the strength increased) prior to starting the second stage. We use special geotechnical instruments installed in the foundation at different depths to monitor the strength gain. The soft foundation means also large settlement.  As a result, APC raisesthe dyke level from time to time to maintain its functionality.
  4. Continuous dropping of the Dead Sea level, which leads to change in the boundary conditions (the design basis) such as changes in the ground water level (piezometric head). This also leads to increased settlement and facilitates the formation of sinkholes due to the movement of subsurface fresh water toward the sea to compensate the regression of the sea
  5. The international standard tests for the soil cannot be directly adopted to test the Dead Sea soil due to the unique mineral consistency (such as the presence of soluble minerals in the soil) and the presence of hyper-saline pore water.
  6. The design of any building within our site is based on the high seismic zone standard; therefore APC conducts regularly seismic surveys at the site to ensure/confirm the seismic zone. For our latest expansion works the design basis was zone 4  parameters 
  • Challenges -The increase in electricity tariffs and the high costs ofproduction

Until 2008, APC had one of the lowest cost of production per ton among potash producers.  Since then production costs rose considerably as follows:

  • In 2008 royalties rose from JD 15 per ton to JD 125 per ton, with a ceiling of 25% of net profit. This makes APC's royalties the highest of all potash producers in the world.
  • In 2009 rent was raised from JD 200,000 per year to JD 1.5 million per year.
  • In 2011 the water tariff was raised by an additional JD 1.3 million annually.
  • In 2011 the electricity tariff rose by 150% which cost the Company an additional JD 31.5 million annually.  In addition the electricity tariff has been raised by 7.5% annually in the period 2013-2017

These sharp rises have now laced APC among the highest cost of production producers in the world, which inevitably makes it challenging for the Company to maintain its competitiveness.

  • Performance – Arab Potash Company as the eighth largest potash producer in the world and the soleproducer in the Arab world. Evolution of the company’s output since its creation in 1956

The Arab Potash Company was established on 7th July 1956 as a pan-Arab public shareholding company to extract potash from Dead Sea minerals. As such it was one of the first joint Arab economic projects.  In 1958, the Government of the Hashemite Kingdom of Jordan granted APC exclusive rights to extract manufacture and market minerals from the Dead Sea until 2058.

In 1976, the project began tests and experiments to determine the parameters of various technologies and ideas and in 1979 construction work started on the project, which was completed in 1982. 

A major engineering challenge was to build the dykes on the unstable sea bed. Sixteen million cubic meters of earth material were displaced in the process of building about (117) kilometers of seepage proof dykes eight meters wide at the top.  More dykes were added later.

In 1983, APC began production at an initial total capacity of 1.2 million metric tons of product.  Production capacity was later optimized to reach 1.4 million tons at the end of the eighties.

In 1988, APC posted its first profit and began plans to diversify production by studying Bromine and downstream products.

In 1994, construction of a second plant of a 0.4 million ton capacity at a cost of US $ 120 million brought up total production capacity to 1.8 million tons.

In 1997-99, APC started work on bromine and derivatives plants and potassium nitrate, magnesia and salt, at an investment of about US $ 500 million in the downstream industries. It signed JV agreements with Albemarle of The United States for the bromine complex and Kemira of Finland for the potassium nitrate complex in Aqaba.

In 2003       PotashCorp (Potash Corporation of Saskatchewan) bought 28% of APC shares from the Government of Jordan. Sales surpassed 2 million tons for the first time.

In 2004       construction began on the second cold crystallization unit at an investment of USD 450 million to bring capacity to over 2.4 million tons. In the same year, APC opened its first overseas sales office in Kula Lumpur- Malaysia.

In 2007       APC became 100% owner of Kemapco after buying Kemira of Finland’s shares in the Company which produces 120K of the high value nutrient (potassium Nitrate)

In 2010       the new cold crystallization plant was inaugurated by His Majesty King Abdullah and APC reached an official potash production capacity of 2.45 million tons. As part of the expansion, The Aqaba Warehouse became the largest Potash Export terminal in the world with a capacity of 300,000MT. 

  • Diversification – Reasons behind the production of Bromine and other downstream products. Importanceof such products to the overall portfolio of the company

Jordan Bromine Company (JBC) was incorporated in January 1999 as Joint venture between Arab Potash Company and Albemarle Corporation, registered as a private Free Zone Company located at Safi South of the Dead Sea in June 2000.

JBC with its diversified range of its high-quality and safe products reaching more than 30 countries Globally, managed successfully through engineering chemical solutions to deploy its products to diverse industries and sectors that include agriculture, construction, pharmaceuticals, electronics, cosmetics, food production and processing, textiles and plastics among others; we successfully contribute to global markets

JBC is committed to long-term growth and excellence through customer and supplier partnerships, creating value for all.

  • Joint Ventures – Input received by APC from its partnerships with Albemarle of the US and Kemira ofFinland.

