Fertiliser kingpin, Incitec Pivot, has bought itself some gas supply wriggle room and staved off closure concerns for its big Brisbane plant after cutting deals to buy gas piped east from the Northern Territory.
The Central Petroleum, APA Group and the Jemena northern gas and pipeline companies will supply the Gibson Island nitrogen fertiliser site partly via the new pipeline being built to connect NT gas fields with the eastern Australian gas network.
Incitec Pivot’s Gibson Island plant is eastern Australia’s biggest nitrogen fertiliser production site.
It made about 150,000 tonnes of urea equivalent product in the first half of this financial year and has capacity to produce up to 400,000 tonnes of urea.
It is also the production base for the widely used diesel engine emission reduction ingredient AddBlue, used in trucks, tractors and other heavy machinery, and is the main source for carbon dioxide for carbonated soft drinks in Queensland and northern NSW.
This gas is being used to keep open an existing fertiliser plant – an essential input in the production of food
Rising gas prices and supply insecurity have clouded the viability of the plant for the past two years.
Its long-term future remains heavily dependent on the success of a $20 million joint gas exploration venture Incitec is undertaking in Queensland with Central Petroleum during the next 12 months.
The new, temporary, gas supply lifeline from NT won’t be cheap for Incitec.
The company expects to pay an additional $50m a year on its current supply contract rates which expire in the next six months.
The supply arrangements are for 2019 only, but with the option to extend if the search for, and development of, alternative gas supplies is still underway.
The stop-gap arrangements give Incitec access to about 32 terajoules of gas a day from the Central Petroleum’s (currently mothballed) Palm Valley gas field and its Mereenie field, both near Alice Springs.
The 3300km journey
APA, which operates Australia’s largest interconnected gas transmission network, will suck gas through about 3300 kilometres of pipelines to supply the Brisbane plant.
The journey will start on APA’s Amedeus pipeline going north from Mereenie to Tennant Creek, then joining the new $800 million Jemena northern gas pipeline which is set to connect NT to the eastern grid at Mount Isa in December.
From there gas will travel south via the Carpentaria pipeline to Ballera, turning east on the South West Queensland pipeline (which also draws gas from Moomba in South Australia) to Wallumbilla, then into the Roma-Brisbane pipeline to finally reach Gibson Island.
Incitec has another deal with Jemena to draw a further 31 TJs of gas from NT for its Phosphate Hill processing plant near Mount Isa for 10 years when the northern pipeline opens.
Managing director, Jeanne Johns, said the circuitous interim gas supply agreements for Gibson Island were a significant step to ensure supply for the company.
However, they were just “one of several in our ongoing efforts to secure future operations” at the site.
Exploring other options
She said exploration and appraisal works with Central Petroleum which aimed to develop new gas tenements should be completed next year.
If sufficient reserves were proven, a new site was expected to start delivering gas to support Gibson Island by 2022.
The fertiliser and explosives company has been critical of Queensland’s liquid natural gas industry for concentrating on export opportunities to the detriment of domestic gas needs.
It has also been underwhelmed by the impact of political pressure on gas companies to bring prices down to sustainable levels for industrial users.
The Gibson Island plant site employs about 1500 people, including laboratory staff and employees with Incitec’s explosives business Dyno Nobel.
Granulated fertiliser production at the site includes the line, Entec, developed to reduce leaching into the soil profile and waterways.
Gas security brings innovation
Incitec has maintained the success of its gas-dependent fertiliser business at Gibson Island, and Portland and Geelong in Victoria, has a strong relationship with the development and production of new technology products such as Entec and AddBlue which help farm efficiency and the environment.
Central Petroleum managing director, Richard Cottee, said the Incitec deal demonstrated the importance of NT gas to the east coast domestic market.
"This gas is being used to keep open an existing fertiliser plant – an essential input in the production of food – and preserving the existing employment of many Australian workers," he said said.
Central will reopen its Palm Valley gas field west of Alice Springs, providing welcome employment opportunities for indigenous and non-indigenous workers.
Jemena’s acting managing director, Antoon Boey, agreed the Incitec contract reinforced the leading role the NT gas industry could play in creating and sustaining jobs in northern Australia.
“We have had a fantastic relationship with IPL, and are thrilled this additional gas will support its Gibson Island operations,” he said.
“This gas gives much-needed certainty to Incitec, and is a positive for the people relying on the facility who will benefit not only from jobs which rely on gas as a direct feedstock, but from the flow-on effects of having a vibrant local economy and industry.”
Jemena also recently signed a deal with Senex Energy to build, own, and operate the Atlas gas processing plant and pipeline, connecting Senex’s new Atlas gas field in the Surat Basin in south-east Queensland with Jemena’s Darling Downs pipeline and the Wallumbilla gas hub – Australia’s largest gas hub.
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