The purpose of this Bill is set out in the Long Title and outlined in the Explanatory Memorandum which has been circulated to Senators. Briefly, it is to provide for the financing and control of Nítrigin Éireann Teoranta on the lines of existing legislation relating to certain other State concerns such as the Electricity Supply Board, Irish Steel Holdings, Bord na Móna and Min Fhéir Teoranta.
The principal object of the Bill is to provide for repayable interest-bearing advances from the Central Fund to enable Nítrigin Éireann Teoranta to undertake on behalf of the State the establishment of a nitrogenous fertiliser factory at Arklow.
I should like to emphasise, at this stage, the fact that all moneys advanced to the Company will be repayable with interest, on the lines of advances made to the Electricity Supply Board and Board na Móna. There will be no grant or subsidy assistance for this industry and no tariff or quota protection in any shape or form.
Full information about the selection of the site for the factory, the raw materials to be used and the nature and quantities of the products to be manufactured, as well as the name of the contractor engaged to erect and equip the factory and the approximate aggregate cost of the project has been published.
I can give the House an unqualified assurance that, since the inception of the State, no industrial proposal has received a more thoroughly searching examination than that to which the Arklow project has been subjected. The decision to seek binding tenders for the establishment of the factory was taken by the Government on the basis of a unanimous report made to them through me, after a final objective and completely uninhibited investigation by a Committee set up by me to undertake the assignment. The subsequent examination of the tenders, with their guaranteed costings, confirmed fully the findings of the Committee that an industry could be established at Arklow to produce nitrogenous fertilisers to meet the growing requirements of Irish farmers and to make such fertilisers available at prices at least as favourable as the prevailing import prices, without protection or subsidisation.
The case, economic and otherwise, for the establishment of the factory has been given broadly in the Explanatory Memorandum. I have, of course, been furnished by the Company, in confidence, for my consideration and for consideration by the Government with comprehensive information on all the commercial aspects of the project including capital, production and distribution costing. The procuring of this information involved a full-scale and intensive investigation over a protracted period.
Senators may wish me to recapitulate the history of the investigations which led up to the Government decision to go ahead with the project. This industry has been under consideration since the early 1930's and might well have gone ahead some years later were the negotiations not interrupted by the outbreak of hostilities in Europe. The prospects for the industry were kept in careful review during the post-war period, and when it became clear in recent years that considerable expansion in the home demand for nitrogenous fertilisers was about to take place, a special Committee was set up in 1959 to report on the practical considerations involved in establishing a factory based on peat.
This Committee consisted of senior officers from the Electricity Supply Board, Bord na Móna and Ceimicí Teo. with special qualifications and experience in the engineering and chemical fields, as well as economist and administrative representatives of the Departments of Industry and Commerce, Finance and Agriculture, who were experienced in dealing with the fertiliser industry over a considerable period of years.
The Report of this Committee was submitted in July, 1959, and while it was being considered by the Government a considerable reduction in import prices of nitrogenous fertilisers took place. The Government announced in October, 1959, that, having considered the Committee's Report, it was satisfied that the project would be economically feasible at prices prevailing before the recent drop in import prices but that it was not intended to put the project into operation until it could be shown that such a step would be economically sound and of advantage to the farming community. I may say that this Committee was confined to the consideration of peat as a source of gasification for the production process.
In September, 1960, the Committee was re-established with additional representation from the Department of Transport and Power and the Economic Development Branch of the Department of Finance. The re-established Committee were not confined in their terms of reference to peat as a means of gasification. Detailed studies were secured from the foremost chemical and engineering firms in Britain, France, Germany and America, and further consultations took place with all possible sources of technical and commercial information in this country about production, distribution and application of fertilisers.
The Committee in their Report submitted in June, 1961, unanimously concluded that a nitrogenous fertiliser factory operated by a State Company at Arklow, using fuel oil and Avoca pyrites, could produce nitrogenous fertilisers for sale, without subsidisation, at prices in line with prevailing import prices. The Committee's recommendation was made in the context of a factory with a design capacity of about 125,000 tons a year, but they pointed out that with the increases which were taking place in the home demand, a capacity of the order of 150,000 tons a year might be necessary.
The Government accepted the Committee's recommendations and established Nítrigin Éireann Teoranta to implement their decision to go ahead with the factory.
