Incitec fert site secures Qld gas supply and looks for more

Gassed up Incitec to spend $100m on Gibson Island upgrade


Agribusiness
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Incitec Pivot's nitrogen fertiliser plant at Brisbane's Gibson Island will stay in business until 2022, at least.

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Australia's big fertiliser maker, Incitec Pivot, is expecting to keep its nitrogen fertiliser plant at Brisbane's Gibson Island open until 2022, at least, having secured new gas supplies from Chinchilla, just 300 kilometres away.

It will also spend up big - about $100 million - on infrastructure upgrades starting early next year.

Incitec has locked in a supply deal with Australia Pacific LNG which was awarded a joint venture licence with Armour Energy to develop the gas site specifically to service Australian manufacturing businesses.

But the fertiliser and explosives company is still far from happy with eastern Australia's overall gas supply situation.

Australian consumers and industry are being asked to carry the burden of this situation - Jeanne Johns, Incitec Pivot

Managing director, Jeanne Johns, said the energy sector must increase domestic production, or ring-fence more of what it currently produces for domestic use.

"East coast gas prices remain stubbornly high, while huge volumes of Australian gas are exported," she said.

"Australian consumers and industry are being asked to carry the burden of this situation."

At the moment Incitec Pivot draws gas via an expensive 3300-kilometre supply route, starting near Alice Springs and flowing through an APA pipeline to Tennant Creek, then east to Mount Isa and south, through various APA pipelines, to Brisbane.

The APA energy infrastructure group has now signed a three-year extension to its current service agreement with Incitec, expecting to start delivering the Chinchilla gas in January.

Meanwhile, Inctec and exploration partner, Central Petroleum, continue looking for more coal seam gas in Queensland's Surat Basin, north-west of Miles, to secure the Gibson Island plant's needs after the APLNG contract ends in 2022.

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Gibson Island produces up to 580,000 tonnes of ammonia, urea and ammonium sulphate annually, plus other industrial chemicals.

Incitec Pivot Limited (IPL) had threatened to close the fertiliser plant, potentially putting about 400 workers out of jobs, because it could not afford soaring local gas prices.

The new contract has also provided IPL with the confidence to commit to plant maintenance, with two months of initial work starting in January.

Ms Johns said securing a gas agreement and other commercial arrangements meant certainty for Gibson Island's workers, as well as IPL customers, suppliers and shareholders.

Customers include more than 4000 cotton, cane and grain growers in Queensland and northern NSW.

The fact this gas could not have been secured without assistance from the Queensland government demonstrates clearly the east coast gas market is working neither efficiently, nor effectively - Jeanne Johns

"We are grateful for the support of the Queensland government, particularly Premier Annastacia Palaszczuk and her government's domestic-only gas policy to support local manufacturing businesses and jobs," she said.

Jeanne Johns

Jeanne Johns

However, Ms Johns said while IPL was delighted to have locked in supplies for the next few years, the outcome was not a solution for the long-term issue of affordable gas.

"Creating an efficient east coast domestic gas market needs to be a priority," she said.

"The fact this gas could not have been secured without assistance from the Queensland government demonstrates clearly the east coast gas market is working neither efficiently, nor effectively."

"A properly functioning domestic market is required to secure manufacturing jobs, future investment, and affordable energy for every Australian".

The extended fertiliser operations in Brisbane are expected IPL's 2019-20 operating profit by about $5m above current financial year forecasts, which are expecting earnings before interest and tax of $370m to $415m.

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