Our shareholder Albemarle Corporation viewsits partnership with Arab Potash Company as being strategic and further strengthens JBC's Global position as a key bromine producer.

  • Insights on the 15 year agreement between APC/Jordan Bromine and Nobel Energy of HoustonTexas

This is an agreement negotiated and signed by private companies: APC and Jordan Bromine Company on the one hand, and U.S.-based Noble Energy on the other.  The benefits of this agreement will be lower production costs and higher competitiveness for APC and JBC, which will enable us to continue as Jordan's highest private-sector earner of hard currency, in addition to our financial contributions to the national Treasury. The agreement will also protect the interests of our 2,176 employees, and sustain our CSR programs.

Ultimately, as a major Jordanian public shareholding company, APC has a responsibility to its shareholders, employees and community. This deal is essential for maintaining our market competitiveness.

  • Natural Gas – Expectations on the amount of energy cost savings such agreement will have

The shift from heavy fuel, which is used at present, to the less expensive and more eco-friendly natural gas, which we expect to start receiving in 2016, is projected to produce total cost savings of JD 235 million, or average savings of JD 11 per ton of potash produced.  This is essential to maintain our long-term operations and growth as Jordan’s largest private-sector earner of hard currency, one of the largest contributors to the Treasury, and one of the largest private-sector employers in the country, particularly as we cope with the drop in global potash prices.

  • Expansion – Investments in cold crystallization units and its consequent increase in capacity. Futureexpansion plans and your strategic international presence

The first cold crystallization plant (CCP1) was built in 1994 with a total capacity of 400,000 tons per year. The plant operates under ambient conditions without the need for steam (which is used in the old hot leach plant).  The plant is built of carbon steel because the ambient process temperature eliminates the need for noble metals such as inconel, monel, or titanium, which makes the CCP plant operating cost much lower than the hot plant.  The plant was upgraded to produce more than 500,000 TPY, and in 2008 production reached 572,377 TPY.

The second cold crystallization plant (CCP2) was built and put into operation in September 2010 to give a total production of 450,000 TPY.  The new plant is similar to CCP1, but it encompasses certain areas of modified processes and advanced technology.  The modifications tackle the areas of crystallization, flotation, screening, leaching and others. An advanced control system (DCS) was incorporated to facilitate control of the production process. Highly efficient dust collection systems were included in the new plant to ensure minimum dust emissions into the surrounding environment.  A new compaction plant was also installed to produce more than 250,000 TPY of high quality granular potash. The new compaction plant comprises a post-treatment unit intended for enhancing the quality of granular potash.  The plant has demonstrated that it can achieve design capacity of 450,000 TPY.

In 2012, APC evaluated several scenariosfor possible future expansion.  One scenario was to increase its capacity to 3.2 million TPY, but any expansion decision would be guided by the state of the market and cost of production. 

At present APC's main focus is to minimize the cost of production in order to enhance the Company's international presence.  One major initiative in this area is to replace the burning system for our boilers and dryers, from heavy fuel to natural gas, which will produce a considerable reduction in production costs.  APC also considers generating all its electricity from gas.  Another initiative is to reduce the cost of water by financing the construction of Wadi Ibn Hammad Dam at a cost of JD 26 million (ca US $ 37 million) to harvest four million cubic meters of rain water, which would address some of APC's needs and help provide drinking water for local communities. 

Also as part of its work to expand production capacity, APC is conducting a site investigation of the collapsed dikes around the SP0B pondto determine the most cost-effective way to make use of this pond, which would increase potash capacity by approximately 180,000 TPY. Preliminary results of this study are expected in late 2014.

  • Aqaba warehouse – Competitiveness of such infrastructure and the role Aqaba’s port has in the futuresuccess of APC

The Aqaba Warehouses is sufficient at the present rate of production.  It consist of the following facilities:

  1. Underground unloading facility, which incorporates 2x2 unloading bins in a parallel arrangement that allows the unloading of two trucks simultaneously.  The unloading capacity is 800-1,000 Mt/hrs, which is sufficient to unload 140 potash trucks or 7,000Mt of potash per day, or 2.5 million Mt per year.  There is no need for expansion of this system at the present time.
  2. Storage capacityof the existing two warehouses is 285,000Mt.
  3. Product reclaiming and conveying:  Each existing store is equipped with a 2,000 TPH scraper reclaimer and a 2,000 TPH reclaim belt conveyor.

