Leigh Creek Energy concept select study confirms viability of fertiliser production

Leigh Creek Energy ASX LCK low cost gas disruptive technology fertiliser production
A finalised concept select study by thyssenkrupp has confirmed Leigh Creek Energy’s namesake project in South Australia could viably compete with the lowest cost urea producers around the globe.

Emerging syngas producer Leigh Creek Energy (ASX: LCK) has realised a key component of its commercialisation plans for its South Australian namesake project, announcing the finalised concept select study by thyssenkrupp.

According to Leigh Creek, the study confirms the company can viably build a plant capable of producing urea that will compete with the world’s lowest cost urea producers.

The finalised study follows the successful completion and subsequent decommissioning of the company’s pre-commercial demonstration plant, which proved it could produce commercial levels of synthesis gas, or ‘syngas’, via in-situ gasification (ISG) at the start of this year.

Disrupting the fertiliser market

Global fertiliser technology company thyssenkrupp has constructed and commissioned 14 new fertiliser plants in the last decade, with a total annual urea capacity of close to 12 million tonnes.

The urea plant design by thyssenkrupp in the concept select study has been built, commissioned and is in operation in several locations around the world, Leigh Creek said.

According to the company, its Leigh Creek energy project (LCEP) will “provide syngas into its fertiliser plant for a fraction of the cost of current natural gas producers”.

This is thanks to the company’s cost-competitive advantage of being able to provide syngas feedstock from the ground in-situ, compared to the traditional process by manufacturing urea companies of buying expensive natural gas then converting it to syngas.

The study also showed the project’s potential to further disrupt the Australian fertiliser market by having lower gas feedstock prices (less than $1 per gigajoule), certainty of gas supply over the life of the project and stable gas feedstock prices.

Another advantage is its close proximity to a pivotal rail hub point for nationwide distribution.

“By way of example, approximately 40 GJ of gas is used to produce 1 tonne of urea. At current Australian gas costs, if a producer was able to acquire gas, even as low as $8 per GJ they would have a raw cost of $320 per tonne for gas feedstock, which they would then convert to syngas at extra cost,” the company stated.

Compared to its competitors’ $320 gas feedstock price, Leigh Creek would be able to provide syngas feedstock at less than $40/t of urea, Leigh Creek explained.

Low-cost urea plant

Thyssenkrupp has estimated a $3.27 billion capital cost for the development of the 2 million-tonne-per-annum plant in South Australia.

“Linking this to the LCEP’s feedstock syngas at less than AUD$1.00/GJ will enable LCK to produce urea at less than USD$100/tonne ex plant,” the company reported.

According to Leigh Creek, this places its project on par with the world’s lowest cost urea producers in Saudi Arabia and Russia.

It said this significant cost advantage would also enable the project to compete favourably in local export markets with lowest cost producers globally, which have similar plant costs but higher transport costs into Asia Pacific markets.

Leigh Creek managing director Phil Staveley said he was pleased to receive such positive validation from thyssenkrupp.

“At a cost that is sub USD$100, amongst the lowest urea costs globally, this is an extremely attractive and robust project, now and in the long term,” he said.

Danica has extensive experience writing and editing business news in the Oceanic and Southeast Asian regions. She has written across a range of industries including oil and gas, mining, energy, science and research, retail and travel. Danica has covered small and large cap companies listed on the Australian, Singapore, Hong Kong, Indian, London and Toronto exchanges.