Liberty Resources is on track to revolutionise the way in which Queensland and Australia meet the pressing need for fertiliser supply, and to transform the nation into a net exporter of low-cost, in-demand product in line with increasing global food production.
Liberty Resources is intent on becoming a large-scale, fully-integrated fertiliser producer: Fact. However, what differentiates the company behind the Urea Fertiliser Project in Queensland from other like-minded Underground Coal Gasification (UCG) players, says Liberty’s Queensland state manager Scott Cross, is that Liberty is the only company to fully understand the fertisliser market, to understand how UCG fits within that market and to have the unbridled belief in the business model to deliver on it. What puts Liberty at an advantage over the rest of the fertiliser industry, he explains, is that it owns its resource, coal, and the gas feedstock that insulates it from future gas price rises.
As Australian gas and coal are highly sought after by China and India, the cost of fertiliser for the farmers and agricultural sector in Australia is going up. The solution, says Cross, lies in Liberty’s landmark project.
“The reason we consider [that] the ammonia and fertiliser game fits so well for Australia is two-fold; ammonia production is a proven low-cost refining process that fits well with UCG, and Australia imports some 90 per cent of its fertiliser,” he says.
“We have a massive agricultural sector in Australia, but an underdeveloped small domestic fertiliser industry.”
A project of this magnitude – one capable of transitioning the nation from high-cost imported fertiliser to low-cost net exporter status – is an exciting prospect. But, as Cross says, when by company calculations you have the lowest-cost urea fertiliser in the world, the possibilities for both Liberty and Queensland are limitless.
Low-cost and well-located
Weighing up the 2010 average cost of urea fertiliser production at around A$185/t against Liberty’s projected cost for product produced from UCG of syngas at around $80/t, demonstrates quite how low-cost Cross and the team believe their project could be. Figures are, in part, a result of Liberty’s own vertically integrated structure and ownership of Urea Corp; the subsidiary with strategic assets in Queensland totalling inferred resources of thermal coal at 3,300Mt in the Galilee Basin, and the Denison Trough within the Surat Basin with an inferred resource of 1,400Mt of thermal coal.
“We’re looking to get our Denison resources into the measured and indicated [JORC] category,” Cross says, adding that the only factor preventing the team from drilling it out is the weather.
“As we go about de-risking the significant CAPEX of this project, for UCG we need to further define the resource and get a better understanding of the coal bed and the coal seam. There’s also indication that some of the coal is as shallow as 30m and we’re going to commence drilling for that as well.”
But it is not just the development costs that flag Liberty’s project from its onset. Its Denison site has both a favourable geological and environmental setting.
While Queensland seeks to safeguard its large expanses of agricultural, arable land and has moved to protect them from resource exploration – steps Cross fully supports – Liberty has selected an area that will see a very low impact on the flora and fauna and Injune, the closest town, is 35km away. Moreover, Cross explains, not all coal beds are appropriate for UCG given the location of water aquifers and rock strata, and as such Liberty has specifically selected an area that will have no impact on the water table.
“We’re talking down 1,000m, so our calculations don’t show it to be an issue,” he says.
“We’ll be deeper than other UCG projects under development.”
Respecting state interests in terms of conservation, land use and safety – well matched by the project’s secured feedstock, low future operating cost and strong domestic fertiliser demand – sees Liberty assume a competitive position as it goes about finessing its portfolio to progress the project and negotiate off-take agreements.
Fine-tuning and Australia’s export role
Cross says the company hopes to secure conditional financing and off-take agreements to further commercialisation of the project within the year.
“We are talking to major producers in China, India and others. The fundamental driver for them to get into this space is that current players in the fertiliser industry will be challenged to compete at the low level of production cost that UCG promises – Urea fertiliser in Australia is selling for $550/t while we are looking at production costs of $80/t,” he explains.
“Large companies in Asia and India have the balance sheets to fund significant CAPEX required for the project but also to participate in international markets at spot prices.”
Moreover, he adds, urbanisation in emerging markets means that more people are sharing less land – agricultural land in particular. China adds an entire Germany in new births every year, for example, which demonstrates clearly the need to produce more food on a smaller amount of land, which is achieved by using fertiliser.
One of the key project challenges remains the development of supporting infrastructure. Some is already in place, including roads and rail from the logging industry and the port facility at Gladstone. A significant project component yet to wind its way through approvals, Cross says, are the dual pipelines Liberty plans to build from the ammonia facilities at Denison to the urea syngas plant at the port. This is not a new challenge for the state; Queensland has many pipelines supporting the gas industry and a nearby pipeline easement that runs in the same area as Liberty’s project will allow for co-location. And Cross notes that avoiding rail and road to transport urea fertiliser will reduce the project’s environmental footprint, reduce congestion and noise, and also reduce operating cost, while transit will be ensured given that Liberty will own the pipeline.
“We believe that this project will be significant enough that the Queensland government should get onboard and expediate [it] so that we can go down this path. We are almost through the process and are confident of receiving the significant project determination,” Cross says.
With a project in line for staggeringly low production costs, supported by wholly owned feedstock, proven technology, an environmentally astute management – and an on-site location housed in both a state supportive of energy development and a nation in need of its product – Liberty is in a relatively unique position.
Negotiating off-take agreements will cement international appreciation of how significant a project this is, and when the details are finessed between Liberty and Queensland’s pipeline powers-that-be, this cleverly planned development will move into commercialisation and guide Australia into its future as a low-cost net exporter.
IRJ encourages readers to learn more about Liberty Resources by visiting their website and following the ‘HYDROGEN’ tab on the homepage to the comprehensive list of project-specific ‘FAQs’.