A ground-breaking ceremony was held on April 26 marking the start of construction of the long planned Perdaman Fertilisers and Chemicals Pty Ltd.’s 2.3 million mt/y granular urea plant some 20 kilometers north of Karratha on Western Australia’s Burrup Peninsula.
On completion – expected by mid-2027 – the plant will provide Incitec Pivot Fertilisers Ltd. (IPF) with a secure, long-term supply of Australian urea.
The event followed last Friday’s reveal by IPF’s parent company, Incitec Pivot Ltd. (IPL), that Perdaman had finally achieved financial close for the A$6 billion (approximately $3.96 billion at current exchange rates) project (GM April 21, p. 1), pre-empting the official announcement by the junior producer itself.
In an April 26 statement, Perdaman revealed that to achieve financial close it had agreed to a strategic equity investment in the project of “over A$2.1 billion” with the US-based Global Infrastructure Partners (GIP) in return for GIP taking a 49% interest in the urea development. Perdaman did not disclose the terms of the deal with GIP.
The junior producer said the remainder of the funding is being provided by “a strong group of debt providers,” as well as the previously announced loans by Northern Australia Infrastructure Facility (NAIF) and Export Finance Australia (EFA). NAIF is providing a A$220 million loan (GM Oct. 7, 2022) and EFA Export Finance Australia will provide a A$269 million loan to the project.
NAIF has also committed another A$255 million toward key infrastructure servicing the project, namely A$160 million to the Pilbara Ports Authority for a new multi-user wharf and facilities at the Port of Dampier, and A$95 million to the Western Australia Water Corp. for the expansion of the Burrup seawater supply and brine disposal scheme (GM Feb. 11, 2022).
The Engineering, Procurement, and Construction (EPC) contractors for the Karratha plant, Italian firms Saipem SpA and Webuild Group SpA (who took over from the liquidated Australian firm Clough), confirmed on April 21 they had reached full contractual effectiveness by the achievement of the commencement date for the development of the project.
The two contractors, in an equally shared (50/50) joint venture, reached an agreement with Perdaman in May last year to revise the contract price to US$2.7 billion, a 12.5% increase on the original contract price. The upward revision reflected changes in market conditions and logistical challenges faced in recent times, and provided for further risk and reward provisions to afford flexibility to manage any potential further deterioration in market conditions (GM June 3, 2022).
The plant will incorporate Topsøe’s SynCOR ammonia technology and Saipem’s proprietary Snamprogetti urea technology to produce urea.
In an ASX statement last Friday, IPL confirmed the previously announced 20-year offtake agreement of 2.3 million mt/y of granular urea from Perdaman’s Karratha plant, stating that the offtake agreement is “unconditional” now that Perdaman has obtained financing for construction of the new plant.
The Karratha plant will utilize natural gas feedstock from Woodside Energy’s under-development Scarborough Gas project. The finalization of a 20-year agreement to supply 130 terajoules per day once the plant is commissioned was also announced on April 26.
However, there are concerns that industrial pollution from the Perdaman plant could accelerate the weathering of nearby World Heritage indigenous rock art. Murujuga traditional custodians, representing the five traditional owners of the land in Western Australia, have been campaigning against the project because they fear it will damage the sacred rock art.
The Western Australian Environmental Protection Authority concluded that “there may be a threat of serious or irreversible damage” to the rock art from the plant’s emissions, such as nitrous oxides, Australia’s Sydney Morning Herald reported.
According to a report by Australia’s The Age newspaper last year, the Perdaman plant initially will emit 650,000 mt of greenhouse gases a year (GM Oct. 7, 2022).
The Western Australian government, however, gave environmental approval to the plant on the condition that Perdaman commits to a gradual reduction in emissions and makes the urea plant net carbon zero by 2050.
In its April 26 statement, Perdaman said the plant has been designed to “minimize both industrial emissions and the carbon footprint of fertilizer production.” The company said it is implementing global best practices at the facility with respect to greenhouse gas emissions.
As part of its efforts to decarbonize its urea project, Perdaman plans to construct a 100 MW solar power facility and associated transmission infrastructure at the Maitland Strategic Industrial Area, some 24 km west of Karratha. Land has been allocated by the Western Australian government in the industrial area for the project, the company said on April 26.
The junior producer said the construction of the Karratha plant would generate an average of 2,000 jobs over four years, and the plant, when operational, will employ 200 people.
The urea offtake agreement with IPL will start from the date the new urea facility is fully commissioned, and firms up on an offtake deal signed between IPL’s wholly owned subsidiary, Incitec Fertilizers Pty Ltd. (IPF), and Perdaman in May 2021, which was subject to certain conditions precedent, including financial closing (GM May 7, 2021).
IPL expects up to 50% of the urea to be marketed within Australia, including through IPF’s existing East Coast Australian distribution business, with the remainder marketed to key international export destinations.
Australia last year imported some 2.8 million mt of urea, a similar total to the previous year, and up from 2.4 million mt in 2020, according to Trade Data Monitor.
According to Minister for Resources and Northern Australia Madeleine King MP back in September last year, Australia currently imports around 2.4 million mt/y of urea for agricultural use.
IPL was Australia’s sole urea producer, but ceased production at its only urea plant – at Gibson Island, Brisbane – around the end of last year after it had unable to secure “an economically viable” long-term gas supply to its plant beyond the prevailing supply contract. The plant had urea production capacity of 340,000 mt/y, according to Green Markets data.
Perdaman’s Karratha plant is also expected to produce the diesel emissions reduction additive AdBlue, which was in short supply in Australia in late 2021 (GM Dec. 17, 2021; Dec. 10, 2021).