Nitrogen+Syngas 392 Nov-Dec 2024
30 November 2024
Australia’s nitrogen industry
AUSTRALIA
Australia’s nitrogen industry
An ammonium nitrate industry geared around producing explosives for the mining sector is now being joined by a major urea project and a number of renewables-based products for export of green ammonia.
Australia is a country rich in natural resources but relatively sparsely populated. For this reason, the country’s nitrogen industry has long been dominated by the ammonium nitrate industry, primarily for commercial explosives as ‘technical’ grade AN (TAN), for Australia’s large and growing mining industry. TAN is mixed with a variety of substances, often fuel oil to form ANFO – the most widely used explosive worldwide. Australia is actually the world’s second largest market for commercial explosives, with only China consuming more, and consumption is growing rapidly due to expansions in coal, iron ore, gold and other mining operations. In 2023, Australia consumed 2.3 million t/a of TAN, or just over 13% of all TAN globally. It is also the third largest producer of TAN – Russia still takes the top spot over China and Australia. In 2023 Australia produced 2.2 million t/a of TAN, leaving it a slight net importer. In addition, CSBP Wesfarmers produces around 250,000 t/a of UAN solutions at Kwinana for fertilizer use, but the bulk of Australian AN production goes to the explosives industry. Consumption of explosives continues to grow, but at relatively modest rates, with an AAGR of 1.4% forecast over the next four years.
Nitrogen fertilizer use in Australia comes mainly as urea. Total nitrogen fertilizer use was 1.57 million tonnes N in 2023, 87% of which was consumed as urea (3.0 million tonnes product). Another 250,000 tonnes of urea was consumed in technical uses, mainly as diesel exhaust fluid. However, domestic production of urea ceased in 2022 with the shutdown of IncitecPivot’s Gibson Island plant. Since then a number of new projects have been under development to feed Australia’s urea needs, but Australia has had to rely upon imported urea to meet its fertilizer and DEF requirements.
The coal industry
Mining uses for AN have traditionally been dominated by Australia’s large coal industry. Australia is the fifth largest coal producer in world, with production running at 455 million t/a in 2023, although little of this is consumed domestically, with almost 75% of it exported, primarily to China and Japan. Although China’s coal use continues to climb, it is levelling off as the government attempts to move to cleaner and lower carbon energy sources, while an unofficial import ban on metallurgical coal imports, and the global Covid19 pandemic have all impacted Chinese coal consumption.
Meanwhile, Australia is also under pressure to reduce domestic coal consumption. Coal was responsible for 65% of domestic energy production and 53% of electricity production in 2023. However, governments have been slow to take steps to reduce consumption, and indeed subsidised energy prices during the disruption following the Ukraine invasion. Overall, Australian domestic coal production is relatively flat.
Global coal production is expected to peak in 2023 at 6.9 billion t/a. Declines in coal production are expected to be driven by China and the US as coal is replaced in the fuel mix by renewables. But in the medium term, TAN demand for coal remains moderately stable at around 6 million t/a, with demand increases from India and a modest increase in Australia offsetting decreases from China and the US.
Other mining
Other major consumers of AN are iron ore and gold mining. Iron ore production was 945 million t/a in 2023, and iron ore and concentrates exports represented 20% of Australia’s exports last year, with China again the main destination (85% of exports), for use in steelmaking. Unlike coal, iron ore production continues to increase, with projections that it may reach 1.2 billion t/a by 2030, including new projects and expansions at Onslow, Jimblebar and Western Range in the Pilbara region of Western Australia. Once again however there are potential challenges from Australia’s major market, as China increases steel recycling and moves towards direct reduced iron (DRI) for steelmaking, which requires higher grade ores than those from the Pilbara. Nevertheless, there are moves by Australia’s iron ore producers to address carbon intensity issues. Rio Tinto is investigating a low-carbon iron-making process, BioIron, and is also partnering BHP and BlueScope in a pilot electric smelting furnace for iron using renewable power and DRI process technology. At present, TAN demand growth for iron ore production in Australia is expected to be driven by 200 million t/a of new capacity commissioning by 2027, and this will represent the largest slice of new TAN demand in Australia.
As far as gold is concerned, production is anticipated to decline from 2026, primarily driven by the depletion and closure of existing mines, coupled with a notable scarcity of investments in the exploration of new mining opportunities. This trend is expected to significantly curtail the emergence of fresh gold production capacities in the medium term.
