Malaysian, Tanzanian firms sign $1.02b ammonia plant deal

DAR ES SALAAM (REUTERS) - Malaysia's Huchems Fine Chemical Corporation has signed a memorandum of understanding with two Tanzanian firms to invest US$800 million (S$1.02 billion) in a new ammonia plant following huge discoveries of natural gas in the east African country.

Huchems, a unit of the South Korean chemical manufacturer with the same name, signed the deal for the plant with Gro Energy and Infotech Investments of Tanzania on June 29.

"The plant will be located in Tanzania and will utilise the country's abundant natural gas resources. The parties expect to conclude a final agreement before the end of 2013," the companies said in a joint statement to Reuters.

East Africa's second-biggest economy estimates it has 41.7 trillion cubic feet (tcf) of recoverable natural gas reserves following recent offshore discoveries.

The investment is expected to lead to east Africa's first ammonia-based chemical manufacturing plant.

"The investment can contribute to the socioeconomic development of Tanzania... while also contributing to the growth of the agricultural sector throughout east Africa by being a regional producer of fertiliser," Mr Choi GyuSung, chief executive officer of Huchems Fine Chemical Corporation and Huchems Malaysia, said.

Tanzania has said it wants to encourage construction of chemical and fertiliser plants in the south of the country to create more jobs.

Residents of the southern Mtwara region are opposing construction of a 532km pipeline to transport gas to the country's commercial capital, Dar es Salaam, and have staged riots on several occasions to demand a bigger share of benefits from gas development.