Upon completion of the Aqaba Port new jetty and rehabilitation of the existing one, APC will achieve the following strategic goals:

  1. Ship loading rate will be increased at least by 25% (from 750Mt/h to about 1,000Mt/h), which will increase dispatches and reduce demurrages.
  2. Higher customer satisfaction since shipments will be delivered on time.
  3. The risk of product contamination with other materials will be significantly reduced.
  4. Environmental conditions during ship loading operations will be significantly improved

Moreover, construction of the new jetty and rehabilitation of the existing one will solve a number of operational and technical problems with the current , mainly:

  1. Lack of maintenance manpower for maintaining port facilities and equipment for both emergency, as well as preventive maintenance.
  2. Low efficiency of some transport and handling equipment, such as conveyorbelts, loaders, unloaders…etc.
  3. Stoppages (sudden, emergency, trouble shooting) of loading and unloading mainly due to sudden breakage, damage, wear and tear and failure of control devices. This causes emergency shut downs and interrupts loading operations.  Frequent failures occur due to the lack of scheduled and preventive maintenance for such devices and equipment.
  4. Lost time caused by the operation of the Industrial Port by JPMC staff during the operating shifts exchange. Normally (1.5-2)hour per shift change is lost.
  5. Lost time resulting from bad weather conditions (high windspeeds, or no wind) which has delayed our ship loading operations for about 220 hrs.from the beginning of this year until Oct 27th,2014.
  6. Lost time required for leading ships for berthing and for departure, especially due to long wait times for tug-boats.
  • Human workforce – APC’s strategy in terms of maximizing the potential of its labour. Benefits granted toemployees and the reasons behind APC being named one of the best environments to work in Jordan

APC's first priority is to provide its employees with a safe, healthy, and rewarding working environment.  As a result the Company reviews and updates its safety procedures regularly and holds awareness sessions to spread the culture of safety among it workers.  These efforts are successful as this year we have celebrated 4 million working hours without time lost injuries, which are injuries that require workers to take time off for treatment.

As far as rewards are concerned, APC's average monthly salary amounts to JD 1,635, which is above the national average.  Human resource studies conducted indicate that APC workers are paid well above the national average, at a level compatible with salaries paid in Gulf countries.  The incentives package provided by APC includes:

  • A housing estate for its employees and their families at Ghor Al Safi and Aqaba,
  • Free transportation for workers between Ghor Al Safi and Amman, Karak, and Tafileh.
  • 16 months' salaries annually
  • An annual bonus calculated on the basis of profits
  • A savings fund
  • Housing loans
  • Health and life insurance for employees and health insurance for their families    
  • Post-retirement health insurance
  • Study grants for the children of employees and retirees
  • Corporate Social Responsibility – How does APC collaborate with the Jordan society to create a betterliving environment and its annual contributions

APC is a major contributor to the development of local communities through its active CSR program, which amounted to JD 10 million (US $ 14 million) in 2012 and 2013.  In this program APC focuses on translating the vision of His Majesty King Abdullah II Ibn Al Hussein, that the first "priority is a better life for all Jordanians" into reality by supporting local communities and working to address their needs in ways that raise local living standards and contribute to improving services provided in different sectors, in the aim of achieving social balance and sustainable development.

To fulfill this outlook, APC supports projects in all parts of the Kingdom in in the key sectors of water and sanitation, health services, education, building public facilities, professional and labor association activities, social welfare, welfare package campaigns, sports federations and clubs, municipal services, restoration of mosques and churches, and fighting poverty

  • Environmental Sustainability – Impact of your production activities on the Jordanian environment.Technology as the way to a cleaner future

APC has carried out several studies such as Initial Environment Evaluation (IEE) to evaluate the impact of potash production and possible expansion on the surroundings.  Items considered included increase of emissions, truck trips to Aqaba, expanding potash storage facilities at Aqaba, and technical studies to determine the best ways to reduce the stack emissions to comply with international standards.

In general, potash production is considered to be one of the safest activities in industry and its impact on the environment is limited.  Activities involved with the production are well controlled and impacts are measured through multiple procedures and periodic measurements that comply with the requirements of the Ministry of Environment and the international environment standards (ISO 14001) that is granted to us by Lloyds Register.

Environmentalissues at our plants and facilities are summarized as follows:

  1. Dust Emissions:  The conclusion of the technical studies conducted to minimize dust emission was to install high efficiency bag house filter systems, which is best available technology.  This will reduce the emissions within the plants, at the dryer stack, and at the Aqaba storage facility.  At present APC has this technology installed in one cold plant, and we will install it on the hot plant in October 2015.  The final cold plant will have this equipment installed in 2016. 
  2. Truck Fleet to Aqaba:  Measures are now being taken to reduce the number of truck trips to Aqaba by increasing the truck/trailer capacity through replacing the carbon steel trailers with light alloy steel trailers.  In addition the new trailers will have less spillage on the roads. 
  3. Waste Water:  Environment needs for wastewater have been addressed by the construction of lagoons for wastewater effluents at the plant's township.  APC has started to re-use the treated effluent from the township for irrigation within APC facilities.
  4. Oil waste:   A new oil collection and separation station has been opened at our scrap section.
  5. Solid waste: Solids are disposed properly incompliance with the Ministry of Environment regulations through our scrap section.
  6. Future projects:   Installation of two ambient air monitoring stations to measure airborne particles from our plants.

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