Nitrogen producers
The Australian nitrogen industry has seen considerable consolidation over the past couple of decades, leaving it mainly in the hands of three major companies; IncitecPivot, CSBP and Orica, though Yara also has a significant presence via the Pilbara Nitrates project.
IncitecPivot
IncitecPivot was formed from the merger of Incitec Fertilizers and Pivot Ltd in 2003. Both companies had considerable interests in phosphate production, but Incitec also had an ammonia plant at Gibson Island, in Queensland. From there the company has grown by acquisition, buying Southern Cross Fertilizers in 2006 and explosives manufacturer Dyno Nobel in 2008. Southern Cross was formerly the fertilizer arm of the Western Mining Corporation (WMC), with ammonia, urea and phosphate production at Phosphate Hill, Queensland. Incitec Pivot also inherited a 50% share in Queensland Nitrates at Moura, a joint venture currently shared with CSBP.
From Dyno Nobel the company also inherited a new ammonium nitrate project at Moranbah in Queensland, which Dyno Nobel dropped in 2007, but which Incitec Pivot has decided to proceed with after a re-evaluation following their purchase of Dyno Nobel. The 330,000 t/a TAN complex including ammonia and nitric acid plants was completed in 2012.
IncitecPivot also operates a major phosphate plant at Phosphate Hill, Queensland, the largest fertiliser plant in Australia. It includes an ammonia plant with a capacity of 1.0 million t/a which feeds ammonium phosphate production at the site, though production is currently running at around 75% of capacity, with rail and gas supply issues and flooding all remaining concerns. Indeed, IncitecPivot has discussed selling or closing the plant, though a potential sale to Indonesia’s PT Pupuk Kalimantan Timur fell through in July. In the meantime, an investment project to replace some of the gas feed with solar power for hydrogen electrolysis is under way.
In addition to these, IncitecPivot also owns the Gibson Island plant in Brisbane, south-east Queensland. Gibson Island has the capacity to manufacture 300,000 t/a of ammonia, 280,000 t/a of urea and 200,000 t/a of ammonium sulphate, and is close to major fertilizer markets in southeast Australia. However, the plant was closed in 2022, with IncitecPivot citing high feedstock gas prices as the primary reason, leaving Australia without domestic urea production. The site subsequently became the subject of a major green ammonia project in partnership with Fortescue to generate 70,000 t/a of hydrogen from electrolysis, which might have allowed an expansion of ammonia production to up to 400,000 t/a, using solar energy. However, a final investment decision at the end of 2023 was pushed back three times this year over issues of electrolyser costs and sourcing sufficient electricity, and in April Fortescue entered negotiations with the government over reducing energy costs, and at present the project looks unlikely to proceed.
Orica
Orica was founded from ICI’s Australian division, and the company also bought up ICI Explosives worldwide when it was spun off by the parent company in 1997. It is now the largest seller of commercial explosives in the world. In Australia, Orica have an ammonia-ammonium nitrate facility at Kooragang Island near Newcastle, New South Wales, again sited close to major fertilizer consuming regions. There is 360,000 t/a of ammonia capacity, using natural gas, with three downstream nitric acid trains producing a total of around 330,000 t/a of acid. This then feeds 400,000 t/a of TAN production for the mining industry. The NSW state government is looking to develop a ‘hydrogen hub’ in the Hunter Valley nearby, with 55 MW of electrolyser capacity to start up in 2026, growing to 1 GW over the subsequent decade. Some of the hydrogen is earmarked for green ammonia production at Kooragang Island to help decarbonise production.
Orica also has a site at Yarwun, near Gladstone in Queensland, with three nitric acid plants, two ammonium nitrate trains producing emulsions, and 95,000 t/a of sodium cyanide production. AN output is around 500,000 t/a. Orica recently announced a project to halve greenhouse gas emissions from the site by installing tertiary N2 O abatement technology at two of the nitric acid plants.
CSBP
CSBP is part of the Wesfarmers group (originally the Western Australian Farmers Cooperative). It has grown to become one of Australia’s largest companies, with interests in retail, mining and insurance as well as fertilizers and chemicals. CSBP’s main nitrogen facility is at Kwinana near Perth in Western Australia, with a capacity of 255,000 t/a of ammonia, as well as downstream nitric acid and ammonium nitrate production. The site was expanded in the 2010s with a third nitric acid/AN train, bringing total AN capacity to 780,000 t/a. They also own half of the Queensland Nitrates TAN plant at Moura in Queensland.
