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).
