Australia’s Strike Energy Ltd., Thebarton, South Australia, on Jan. 11 announced the launch of Project Haber, an ammonia and urea complex for Western Australia’s Narngulu Industrial Estate, adjacent to Geraldton Port. The complex, which includes a 1.4 million mt/y urea plant and an 800,000 mt/y ammonia plant, would use gas from Strike’s Greater Erregulla development in the Perth Basin via a 120-km pipeline.
The launch of the nitrogen fertilizer project comes after a year of feasibility studies with engineering group TechnipFMC on a national urea facility with blended input of some blue and green hydrogen.
In parallel, Strike said it had been awarded – subject to final execution – an option for a long-term lease over the 60-hectare site, which has direct access to state rail and road networks. The design of the facility also includes 300,000 mt of on-site urea storage, power/utilities, and steam generation and rail siding for transport.
“The Narngulu location has been chosen due to its proximity to our Perth Basin gas fields and access to transport and shipping options,” said the Australian energy company. “Whilst the economics are supported by the company’s high-quality, low-cost gas, it is envisaged that over the useful life of the plant an increased amount of green hydrogen would supplant the raw gas input.”
Consequently, Project Haber includes the construction of a 10MW hydrogen electrolyser that will enable Strike to take advantage of the abundant local wind energy generated in Western Australia’s Mid-West region to form a green hydrogen input stream, which would represent approximately 2 percent of the initial hydrogen consumed. Local renewable energy will also be preferenced where possible to generate the electricity feed into the plant and reduce fuel gas consumption, Strike said.
The energy company puts the estimated cost of the total development at US$1.8 billion (A$2.30 billion), with a 20-30 year useful life. Gross fertilizer revenues from Project Haber are estimated at between approximately A$540-A$700 million (approximately US$418-US$542 at current exchange rates) per annum, based on current urea prices in both wholesale and direct markets, it said.
Strike has entered into discussions “with several parties” who have an interest in securing offtake and or equity in the project, and said it will commence a formal offtake tender with various Australia and international urea consumers in the second quarter of this year.
“With the competitive advantage of a low-cost gas input, access to transport infrastructure, and proximity to Australian fertilizer consumers, Project Haber is expected to deliver more competitively-priced urea than international imports into Australia,” Strike said.
The company plans to secure offtake agreements for up to 80 percent of the product prior to entering into front-end engineering and design for the project.
It also plans to begin marketing equity participation in the project toward the end of calendar 2021, where it expects to retain around a 30 percent carried interest in Project Haber.
Strike noted that Australian nitrogen fertilizer consumption has increased 67 percent over the past decade due to global population growth and the avoidance of additional land clearing placing rising pressures on achieving higher yields from Australian farms every year.
Yet the country’s domestic urea production has almost completely ceased due to rising input (energy) costs. Incitec Pivot Ltd. (IPL) currently is Australia’s sole urea producer, with capacity to produce 340,000 mt/y at its Gibson Island plant in Brisbane, Queensland, on Australia’s East Coast, according to Green Markets data. However, the producer has been dogged with gas supply issues to the Gibson Island production site, which also includes ammonia and ammonium sulfate production capacity.
IPL Managing Director and CEO Jeanne Johns has been highly critical of gas pricing in eastern Australia, arguing that the domestic gas market needed to return to affordable, internationally competitive pricing (GM Aug. 7 & Jan. 31, 2019). Last September, she welcomed the Australian federal government’s plans to reset Australia’s East Coast gas market (GM Sept.18, 2020). One of the key points in the government’s new gas plan is new agreements with the three East Coast LNG exporters to avoid potential supply shortfalls in the domestic market and ensure that affordable gas is available to local businesses.
Certainly, the continuity of IPL’s Gibson Island operations is reliant on the company securing an economical gas contract after December 2022. A new gas supply agreement was secured for the plant in June 2019 for supply through December 2022, replacing a temporary one-year gas contract that expired on Dec. 31, 2019 (GM June 7, 2019).
New urea production projects in the country also face multiple hurdles. Perdaman Industries’ (Chemicals and Fertilisers) push to establish a 2.14 million mt/y granular urea project near Karratha on Western Australia’s Burrup Peninsula, for example, has been a long-time in development. Perdaman inked a 20-year natural gas supply agreement with Woodside Energy for the project in November 2018 (GM Nov. 21, 2018), but only signed an engineering, supply of equipment and materials, construction, pre-commissioning, and commissioning for the execution of the urea plant late last year. The deal was inked with Clough Group, Perth, and Italy’s Saipem SpA (GM Dec. 31, 2020).
It is unclear whether Perdaman has reached any offtake deals for urea output from the Karratha plant. The company back in 2010 had inked a deal with Incitec Pivot Ltd. (IPL) for its then proposed coal-gasification Collie urea plant, also in the state (GM Oct. 18, 2010). That deal covered the purchase of the entire output of 2 million mt/y granular product for 20 years.
Strong Australian demand growth for urea has been increasingly met by imports, which in 2019 reached 1.7 million mt, up from just 800,000 mt a decade earlier, according to the Australian Department of Foreign Affairs and Trade data, cited by Strike.
Strike said the Haber Project will be primarily focused on meeting the needs of Australian farmers, with surplus product to be made available to international markets.
“The advantaged location of Project Haber in Geraldton is its position at the northern end of Western Australia’s wheat belt region, where about 30 percent of Australia’s total urea consumption occurs,” said Strike. “Currently more than 260,000 mt of fertilizer is imported via the Geraldton port annually, which reinforces the available market in Project Haber’s identified location.”
The company believes Project Haber has the potential to displace nearly A$1 billion of trade deficit as Australia becomes more self-reliant in the manufacturing of urea fertilizers.