As indicated in the Explanatory Memorandum the discontinuance of supplies of Avoca pyrites resulted in a change over to imported sulphur as an ingredient of sulphate of ammonia, one of the factory products. While sulphur from Avoca pyrites would have been more economical than imported sulphur, the change has proved not to be significant in the economics of the project as a whole. Sulphur is now in excess supply in world markets and prices are falling.
Nítrigin Éireann Teoranta have confirmed to the Government on the basis of the capital investment required and of the production costings guaranteed by the contractors that, using fuel oil, limestone and imported sulphur, sulphate of ammonia and calcium ammonium nitrate can be produced at Arklow at prices which will ensure that Irish farmers will continue to receive their requirements of these fertilisers at the present favourable levels.
Nítrigin Éireann Teoranta was incorporated as a private company in October, 1961, to acquire, erect and operate a nitrogenous fertiliser factory at Arklow, County Wicklow. The company engaged as their technical consultants the United Fertiliser Company of Holland, and its associate Shell Chemical Company Limited, England, both of whom are fully experienced in the operation and management of major nitrogenous fertiliser factories. The Electricity Supply Board provided consultancy services on the civil engineering side.
The factory site selected by the company in the townland of Shelton Abbey, situated about 1½ miles west of Arklow, has outstanding advantages. It can be readily and economically connected by road and rail. Movement of the products out of the factory will not cause any traffic problems. In particular, road traffic to and from the factory will not have to pass through Arklow town. In addition, the site is screened from public view and it will be suitably screened from the Forestry School at Shelton Abbey. I have placed outside the Library of the House a photograph of the site. Senators will be able to see how convenient the location is for road and rail connection and for adequate water supply. The factory will use a minimum of 1½ million gallons of fresh water per day. Fuel oil, which is the main raw material for the factory, will be delivered there by pipeline from Arklow Harbour.
The closest possible consideration was given to the question of location before the site at Shelton Abbey was ultimately selected. Representatives of the Arts Council inspected the site in April, 1962, and, having received full information as to the layout of the buildings, etc., they intimated to representatives of Nítrigin Éireann Teoranta that they saw no objection from their point of view to the location of the industry as planned. Full information about the site was also given to An Bord Fáilte, who raised no objection from the tourist amenities viewpoint.
The plant will include special equipment for treating such waste gases as oxides of sulphur and nitrogen to absorb any elements which could be harmful to local vegetation, or in any way unsightly. In this respect it can be said that the factory will be ahead of any of its kind in Europe and will more than comply with the requirements of the most modern clean air regulations.
The house and out-offices in this townland, known as Shelton Abbey, are used as a Forestry School under the aegis of the Minister for Lands. It is not open to public view save with the permission of the Minister. Contrary to the impression sought to be given by the critics of the site, the house in Shelton Abbey has not, as a matter of fact, been a tourist amenity of Arklow. The house is situated one and a half miles from the town and, without travelling that distance along the road, it cannot be seen.
For the convenience of any Senators who may not be acquainted with the appearance and other characteristics of sulphate of ammonia and ammonium nitrate, I have placed samples of these products on display in the House. It will be noted that both products are granular, odourless, and dustless. Senators, I hope, will agree with my view that the production of these materials in a modern, well laid out factory, giving permanent employment to upwards of 300 persons, should not detract in any way from the amenities of Arklow. I believe that, in the event, the factory will become a place of great interest to the public, and that planned landscaping of the grounds between the buildings and the Shelton Abbey house will add greatly to the tourist value of that property, should it be decided at any time in the future to throw it open to public view.
I can appreciate that the first announcement of the location of the factory could have caused some apprehension among the aesthetically minded. But I feel that, apart altogether from the undoubted economic and practical merits of the site chosen with which I will deal later, what I have just said should dispel any remaining apprehension.
Following the selection of the site, invitations to tender for the factory were issued by Nítrigin Éireann Teoranta to consortiums of chemical engineering firms, comprising fifteen firms of international repute from Britain, France, Belgium, Germany and the USA. Four Irish civil engineering firms were associated with the consortiums.
