By Peter Milne
A gas-fuelled fertiliser plant in Western Australia’s Pilbara that will boost Australia’s food security will proceed after Vikas Rambal’s Perdaman secured financing for the $6 billion project.
However, the WA environment regulator is concerned that the plant’s emissions could irreversibly damage nearby World Heritage-nominated indigenous rock art.
The Perdaman plant will be built on the Burrup Peninsula, home of the World Heritage-nominated Murujuga rock art.Credit: Perdaman
US fund Global Infrastructure Partners has bought a 49 per cent equity stake in the project that, together with debt financing, will allow construction to begin immediately.
Perdaman chair Vikas Rambal said on Wednesday the plant near Karratha that will produce 2.3 million tonnes of urea a year from 2027 would be Australia’s largest gas-fed manufacturing project.
“This state-of-the-art facility will help to ensure that Australia has a secure and reliable source of high-quality urea, supporting our nation’s farmers and food producers,” he said.
Rambal said the local urea production – almost equal to Australian demand – would give the nation security if global trade was again disrupted like it was by the COVID pandemic.
The official announcement was preempted on Friday by fertiliser manufacturer Incitec Pivot which told the market financing had been completed so its agreement to buy the plant’s 2.3 million tonnes a year of urea for 20 years was effective.
The ASX-listed company plans to sell about half the output in Australia.
Global fertiliser prices have rocketed since Russia’s invasion of Ukraine crimped gas supply to European plants and increased the cost of gas to all producers.
The plant which will employ about 200 people will also produce the diesel emissions reduction additive AdBlue that was in short supply in Australia in late 2021.
Perdaman said construction by a joint venture of Italian firms Saipem and Webuild that took over from the liquidated Australian firm Clough would generate an average of 2000 jobs over four years.
A similar number of workers will be engaged in expanding Woodside’s nearby Pluto gas export plant in a labour market already experiencing significant skill shortages.
New industry clashes with ancient art
The Perdaman urea plant will share the Burrup Peninsula Woodside’s North West Shelf and Pluto liquefied natural gas plants, gas-fed ammonia and explosives plants owned by Norway’s Yara, Rio Tinto’s iron ore export port and more than one million ancient rock engravings dating back more than 40,000 years.
The area, known as Murujuga by traditional custodians, was nominated for World Heritage listing by the federal government in February.
There are concerns that industrial pollution from the plant could accelerate the weathering of the thin coloured patina that covers the area’s rocks and makes the art visible.
The WA Environmental Protection Authority concluded “there may be a threat of serious or irreversible damage” to the rock art from the plant’s emissions such as nitrous oxides.
The WA government gave environmental approval to the plant on the condition that in the future it could be ordered to cut any damaging emissions to protect the art.
The project has the support of the elected Murujuga Aboriginal Corporation but is opposed by a group of traditional custodians called Save our Songlines.
In August 2022, Environment Minister Tanya Plibersek rejected a request to use section 9 of federal Aboriginal heritage laws to halt work on the project that will involve the relocation of some sacred artefacts.
Rambal said the artefacts would be moved in the next few days
“Traditional Owners signed off how they want to do it: culturally safe,” he said.
In September Plibersek used section 10 of the laws to initiate an independent review to determine if the ancient art is threatened by industry.
Save our Songlines spokeswoman Josie Alec said she was angry and hurt by the project going ahead.
“We still have an outstanding cultural heritage assessment of industry damage to Murujuga under Section 10.
“How can they go and remove rocks straight away when they are supposed to be consulting with us?”
Murujuga Aboriginal Corporation has been contacted for comment.
WA Premier Mark McGowan said he thought his government had got the balance right between heritage development and industrial development.
He said the urea plant would be the last greenfield development on the Peninsula and other sites that had been earmarked for industry would be incorporated into a planned Murujuga National Park.
“This is a very small footprint within the totality of the Burrup,” he said of the Perdaman site.
Backing from government and infrastructure investors
US-based Global Infrastructure Partners has invested in both projects. Privately-owned Perdaman did not disclose the terms of its deal with GIP.
When Woodside sold 49 per cent of the Pluto plant expansion to GIP in 2021 it retained most of the risks from cost or schedule blowouts or adverse regulatory changes making the purchase more palatable for infrastructure investors that normally seek low-risk destinations for their money.
The plant has been strongly backed by the WA Labor government and successive federal governments.
“The simple matter is that the state has to work with private entrepreneurs like us make it work,” Rambal said.
The federal government’s Northern Australian Infrastructure Facility has backed Perdaman with $475 million of financing; $220 million direct to the project, $160 million to the Pilbara Ports Authority for a wharf upgrade, and $95 million for WA’s Water Corporation to expand the supply of desalinated water.
The WA government has committed to spend $48 million on supporting infrastructure. Additional support came from Export Finance Australia.
Premier Mark McGowan said the investment underlined that the Pilbara was the engine room of Australia’s economy.
“My Government is proud to support developments like the Perdaman Urea Project that will deliver decades of economic benefits for WA, creating local jobs and diversifying the Pilbara economy,” he said.
WA gas market to tighten
The foundation for the investment is a deal Perdaman signed with Woodside five years ago for the supply of 125 terajoules a day of gas for 20 to 25 years from the proposed Scarborough gas field.
The plant will take the bulk of the 180 terajoules of gas a day expected to flow from Scarborough to the WA market under the state government’s domestic gas reservation arrangements for gas export plants.
The final investment decision on the urea plant was expected a few months after Woodside committed to Scarborough in November 2021 but was delayed while financing was secured.
Rambal’s success may bring forward an expected gas shortfall in WA.
In December the Australian Energy Market Operator forecast the state that is Australia’s biggest gas exporter would have a shortage of the fuel from 2030 on the assumption the Perdaman plant did not process and Woodside would sell the gas elsewhere.
The shortage is now likely to be brought forward to 2027.
The plant will produce about 650,000 tonnes of greenhouse gases a year which the stste government has required to be gradually reduced to zero by 2050, starting in 2030.