Mark Wynne, chief executive of Ballance Agri-Nutrients. Photo/Andrew Warner
Bay of Plenty fertiliser cooperative Ballance Agri-Nutrients has called for international tenders for a potential major redevelopment of its ammonia-urea plant at Kapuni in Taranaki, says chief executive Mark Wynne.
If the decision to go ahead is made, it could result in an investment of "hundreds of millions" and increase current annual production of about 260,000 tonnes to up to double that volume, he said.
"It's a big ticket item," said Mr Wynne, who declined to provide an estimate of the eventual cost, which he said would depend on the outcome of the tenders, which are due to be submitted in December.
"It's an exciting step - but it's the first one on a long journey which includes board and shareholder approvals. We won't be making any decisions before the year is out."
Ballance's farmer-shareholders need to approve any investment requiring more than half the total value of company assets.
Urea from the plant comes back into the Bay of Plenty, and is also transhipped throughout New Zealand, said Mr Wynne.
The Kapuni plant is the only one of its kind in New Zealand and was one of a raft of Muldoon-era 'Think Big' projects from the early 1980s.
Ballance had carried out a year-long internal feasibility study, which included discussions with international specialists in converting gas to fertiliser.
"This has given us confidence to make the next move and ask global experts to scope and cost a re-development," said Mr Wynne.
Three specialist international engineering firms have been asked to tender.
The Kapuni plant makes around one-third of New Zealand's total needs. It's estimated that local production saves around $150 million in foreign exchange annually in importation costs.
After it was first commissioned in 1982, around 80 per cent of Kapuni's urea production went to export. However all of the production is now taken up in New Zealand.
The plant was originally owned by Petrocorp and Petrochem, and then by Fletcher Challenge. Ballance acquired it in 1992 and has continued to maintain and expand the facility.
Ballance's 2014 annual accounts noted: "With global urea prices anticipated to remain low in the foreseeable future, we are currently looking at opportunities to optimise the effectiveness of this plant and maintain its valuable contribution to the business."
Mr Wynne said the plant was well maintained, ran efficiently and was achieving higher production following a $21 million investment in late 2013.
Nitrogen fertiliser plays a key role in New Zealand food production, and we need to take a long-term view on providing a reliable and sustainable supply which is globally competitive
"Technology has also advanced and we need to consider the benefits of a new state-of-the art plant versus the cost of maintaining the current one. We have to make sure we keep our global competitiveness right up there so we don't get run over by imports and can keep manufacturing here in New Zealand."
Additional benefits of a new plant were part of an open-minded evaluation of the company's options, he said.
The Ballance feasibility study had arrived at some preliminary costings, but it would be over to the international companies to come up with exact engineering plans and costings and submit their responses to the tender. Local companies would be used for the actual construction, he said.
Ammonia-urea 101
The Kapuni ammonia-urea plant turns natural gas into liquid ammonia and carbon dioxide, which are both used to synthesise urea, ultimately producing urea pellets which contain nitrogen, one of the four key building blocks for plant growth along with phosphate, sulphur and potassium. The majority of the ammonia produced goes into producing urea.
The Kapuni plant has also begun producing Go-Clear, a diesel exhaust fluid used in the Selective Catalytic Reduction process incorporated into modern heavy duty diesel engines.