UREA usage has grown by an estimated 24 per cent over the past three cropping seasons in Australia, but only 8pc of last season's 2.5 million tonnes was produced here, according to Strike Energy's annual report.
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With urea usage estimated to top 2.6mt in Australia this season, one third of the world's supply of urea fertiliser had "disappeared" with the Russian invasion of Ukraine in February, Strike chairman John Poynton and chief executive officer and managing director Stuart Nicholls indicated in the annual report.
"A global food crisis is unfolding due to the lack of natural gas for manufacturing fertiliser," they said in the report released ahead of the company's annual meeting last Thursday.
Strike's leadership team outlined the potential economic benefits of and the company's rationale for pursuing Project Haber - its plan to produce 1.4mt of granulated urea fertiliser per year for at least 15 years in the Three Springs shire.
As previously reported in Farm Weekly, Strike proposes using its own proven natural gas supplies as raw material for urea production and wind and solar energy in a vertically-integrated, low-carbon-emissions manufacturing process producing excess hydrogen that could also be sold for future fuel.
The South Erregulla-1 (SE-1) gas well, urea manufacturing plant, solar and wind farms and a carbon-sink regrowth forest are proposed to form the basis of a 3500 hectare Midwest Low Carbon Manufacturing Precinct that Strike wants to co-develop with like-minded manufacturing business partners on degraded farmland it has negotiated to buy north west of the Three Springs township.
The cost of imported urea was "effectively a derivative of global gas prices", Strike's leadership team said in the report.
It produced data showing the Free On Board price of Middle Eastern urea remained below $US400 per tonne from 2014 until part way through last year, when it suddenly spiked twice - once in the second half of last year and once in the first half of this year - to almost US$1000/t, before retreating to US$600-US$500/t.
In comparison, Strike estimated it could produce granulated urea for a cash cost free on board at Geraldton port of US$78/t, which would make it equal cheapest with Russia and less than half the cost of Chinese urea - the world's biggest volume producer - based on 2020 prices.
Project Haber will generate "substantially higher returns" than selling gas into the WA domestic market could and provide a larger domestic market via urea production, with "ability to expand and access global markets versus the constrained and finite WA domgas market/customers", Strike's leadership team said.
"Project Haber is designed to manufacture Australia's most competitive supply of nitrogen based fertiliser due to its advantageous location, technology choices and integrated gas and renewable energy supply," it said.
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Mr Poynton told shareholders Strike's "ambition" was to "play a major role here through the delivery of low carbon fertiliser to Australian farms".
"Since the February invasion of Ukraine by Russia, the global supply of fertiliser has been substantially constrained which has led to a significant increase in prices," he said.
"The conflict in eastern Europe and the trade dispute with China has also shone a light on Australia's supply chain weaknesses and highlighted the need for domestic manufacturing of critical agricultural imports."
Mr Poynton confirmed independently certified gas reserves accessed by Strike's wholly-owned SE-1 well would be sufficient for 15 years of urea production at 1.4mt a year.
As well, he said, extra drilling at the West Erregulla gas field, with access rights shared by Strike and Warrego Energy, which recently rejected a takeover offer from Strike in favour of an offer from Beach Petroleum, had identified a 41 per cent "upgrade" in reserves there.
This opened up the possibility of also using gas from the West Erregulla field as urea fertiliser feedstock, he said.