BEIJING (Xinhua) -- Indonesia plans to build a fertilizer factory in Iran which offers cheaper gas supplies needed in the industry, an envoy said Thursday.

A delegation of government officials and executives from state-run fertilizer producer PT Pusri has visited Iran twice to finalize agreement on the construction of the 700 million U.S. dollars factory, said Alwi Shihab, a special envoy of President Susilo Bambang Yudhoyono for Middle East affairs.

"A team from Iran will come here in the near future to prepare a memorandum of understanding for us to sign," he was quoted by the country's leading news website Detikcom as saying.

The project will be financed with loans from the Islamic Development Bank (IDB).

Building a fertilizer factory in Iran is more economical than in Indonesia, where gas supplies are running low due to earlier export commitments, he said.

Besides Iran, Indonesia also plans to build a fertilizer factory in Nigeria, he said.