Queensland Nitrates
Queensland Nitrates Pty Ltd (QNP) is co-owned by CSBP and IncitecPivot (via Dyno Nobel). It operates an integrated TAN facility near Moura in central Queensland, approximately 160 kilometres west of Gladstone at the southern end of the coal-rich Bowen Basin. The facility is designed to produce 220,000 t/a of technical ammonium nitrate for use in mining operations and comprises an ammonia plant, a nitric acid plant and an ammonium nitrate plant.
Like many other Australian nitrogen operations it has studied using solar energy to crack water into hydrogen for ammonia production. A feasibility study on 3,500 t/a of hydrogen production to generate 20,000 t/a of green hydrogen was completed in 2020, sponsored by the Australian Renewable Energy Agency (ARENA), though no decision to proceed has been taken.
Pilbara Nitrates
In order to monetise the gas resources of the northwest shelf, the Western Australian government pushed for the development of a chemical complex in the Pilbara region. Development proceeded initially on an ammonia-urea complex by the Australian based Plenty River Company, with Indian development money from Chambal Fertilizers and Chemicals. However, the project saw issues with costs and infrastructure, and land rights issues with local native peoples groups, leading to Chambal – which had been hoping to export the ammonia to India – to withdraw from the project. Once resolution on these was achieved the project metamorphosed into Burrup Fertilizers, a joint venture between Indian entrepreneurs Pankaj and Radhika Oswal and Norwegian fertilizer major Yara, which took a 30% minority stake. The 760,000 t/a nameplate capacity plant (it has run at 840,000 t/a for some time, however), licensing KBR technology, came onstream in April 2006.
However, concerns were expressed by Yara over financial improprieties, and the Oswals defaulted on a loan to the Australia and New Zealand Bank (ANZ), leading to the enforced sale of their share of the company. The holding was eventually split between Yara and gas supplier Apache Energy Ltd, which had also been in dispute with Burrup over gas contracts, but Yara subsequently bought out the Apache share in 2015, and now runs Yara Pilbara Fertilizers Pty Ltd as a wholly owned subsidiary. A joint venture downstream technical ammonium nitrate plant – Yara Pilbara Nitrates – was completed in 2015 in 50-50 partnership with Orica, which markets the AN produced at the site. The downstream capacity includes 760,000 t/a of nitric acid and 965,000 t/a of AN solutions.
More recently, plans for a green hydrogen feed to the ammonia plant at Pilbara have come from the Yuri Renewable Hydrogen to Ammonia Project, in conjunction with Engie and Mitsui, which is looking to add a 640 t/a hydrogen stream from 10 MW of electrolyser capacity fed by solar energy, along with associated battery storage. This would generate 3,600 t/a of green ammonia as part of the output from the plant. Completion is due for 4Q 2025 at a cost of A$87 million.
Feedstock
Feedstock for the ammonia plants which feed AN and ammonium phosphate production comes from natural gas. Australia is a gas-rich country, and has extensive deposits of gas offshore of the northern coast. However, while some of these are near major mining areas, they are on the opposite side of the country to major fertilizer consuming regions in the southwest and southeast. Trans-Australia gas pipeline infrastructure also remains limited due to the huge distances involved, especially in the east-west direction. This effectively cuts the country into three regions: Western Australia; Northern Territory; and the east – Queensland, New South Wales and South Australia. It means that the major eastern markets do not have access to the rich gas production regions of the northwest. Thus while Australia is one of the largest global exporters of LNG from the northern gas basins, only just behind the US and Qatar in terms of volumes, little of this gas finds its way to the southeast, leading to shortages and higher prices, particularly as the government tries to discourage coal-fired power generation. But government intervention in energy markets, including a price cap on gas, has discouraged new investment in gas production in the southeast, leading to long term supply gaps, and even the possible construction of an LNG import terminal at Kembla in New South Wales – although this project’s future remains uncertain.
Australia’s labour government has set the country a target of generating 82% of its electricity from renewable sources by 2030, which may ease some of the pressure, but in the interim the pressure on ammonia plants in Queensland remains, and Gibson Island may not be the last to close.
New projects
There have been a number of urea project proposals to meet Australia’s domestic fertilizer needs, currently filled by imports. Burrup Nitrates had plans for a urea plant as a follow-on development from the ammonia plant at Pilbara, but the company’s collapse led its successor Yara to focus on TAN instead. More recently, Strike Energy touted a 1.4 million t/a ammonia-urea project – ‘Project Haber’- using natural gas at a site 350km north of Perth in Western Australia, with Koch in negotiations for the offtake of the plant, but this project has since mutated into an 85MW power plant proposal instead after local gas reserves turned out to be lower than anticipated.