Tenders were received from those firms on the due date, 31st July, 1962, and the Board of Nítrigin Éireann Teoranta, having received a report from the consultants on the capital and guaranteed costs submitted in the tenders, furnished an immediate report to me indicating that the contractual offers had more than confirmed the costings in the Report of the Inter-departmental Committee in June, 1961, on which the decision by the Government to establish the factory was based. The Government, after full consideration of the circumstances of the project, approved the placing of a contract which was then awarded by the Company to the consortium of contractors headed by Messrs. Lurgi of Frankfurt am Main, West Germany. The basic contract price was of the order of £5 million. In accordance with the practice in the chemical industry and to ensure that work could commence on the site before the onset of winter, a Letter of Intent to place the contract was given to Messrs. Lurgi. The preliminary development work at the site commenced in November last and the entire factory is expected to be in commercial operation by 31st March, 1965.
The factory will have a design capacity of 150,000 tons of nitrogenous fertilisers per annum in the forms of sulphate of ammonia and calcium ammonium nitrate. These products are not manufactured in Ireland; neither is ammonia, which is a key intermediate product. For the information of Senators, who like myself, may not be familiar with the chemical processes involved I should say that the process to be used at Arklow is very well established and is of standard design. Briefly, the process involves the separation of oxygen and nitrogen by compression, the partial ozidisation of fuel oil to produce hydrogen and carbon monoxide, the removal of the carbon, and the treatment of a mixture of the hydrogen and the nitrogen to form ammonia. This is the main basic process.
Ammonia contains over 80 per cent. pure nitrogen. Part of the ammonia produced at the Arklow factory will be used for reaction with sulphuric acid produced at the factory to manufacture sulphate of ammonia. Ammonia will also be used for the production of calcium ammonium nitrate, the second main product of the factory, which indeed is expected to become the main product of the future. The manufacture of calcium ammonium nitrate involves the production of nitric acid from ammonia. The reaction of this nitric acid with additional ammonia gives ammonium nitrate, which, as a pure dry product, contains about 34 per cent. pure nitrogen. The nitrogen content is reduced while the product is still in slurry form by mixing the product with finely ground limestone. This treatment ensures that there can be no danger of fire or explosion which could happen in certain conditions with pure ammonuim nitrate. The grade currently favoured by Irish farmers contains 20.5 per cent. nitrogen, but the indications are that calcium ammonium nitrate containing 23 per cent. and perhaps 26 per cent. nitrogen is likely to find favour in the foreseeable future. These higher concentrations can readily be produced at Arklow.
Traditionally, sulphate of ammonia has been the main nitrogenous fertiliser used here. When imports were resumed after the war, calcium ammonium nitrate had come on the market and the imports for 1952/53 amounted to 51,000 tons of sulphate of ammonia and 4,000 tons of calcium ammonium nitrate. Since then the demand for both products has increased steadily and substantially. This is not surprising and the trend is likely to continue in view of the spectacular results achieved by An Fóras Taluntais in experiments in the use of fertilisers generally and particularly in grassland experiments with calcium ammonium nitrate. The actual figures of imports over the past three years have been as follows:—
Sulphate of Ammonia
Calcium Ammonium Nitrate
The continued growth in the demand for these fertilisers has been closely studied throughout the entire post-war period and was the subject of the following comment in the publication Economic Development published by the Department of Finance in November, 1958:
On the other hand, while it has been estimated that ammonium nitrate fertilisers based on milled peat could be produced more cheaply than imported nitrate or sulphate of ammonia, it is unlikely that the economic output of the factory (100,000 tons) would be absorbed on the Irish market for some years. The current demand for all types of nitrogenous fertilisers is of the order of 80,000 tons per annum. A factory producing 100,000 tons of ammonium nitrate per annum would, therefore, be faced with the initial disadvantage of having to sell its surplus production on export markets in competition with large-scale British and Continental producers.
Senators will have noted from the figures I have already quoted that the total demand in the latest 1961/62 season was over 132,000 tons in all. Having regard to the trend of user and to the rate of increase in previous years, it is a reasonable expectation that when the factory is in production in 1965 the total demand in the home market should have reached the 150,000 ton level, at least. A factory with an output of 150,000 tons per annum is well above the minimum economic size and should be able to dispose of its whole output on the home market.
It is a fortunate circumstance that the very substantial daily requirement of cooling and process water is available free from the Avoca river, without affecting in any way the river amenities or the availability of river water for other possible users. A suitable water supply is essential for a project such as this and the ready availability of adequate supplies from the Avoca River was an important factor in the selection of the site.
