(Adds details, quotes, share price)
OSLO, July 17 (Reuters) - Norwegian fertiliser group Yara (YAR.OL) has agreed to form a joint venture with Libya’s National Oil Corporation for the production and marketing of mineral fertiliser, Yara said on Thursday.
The venture will upgrade and operate plants in Libya and explore an expansion of capacity, Yara International ASA said in a statement.
For the National Oil Corporation (NOC) of Libya the venture is part of a strategy to attract foreign investment and expertise with the aim of diversifying the country’s economy, NOC’s chairman Shokri Ghanem said in the statement.
Yara will own 50 percent of the venture and the National Oil Corporation (NOC) and the Libya Investment Authority will own the other half, Yara said.
A Yara executive declined to say how much the company will pay for its half of the venture, but said it would aim to announce that once the deal is closed.
NOC will contribute its urea plants located at Marsa El Brega in Libya to the venture, which will take over operation of those facilities from September 2008, Yara said.
“The partnership agreement signed today covers upgrading of the existing production facilities at Marsa El Brega in Libya, and to study the feasibility of adding new world class fertiliser plants,” Yara said.
The plants now produce about 700,000 tonnes of ammonia per year, of which 150,000 tonnes are available for sale and 550,000 is used internally in urea production, and 900,000 tones of urea, Yara said.
Yara currently has limited activities in Libya, including marketing of some specialty fertilisers, but has no production operations in the North African country.
Yara’s investor relations chief Torgeir Kvidal said that if the partners decide to build a new ammonia-urea plant, it could be somewhat bigger than the current facilities “because the world-class scale has been growing”.
As an example of world-class scale, Kvidal mentioned a 1.3 million tonnes plant that Yara is building in Qatar.
Fertiliser production is an energy-intensive activity. And Kvidal said an expanded gas agreement would be needed before any such expansion plans could be made.
Yara Chief Executive Thorleif Enger said that the partnership was an “excellent strategic fit” and added: “This new cooperation will serve to further strengthen Yara’s position as the global market leader within the fertiliser industry.”
The announcement came two days after Yara reported record-high and forecast-beating earnings for the second quarter and Enger said the fundamentals of the business remain “very, very strong”.
Yara shares were trading up 2.4 percent at 364 crowns by 1246 GMT, slightly lagging a 2.6 percent rise in the Oslo bourse’s benchmark index .OSEBX.
Reporting by John Acher; editing by Rory Channing