Solid Energy and Ravensdown investigate lignite

24 September 2009

Solid Energy and Ravensdown investigate lignite to fertiliser plant

Energy producer, Solid Energy, and agricultural fertiliser supplier, Ravensdown, are jointly investigating the viability of building a US$1 billion plus coal-to-fertiliser plant in Eastern Southland, harnessing the region’s world-scale lignite resource and making New Zealand self sufficient in, and potentially an exporter of, urea fertiliser.

The study will consider the economics and possible location of a plant producing up to 1.2 million tonnes a year of urea – a nitrogen fertiliser used to enhance grass growth – from up to 2 million tonnes a year of lignite mined from Solid Energy’s extensive lignite resources. At last year’s urea prices – up to US$800/tonne – this plant would have generated the equivalent of about NZ$1.5 billion per annum in export equivalent revenue – through a combination of import replacement and direct exports.

Up to 500 new jobs could be created. Solid Energy and Ravensdown expect to complete the study in early 2010 when they will decide whether to proceed to the next stage of a feasibility study. Following engineering design, and subject to consenting and financing, construction could start by 2012, and the plant could possibly be operational late 2014.

Solid Energy’s Chief Executive Officer, Dr Don Elder, says: “We believe this is a tremendously exciting announcement for New Zealand. Agriculture is our most important economic sector and its global importance is growing every day. Urea is a key input to increased farm productivity, but is mostly imported at present, which exposes our farmers to world supply volatility, and prices that can fluctuate widely. Producing urea from our vast lignite resources is a prime example of how New Zealand can capitalise on our position as one of the richest countries in the world in natural resources per capita.”

“This lignite-to-urea study is now running in parallel with our existing work to investigate producing diesel – another key input into New Zealand’s economy - from lignite. Developing a urea plant in advance of constructing a lignite-to-diesel plant would allow New Zealand to have advanced gasification industry competency and capabilities in place at an earlier stage, to substantially facilitate further and larger developments. Alternatively the two developments could take place in parallel and form the basis of a “syngas park”, supplying clean syngas to multiple downstream applications including diesel and urea.”

Dr Elder adds: “Taking full responsibility for greenhouse gas emissions is a key consideration in all our lignite developments. We expect a lignite-to-urea plant would be fully carbon compliant from day one. Solid Energy is already investigating a range of options for managing CO2 emissions from our planned coal-to-liquid plant including carbon capture and storage, biosequestration and biofeedstock options.”

Ravensdown Chairman, Bill McLeod, says: “Urea is a third of Ravensdown’s Australasian sales. It has grown to be a very important nutrient in New Zealand farming since it began to be more widely accepted over the last 20 years. Ravensdown is constantly working to identify more secure alternatives for farmers and is pleased to be working with Solid Energy to investigate the viability of this domestic opportunity.”

Ravensdown Chief Executive Officer, Rodney Green, adds: “A domestic urea supply could be a major benefit for Ravensdown and our farmers. We wouldn’t be at the mercy of international commodity prices - last year urea increased from US $250/tonne to more than US$800/tonne and we wouldn’t be dealing with foreign exchange for this important nutrient. As New Zealand production techniques would be the latest technology, a local plant would have major environmental benefits.”

Urea is currently produced worldwide using either coal or gas as a feedstock and using well-established technology. There are a significant number of urea plants already operating and new plants currently being built in China, with almost all of these coal-based. In New Zealand some urea is currently made in Taranaki using natural gas.

New Zealand currently imports about 500,000 tonnes of urea a year, mostly from the Middle East (gas based) and China (coal based). An additional New Zealand production facility would allow the country to be self sufficient in urea and in addition export up to 750,000 tonnes a year. In the last 18 months, Ravensdown has expanded into Western Australia and Eastern Australia and these mainly cropping and sugar markets are large urea users.

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