Another new company, NeuRizer, was working on a 1.0 million t/a ammonia-urea project at Leigh Creek, South Australia, with front end engineering design completed in 2023 and offtake agreements in place. The project was to be based on coal gasification, bypassing the gas issue, with carbon capture and storage to produce ‘blue’ ammonia for urea production. However, in January the company said that an unnamed strategic partner had pulled out of the project, and that it was on indefinite hold for now.
The last man standing is Perdaman’s Project Ceres gas-based ammonia-urea plant, backed with money from Abu Dhabi-based Mubadala. This A$6.4 billion (US$4.3 billion) project is destined for a coastal site near Karratha in the Burrup Strategic Industrial Area in the north of Western Australia, and is slated to produce 2.3 million t/a. Perdaman has signed an offtake agreement with IncitecPivot, who will market and sell the urea under a 20-year agreement. The plant is ideally sited to sell urea overseas into Asian markets or to the Australian domestic market and intends to split its output between the two. Though delayed by environmental permitting from its originally planned 2020 start date, site work on the project began in May 2024 and the plant is scheduled for completion in 2027.
Green ammonia
Over and above these conventional projects however, Australia’s abundant sunshine has also encouraged a number of developments for producing green ammonia in Australia. In addition to the side streams to existing plants mentioned above (or entirely replacing the existing feed in the case of Gibson Island) there are a number of standalone green projects, often looking towards Japan’s desire to import green ammonia to co-fire at power stations. In June, the Australian government gave a boost to this via its Future Made in Australia budget measures, which have allocated more than A$15 billion of funding support for green hydrogen.
One of the largest projects under development, Allied Green Ammonia, has proposed a large-scale (950,000 t/a) renewables-based hydrogen and green ammonia facility on the Gove Peninsula in the Northern Territory, with front end engineering design by Tecnicas Reunidas beginning in 3Q 2024 and a final investment decision in 4Q 2025. Topsoe would license ammonia technology for the project and Trammo has been lined up for offtake.
Australian mining giant Fortescue had been planning a green hydrogen and ammonia project at a sustainable development hub at Darwin in Australia’s Northern Territory, but confirmed in June 2024 that this project had been shelved.
The North Queensland Clean Energy Project (HYNQ) says that it will produce renewable hydrogen and ammonia using over 1 GW of electrolyser capacity, powered by solar and wind energy. Current members of the consortium include Idemitsu Australia, Queensland state government-owned CS Energy and local developer Energy Estate. Pre-FEED activities were completed on schedule in Q3 2023 and FEED is now under way, with a FID scheduled for 2025.
Climate Impact Corporation (CIC) said in July that it plans to develop two projects in Australia, based on its modular hydrogen production technology. Each project will feature a 10 GW “network” of off-grid modules, incorporating renewable energy generation, water extraction from the ambient atmosphere, and a 2.5 or 5 MW electrolyser to produce renewable hydrogen. The first project (named Green Springs) would be sited south of Tennant Creek in the Northern Territory, and produce more than 500,000 t/a of green hydrogen. The second Australian project will be in South Australia.
Meanwhile, the East Kimberly Clean Energy Project is looking to use 1 GW of solar energy to generate hydrogen for 250,000 t/a of green ammonia production at Kununurra in the north of Western Australia by 2029 at a cost of A$3 billion.
The Western Green Energy Hub (WGEH) is a development including Korea Electric Power looking at a very large scale hydrogen and ammonia hub at Mirning Country near Eucla in Western Australia. Phase 1 would use 50 GW of wind and solar power to produce 330,000 t/a of hydrogen for 1 million t/a of ammonia production, but subsequent phases could take this to 3.5 million t/a of ammonia. WGEH is a consortium made up of InterContinental Energy (46%), CWP Global (44%) and Mirning Green Energy Limited (10%), the commercial entity of the Mirning Traditional Lands Aboriginal Corporation. The project is aiming at a FID in 2027.
All of these projects remain highly speculative of course, and the demise of Fortescue’s Darwin project and the delays to its Gibson Island project are indicative of the difficulties in getting these projects off the ground. Allied Green Ammonia looks the most promising, but it remains to be seen how it will fare against real world economics.