The factory will operate round the clock for 7 days a week throughout the year, and to meet this requirement, operations on the basis of 4-shift working will be necessary. Permanent employment will be given to over 300 persons, the majority being males. These will include senior supervisory engineers and chemists, foremen and skilled operatives engaged on the plants producing ammonia, nitric acid, ammonium nitrate, sulphuric acid and sulphate of ammonia, as well as the storage and handling plant. Unskilled labour will also be employed on these units. The maintenance personnel will include instrument operatives, electricians and fitters. In addition, there will be the usual factory employment for accounts and sales staff, clerical staff, despatch clerks, security officers, gatekeepers, messengers, etc.
As soon as the design documents have been drawn up by the contractor, the main civil engineering work in connection with the factory will commence. Orders have already been placed for the major plant items such as compressors, and it is expected that many of the plant units will be ready for installation next Autumn. Substantial employment will be afforded on construction and development work.
Senators may have seen published statements that the employment content of this factory is out of proportion to employment in comparable industries elsewhere. These statements are simply not correct. The actual employment in each separate section of the plant and in administration and sales, etc., has been assessed by Nítrigin Éireann Teoranta in agreement with their consultants, who are themselves operators of nitrogenous fertiliser factories in Britain and the Continent. The figures have been very carefully worked out and compared with the employment content of similar production units elsewhere.
As regards the factory costings, I would like to point out that Nítrigin Éireann Teoranta will be operating a nitrogenous fertiliser factory in open competition with imported products, i.e. in conditions of free trade. While, therefore, as stated in the Memorandum, it is desired to give Senators as much information as possible about the project, they will understand I am sure, that there is no precedent for the disclosure by industrial concerns of such information.
It is quite understandable that Senators are anxious to satisfy themselves as to the soundness of a proposal to invest six million pounds in an industrial project even though the money is to be provided on a repayable interest-bearing basis. I can assure this House that the Arklow project as planned will be fully economic in free trade conditions. I have no doubt whatever that the company will be in a position to honour the undertaking already given that nitrogenous fertilisers will be made available to Irish farmers without subsidisation or protection at prices in line with prevailing import prices. This undertaking assures the supply of nitrogenous fertilisers to Irish farmers at the prevailing favourable prices.
There is, moreover, another potential advantage. Dumping will presumably be prohibited in free trading conditions, consequently there can be no expectation of a continuance of the current low level of import prices. Without the factory Irish farmers would, in European free trade conditions, be at a substantial price disadvantage vis-á-vis their farmer competitors on the Continent.
Any commercial or technical assessment of the location of a nitrogenous fertiliser factory must take account of the final cost to the consumer arising from the cost of raw materials, production and distribution of the products.
The best location for a nitrogenous fertiliser factory is a point convenient to a port where imported materials can be secured, and as close as possible to the principal areas of consumption of the factory products. In Ireland nitrogenous fertilisers are mainly consumed in the East and South, and the largest compounding factories which need sulphate of ammonia for bulk are also located in the same general area, i.e. Dublin, Wicklow, New Ross, Waterford and Cork. It has been established from detailed studies that the average cost of distribution of nitrogenous fertilisers to farmers is very favourable from the Arklow area. The actual factory location is most convenient for distribution purposes. The railway and public road are beside the site and no traffic problems will be involved in connecting up with these facilities. In addition, the factory site has the advantage, as I have said, of providing excellent foundations for the heavy factory equipment and stores. The factory will consume about 1½ to 2 million gallons of fresh water per day. The availability of adequate supplies from the nearby Avoca river at no cost, apart from pumping, was, therefore, a vital consideration. The factory's fuel oil requirements will amount to less than 100 tons per day. There will be no need, therefore, for large scale importations. Indeed the provision of substantial storage capacity and the financing of excessive stocks of oil, which such large scale importations would involve, would very quickly offset the benefit of any transport saving which might result from using large ships. To summarise, the location selected for the factory is the most favourable from the engineering and economic aspects.
This area was originally selected by the Inter-Departmental Committee which reported in June, 1961, that a factory located at Arklow using fuel oil and Avoca pyrites could produce nitrogenous fertilisers for sale without subsidisation at prices in line with prevailing import prices. It is, of course, a matter for regret that sulphur from the pyrites is no longer available. However, while that material, at the price at which it was available, would have been more economical than imported sulphur, the difference is not significant in the economics of the project as a whole, particularly as sulphur is now in excess supply in world markets and prices are falling. The House is aware that investigations into the future prospects for the Avoca mines are taking place at present and I am sure I am expressing the hopes of all the Senators that it will be found possible to reopen the mines on some basis which will be found to be economic. Bearing this in mind, the factory is being planned so that pyrites-burning plant can be readily installed if there are prospects for production at the Avoca mines on a reasonably long term basis.
