Incitec Pivot will be relying heavily on nitrogen fertiliser imports for some time after its big Brisbane plant closes in December, despite big hopes new-age hydrogen technology will enable urea production to continue at the site.
Urea represents about 40pc of the total Australian fertiliser market.
Fortescue Future Industries is studying the feasibility of green ammonia production on Incitec Pivot land alongside its big Gibson Island urea plant.
A decision on whether to go ahead with a full examination of the cost case for industrial-scale green ammonia production at Gibson Island is due in the next couple of months.
However, even if Fortescue's ambitions prove to be technically and commercially feasible, a final project cost estimate and investment green light seem unlikely for another year.
Construction could take a further four years, or more.
Green urea
Andrew Forrest's new era, zero emissions industrial energy division has plans for a water electrolysis facility at Gibson Island to produce about 50,000 tonnes of renewable hydrogen annually, which would then be converted into green nitrogen for local and export markets.
The existing Gibson Island plant has been producing more than 300,000t of ammonia a year, but despite a recent $80 million upgrade to boost its efficiency, it can't afford to operate at current inflated Queensland gas prices or without competitive long term contract terms.
The big fertiliser business has subsequently begun upgrading Gibson Island's urea import capacity so it can also be a primary distribution centre for the company, handling 300,000t of various fertiliser lines each year.
Also being upgraded by 2025 is the site's blending and coating plant.
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At the same time Incitec is hoping for a definite decision, due within weeks, on a start date for the $4.3 billion urea plant in northern Western Australia.
Perdaman Chemicals and Fertilisers' plan was to start producing fertiliser at Karratha by 2026-27.
If all goes as planned it will be Australia's first world scale urea plant, converting WA gas reserves into urea at the rate of up to 2.3 million tonnes of granular product a year, with potential to be a major player in the global market as well as a significant domestic supplier.
Perdaman deal
In May Incitec signed a 20-year offtake agreement with Perdaman, which at that point was expecting to begin construction by now.
A final construction decision has, however, been stalled by numerous pressures, including objections raised by local Indigenous communities and increasing greenhouse gas emissions concerns relating to new gas extraction projects.
The three- to four-year construction phase will require a workforce of up to 2000, which could also be a challenge.
"In the meantime, we will certainly be relying on imported urea to satisfy our Australian market needs," said chairman designate of Incitec Pivot Fertilisers, Mike Carroll.
"It will take time for the next stage of local production to get going.
"We're pinning our hopes on Fortescue Future Industries following through with its green hydrogen production plans at Gibson Island, but we've also got a great supply agreement with Perdaman.
"Perdaman expects to produce almost twice as much urea as the entire east coast market."
Gibson Island already handles fertiliser imports including phosphate and potash, but the upgrade work now underway will give it much more capacity and make it the company's second biggest distribution centre.
Phosphate Hill
The expenditure in Brisbane follows several years of "turnaround investment" at Incitec's Phosphate Hill mining and processing plant south east of Mount Isa.
That site, which sends processed product, via Townsville, to IPF distribution centres around Australia and offshore, has been set up for improved production reliability and an output target of 1m tonnes annually for the next three years.
However, Incitec Pivot's managing director, Jeanne Johns, conceded to an investment briefing last week the company will have to absorb $45m in extra gas costs at Phosphate Hill this financial year because of supply disruptions which were unlikely to be resolved before February by supplier, Power and Water.
Yet, despite gas cost hikes and a recent dip in immediate fertiliser demand in an overheated market, Ms Johns said feedback from overseas investors suggested a lot of interest in the company's plans to unbolt IPF from its sister business, the global explosives company, Dyno Nobel.
If shareholders approve the demerger in February-March next year, the two businesses will be independently listed on the Australian Securities Exchange.
Investor interest in Aust
Recently in Europe to primarily discuss Dyno Nobel's operations in France, Britain, Turkey and the USA, Ms Johns was surprised by the level of enthusiasm for exposure to Australian agribusiness generally.
Soaring energy prices and ammonia production costs in the northern hemisphere of late had also prompted investors to look further afield.
Four years of restructuring and targeted investment at IPF had set it up for success, to list as a standalone company without any debt, except working capital.
She said the IPF and Dyno Nobel had grown into very different businesses serving different customers in different sectors and separation would deliver more focus and maximise growth opportunities for each entity.
Historically the combined Incitec Pivot company's performance had been unable to reflect the inherent value of each division or capture upswings in fertiliser pricing, yet was dragged down by weak fertiliser markets.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
