Strike Energy employees pose with the Ensign 970 rig which will drill down to tap into gas reserves on Strike's leases at South Erregulla near Eneabba. Strike's Project Haber urea production plans at Geraldton depend on its South Erregulla project producing sufficient low-cost natural gas.

Major strike for Geraldton urea project

SURGING imported urea prices and the realisation agriculture and transport could grind to a halt if diesel exhaust fluid AdBlue supplies run out, have focussed attention on a WA Mid West urea project.

Under the Federal government's Supply Chain Resilience Initiative, Strike Energy Ltd was this month awarded a $2 million matched grant to help fund development of its Project Haber proposed urea and ammonia production plant at Geraldton.

The State government also came to the party last month, accepting Project Haber under its lead agency framework which aims to streamline approvals processes for projects of State significance by co-ordinating government agency response.

In a recent comprehensive Project Haber update to the Australian Securities Exchange, Strike said the Department of Jobs, Tourism, Science and Innovation had assigned a case manager "to facilitate desired project development outcomes assisting primarily in the tracking and approvals management and interagency coordination".

As previously reported in Farm Weekly, Strike proposes using natural gas piped about 125 kilometres from its own South Erregulla natural gas project near Eneabba, to an industrial site already identified at Geraldton to produce ammonia and a projected 1.4 million tonnes per annum (mtpa) of urea fertiliser.

At full production the proposed plant could theoretically supply 74 per cent of the nation's 1.9mtpa current urea fertiliser usage, most of which is imported from China, Russia and Egypt.

Synthetic urea comprises 46pc nitrogen and is the most popular nitrogen fertiliser used in Australia.

Cheap natural gas is said to be the key to urea manufacturing - it represents about 70pc of cost of production - and is why Project Haber hinges on the success of Strike's 100pc-owned South Erregulla gas project.

By the end of the year Strike hoped to have spudded its first drill hole at South Erregulla - SE-1 - using the Ensign 970 drilling rig relocated after a successful campaign at its majority-owned Walyering-5 wet gas project at Cataby.

With SE-1 and any subsequent holes at South Erregulla, Strike is hoping to delineate 350 petajoules of gas which would secure its requirements for Project Haber.

Synthetic urea is manufactured by reacting together natural gas, atmospheric nitrogen and water at high temperature and pressure to produce ammonia and carbon dioxide.

These gases are reacted again at high temperature and pressure to produce molten urea which is cooled and processed into prills as fertiliser and for industrial use.

Further processing produces UAN (urea ammonium nitrate) liquid fertiliser and SCR (selective catalytic reduction) urea.

SCR urea is the main ingredient in AdBlue pumped into the exhausts of big diesel engines to remove nitrous oxides - blamed for causing smog and acid rain - from exhaust gases.

Running diesels designed for AdBlue without it, or attempting to replace AdBlue with water, will, as some farmers and transport operators have discovered, likely cause engine management system sensors to detect no AdBlue is going into the exhaust and trigger a malfunction code causing the engine to immediately 'derate' to limp mode.

Energy shortages in China and elsewhere in the northern hemisphere going into winter have directed natural gas supplies towards power generation and heating, away from urea fertiliser and SCR urea manufacture, causing global shortages, price rises and, in the case of AdBlue in Australia, some service stations rationing supply to customers to try and prevent hoarding.

According to Strike's update, the global shortage of urea "has seen international urea pricing surpassing previous all-time record highs with FOB (free onboard) Middle East prices reaching more than US$1000 (about $1390) per tonne in the spot market".

Although Strike has not yet mentioned producing SCR urea in relation to Project Haber, Farm Weekly understands recent concerns about AdBlue shortages and diabolical implications for transport logistics and agriculture if supplies do run out, has prompted directors to consider it as a potentially profitable complementary option to planned fertiliser production and worthy of investigation.

The only plant in Australia producing synthetic granular urea fertiliser and SCR urea, at Gibson Island, Brisbane, is due to close in 12 months.

Incitec Pivot announced in early November exhaustive efforts to secure a long-term affordable natural gas supply from Australian gas producers had failed and it planned to close the Gibson Island plant after 50 years of production at the end of December next year.

Although Incitec Pivot has since announced the acquisition of a majority stake in Australian Bio Fert Pty Ltd, which produces a range of biological fertilisers based mainly on poultry manure and "seabird guano", it has not indicated what that will mean for its granular urea and SCR urea clients.

Strike said it hoped to merge front-end engineering design (FEED) and subsequent engineering, procurement and construction (EPC) phases of development - it has started early FEED works, mainly to do with environmental approvals and has initiated a FEED/EPC tender process for Project Haber.

The FEED tender will be let once drilling at South Erregulla proves up the required gas supply.

Strike has previously said it hoped to start construction on Project Haber in early 2023.

It already has a memorandum of understanding with AGIG (Australian Gas Infrastructure Group) to source eight gigalitres of water per annum from AGIG's proposed Mid West desalination plant.

It also believes establishment of a Clean Hydrogen Industrial Hub at Oakajee, 23km north of Geraldton, supported by joint State and Federal government funding and utilising renewable power and water, would be mutually beneficial for Project Haber.

Strike initially intends to supply 2pc of its hydrogen demand - hydrogen and nitrogen gases are used to produce ammonia by the Haber method - for Project Haber from its own dedicated 10 megawatt hydrogen electrolyser.

Ultimately though, Strike said its urea manufacturing facility could become a major customer for 'green hydrogen' from a Mid West Clean Hydrogen Industrial Hub.

Green hydrogen would also help Project Haber "tackle hard to abate carbon emissions associated with the manufacture of fertiliser (and) has the potential to reduce the carbon footprint of Australia's urea consumption by more than 50pc", Strike said.

The Strike board has established a major project subcommittee, led by Strike deputy chairman and a former Fortescue Metals Group chief executive officer Neville Power, to oversee Project Haber.

The subcommittee also includes director Mary Hackett, who has design engineer experience on North Sea oil and gas projects, has held senior positions with Woodside Energy in Australia and who is also independent chairwoman of the Future Energy Exports co-operative research centre.

Strike's chief development officer Crispin Collier and managing director and chief executive officer Stuart Nicholls are also subcommittee members.

"The award of this Supply Chain Resilience grant and West Australian lead agency status is recognition of the importance of Strike's pursuits at Project Haber, to not only domesticate the nitrogen fertiliser industry but also dramatically reduce the carbon footprint of Australia's agricultural emissions," Mr Nicholls said.

"The investment in clean hydrogen in the Mid West demonstrates the role that Project Haber can have in creating a new energy economy through the early creation of a large commercial hydrogen demand centre.

"Renewable power with some green hydrogen, combined with Strike's adjacent natural gas resources, could see some of the world's lowest carbon urea produced right here in WA."

A $2.6 billion project based at South Australia's former Leigh Creek coal mine plans to begin producing urea fertiliser in early 2025, but has had some problems securing project finance.

In WA, Perth-based Perdaman Chemicals and Fertilisers plans to build a $4.3b fertiliser project on the Burrup Peninsula, near the Karratha Gas Plant, Woodside's Pluto LNG Plant and an ammonia plant run by international company Yara.

Perdaman's proposed plant would produce up to 2mtpa of urea which the company has previously said would be exported from nearby Dampier port.

The Environment Protection Authority has said the project can go ahead, but with extensive conditions, including a requirement for Perdaman to ensure the project does not damage in any way ancient rock art on the peninsula.