The cost of transporting from the Continent bulky materials such as nitrogenous fertilisers is relatively high, representing about £2 10s. per ton. The total transport costs represent, in effect, an addition of some 20 per cent/25 per cent to the European ex-factory prices. The c.i.f. value of imports last season amounted to £1,800,000. It has been suggested in some quarters that it might be economical to import more concentrated materials such as ammonia, from which bulkier fertilisers could afterwards be made. I am aware of a number of commercial quotations for deliveries of ammonia to this country based on natural gas, and I can assure Senators that such supplies are in no way competitive with the guaranteed production costs based on the use of fuel oil at the Arklow factory. The reason for this is that ammonia is a difficult commodity to ship. Freight and storage charges are heavy. Fuel oil is, of course, an international commodity freely available from commercial sources throughout the world, and is readily transportable. In addition, fuel oil has a very high calorific value and one ton of ammonia can be obtained from ? of a ton of fuel oil. It is clear from our investigations and from the practice in other countries that it is more economical to import materials such as fuel oil for fertiliser production than to import either the basic chemicals such as ammonia, or to import the finished products such as calcium ammonium nitrate.
Imports of nitrogenous fertilisers are generally arranged on a c.i.f. basis. This means that the foreign supplier arranges for the shipping and the importer pays in foreign currency for the whole cargo on a c.i.f. basis. Total cost of imports of sulphate of ammonia and calcium ammonium nitrate last season amounted to about £1¾ million, and this figure may be expected to increase in the future. When the Arklow factory is in production the imported materials used in the process will be fuel oil and sulphur and the home materials limestone, water and air. The total annual cost of the imported raw materials will be in the region of £350,000 for the production of nitrogenous fertilisers for which without the factory we would require to send out of the country some £2 million per annum. By any standards this is a very significant and important contribution to our overall balance of payments position, particularly when it can be achieved without any degree of subsidisation by way of capital grant or otherwise and without the imposition of quotas or tariffs.
As Senators will have seen from the Bill, it is proposed to provide finance for Nítrigin Éireann Teoranta by way of repayable advances from the Central Fund, i.e. on the lines of advances to the Electricity Supply Board and Bord na Móna. I feel I must stress the significance of this arrangement. There is no question of a grant or subsidy to this industry. The money is being advanced on a repayable basis and the Company will be required to provide for the repayment of principal and interest in full to the Exchequer.
The maximum total sum provided in Section 5 of the Bill by way of advances out of the Central Fund for the purpose of enabling Nítrigin Éireann Teoranta to perform its functions is £6 million. The balance remaining after meeting the basic contract for the design, erection and commissioning of the factory will be needed to meet the cost of the following:—
(1) Electrical sub-station and power connection to the national grid.
(2) Supplies of mechanical spare parts.
(3) Initial stocks of raw materials.
(4) Factory mobile equipment, furniture and fittings.
(5) Training of factory operatives.
(6) Salaries, wages and other expenses before commencement of production.
(7) Provision for contingencies.
In addition to providing for advances totalling £6,000,000 to Nítrigin Éireann Teoranta, the Bill empowers the Minister for Industry and Commerce, after consultation with the Minister for Finance, to guarantee borrowings by the Company not exceeding £1,000,000 at any one time.
The House will, I feel sure, readily recognise the importance, in the context of our industrial and agricultural economy, of a factory capable of producing nitrogenous fertilisers in adequate quantities at economic prices. There is, of course, the further attraction that the production of basic chemicals, such as ammonia, nitric acid and sulphuric acid, provides excellent prospects for the development of subsidiary industries and for facilitating the existing fertiliser manufacturers to bring their production programme more in line with the modern demand for more concentrated forms of fertilisers. As I have said, the factory is being laid out so that there can be a major expansion of capacity in due course. In addition, provision has been made for space for subsidiary industries which we may reasonably expect to result from the availability of ammonia and other chemical products at this factory.
I confidently recommend the Bill for approval.
I have been rather lengthy in this introductory statement but I feel I have a duty to inform the House as fully as I possibly can, having regard, of course, to the commercial considerations to which I have referred in this very important national project.