Orica facing up to challenge of going green

It’s not easy going green when your job is to provide explosives and chemicals to the resources sector, but Orica is giving it a red hot go. The company, which offers mining and infrastructure solutions around the world, has pursued a double-pronged decarbonising strategy in recent years – to reduce emissions at its factories, and to produce greener products, such as low-carbon ammonia and ammonium nitrate for its customers.

Its recognition that there is a commercial advantage in selling sustainable solutions to the mining sector comes as other heavy manufacturers move to develop green inputs as part of the transition to a low-carbon economy.

A key focus at Orica is the work done on its nitric acid plants on Kooragang Island, near Newcastle, NSW, and its Yarwun facility in Gladstone in Queensland where technology that works much like a catalytic converter and exhaust system in a car, destroys the nitrous oxide in the tail gas of the plant.

Nitric acid is a key ingredient in the manufacturing of explosives.

Orica’s president, Australia Pacific and sustainability, Germán Morales, saw the technology being used successfully in its ammonium nitrate plant in Carseland in Canada, 40km south-east of Calgary.

The technology had been developed by the German company Thyssen Krupp.

Morales wondered if it could be used to reduce carbon emissions from plants in Australia. “We started the journey in Canada, testing an existing technology, which had not previously been used in Orica’s assets, and never before in Australia,” Morales says.

“By breaking down nitrous oxide, which is about 265 times more potent than CO2 emissions in terms of global warming potential, into nitrogen and oxygen, we effectively abate those greenhouse gas emissions.”

A key focus at Orica is the work done on its nitric acid plants on Kooragang Island, near Newcastle. Picture: Supplied

The changes at the Newcastle and Gladstone plants have led to a reduction in emissions from the plants equal to about 15 per cent of the total emissions of all chemical companies in Australia. Orica is proud of the results, but Morales says there is now more “realism” coming into the debate, given the big challenges Australia faces in moving to net zero emissions by 2050.

While many Australian companies have high ambitions about their climate-change and emission-reduction goals, the Spanish-born Morales, says they are now coming to terms with issues such as the cost of the technology needed to meet their goals, and the availability and price of the energy and raw materials critical to the transition. These include gas and renewable electricity.

He says there is a big difference between ambition and targets. “Ambition is something you aspire to achieve,” Morales says. “A target is something that you expect to deliver on, based on a developed pathway. As we progress towards the understanding of what is required, we are seeing many companies fall short of their ambitions because the funds that are required are much greater than initially expected, or the technologies are not as mature as initially expected.”

One of the world’s largest commercial explosives manufacturers, Orica is a major supplier to the mining, oil and gas, and construction sectors. It is one of Australia’s oldest companies and traces its origins back 150 years when it supplied explosives for the goldfields of Victoria. It now operates in more than 100 countries with a staff of more than 12,500.

Some companies have scaled back on their green commitments as they realise the challenges involved, but Orica accelerated its climate change targets in September 2023. It had already reduced its scope 1 and scope 2 emissions by 22 per cent from its 2019 baseline. It now plans to reduce scope 1 and 2 emissions by 30 per cent by the 2026 financial year and at least 45 per cent by the 2030 financial year.

Morales says: “We feel quite confident about delivering those numbers. When we set targets, we set them for a number of reasons. First, because we knew the technology, and second because we had the funds available to invest responsibly in decarbonising our operations while creating value for our shareholders.” When it comes to scope 3 emissions, Morales says Orica has an ambition but is not yet confident enough to call it a “target”; the ambition is to reduce scope 3 emissions by 25 per cent by 2035 from 2022 baseline levels.

Morales was working for Spanish company Maxam in Madrid in 2018 when he was recruited by Orica as group executive and president of its Latin American operations. He took up the role in Chile. He had worked around the world for Maxam, including the US and Africa, and had a stint running its operations in Australia from 2007 to 2009. He moved to Orica’s headquarters in Melbourne in April 2021, as group executive and president of its Australia Pacific operations, taking on the additional role of head of sustainability in June this year.

Morales says his interest in sustainability comes from his background, having lived and worked around the world. He was born in Spain, his wife is from Uzbekistan, he has a son born in Australia and another born in the US.

“I have also had the privilege of working in Africa and Latin America in some disadvantaged places,” he says. “I am very mindful that we want to leave a better world for the next generation.”

Orica is looking at the next phase of its sustainability journey which involves using more renewable raw materials and energy in its manufacturing. The company wants renewable electricity to make up 60 per cent of its power by 2030. It has secured a renewable electricity power-purchase agreement (PPA) for its operations in NSW and is exploring other opportunities across its global operations. The next big step is the decarbonisation of ammonia, a product needed to produce nitric acid, which Morales says represents the “last big piece of emissions [reduction].”

Plans are predicated on the potential of a green hydrogen project in the Hunter Valley. While Origin Energy has recently withdrawn from the project Orica, remains open to discussions with interested parties who share its vision for a sustainable-energy future and Australia’s hydrogen economy.

Morales says the only way to cope with the challenges of decarbonisation is collaboration between industry and governments, both state and federal, and collaboration between companies.

“We can invest as much as we like in renewables, but if we don’t invest in the distribution network, if we don’t invest in a storage alternative, it is going to be pointless,” he says. “It requires a holistic view of significant collaboration.”

While companies compete fiercely, he argues the decarbonisation challenge is similar to the one industry undertook on safety. Companies compete for business, but they all have a common goal of wanting to reduce accidents and improve safety in their plants.

“There are many examples of collaboration in industries,” Morales argues. “In our business – explosives – safety has always been prioritised over competition. Companies have always strongly collaborated when it comes to safety.” In the same way, he says, Orica is more than happy to collaborate with other companies “on the sustainability journey”.

Morales says financial support from government is essential, and requires strong collaboration among governments, regulators, technology partners, all coming together to solve a common goal.

Orica is working on two other joint ventures. One is with clean energy developer, MCi Carbon, which is building a demonstration plant at the Kooragang Island site to transform captured carbon dioxide into building materials. The second is with ASX listed Alpha HPA, which is based at Yarwun, to look at expanding their operations and establishing a high purity aluminium facility in North America.

But while collaboration is key, commercial realities still decide the day. If Orica can’t get access to gas, renewable electricity and recycled water at a reasonable price, projects like the renewable hydrogen project won’t be feasible.

“Gas, renewable electricity and recycled water are all key enablers for this energy transition period, and critical for green hydrogen production and a low carbon future,” Morales concludes.