Santos gas a lure for Perdaman ammonium nitrate plant in NSW
Perdaman Group is considering an ammonium nitrate plant near Narrabri in NSW after a 20-year gas supply deal with Santos.
Indian-Australian industrial company Perdaman Group is considering developing an ammonium nitrate plant near the NSW town of Narrabri after agreeing a 20-year gas supply deal with Santos.
The non-binding agreement could see Santos supply 14.5 petajoules of gas annually for two decades should its controversial $3.6 billion Narrabri gas project receive environmental approvals and a final investment decision.
Perdaman’s proposed ammonium nitrate plant could either supply fertiliser for agribusiness or explosives for the state’s mining industry and follows plans last year by the company to build a $4bn urea project on the Burrup Peninsula in Western Australia’s Pilbara.
Santos said it plans to use a combination of gas-fired power generation and renewables source - dubbed hybrid power - to provide electricity to both its Narrabri development and the mooted ammonium nitrate plant.
Manufacturers along the east coast are increasingly struggling to compete with high energy input prices.
Gas shortages on the east coast are set to emerge within three years and prices will remain high for the next decade ratcheting up pressure on large industrial users struggling with soaring tariffs, experts warn.
The eastern states of NSW, Victoria, South Australia and Tasmania won’t have enough gas to meet demand as soon as 2022, requiring Queensland to substantially boost the supplies it sends south, according to consultancy EnergyQuest.
Santos’ move will also raise pressure on NSW Labor after it confirmed earlier this week it would block the unconventional gas project if it were successful in next month’s state election.
The NSW Department of Planning is assessing the Narrabri development in the Gunnedah Basin which Santos says has the potential to supply half of NSW’s annual gas demand from 2022.
It faces a test, however, to win environmental approval for its proposal following strong environmental opposition over the effect it may have on water supplies and nearby farmland.
“We want the process to be comprehensive and robust so the community can be confident in the outcome,” Santos chief executive Kevin Gallagher said today. “There is no place for politics in the independent planning process,”
The South Australian energy producer said last week at its results that it had signed an initial gas supply deal with a manufacturer - presumably Perdaman - and expects more to follow if it receives approvals, with a government decision expected by September.
Santos expects additional gas-intensive manufacturing would set up on the east coast should Narrabri go ahead, allowing those businesses to source cheaper gas by cutting about $2 a gigajoule from pipeline costs and situating themselves closer to the project.
Manufacturers “would be moving closer to supply and taking out pipeline costs and transport costs,” Mr Gallagher said.
Perdaman Group chairman Vikas Rambal said gas would be cheaper than traditional sources that rely on pipelines should the industrial deal proceed.
“The cheapest gas for manufacturing projects like ours is always going to be available close to the supply source so you don’t have to pay for long-distance transport and unnecessary processing,” Mr Rambal said.
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