PLANS for industrial development on the Burrup Peninsula have taken an unexpected twist, with two groups of companies now competing for one project.
The competition between Canadian fertiliser giant Agrium and Australian companies Plenty River and Thiess to develop a $1 billion ammonia project contrasts with the stalled or failed plans of most other project proponents.
The three companies had originally formed the Dampier Nitrogen consortium but parted company when they could not agree on the capital cost of the project.
Agrium has taken a more aggressive approach to costs and is seeking savings of more than $100 million before committing to the project.
“The fundamental difference was the fact that Plenty River and Thiess were of the opinion that the project, if properly structured, could be financed from a debt and equity perspective,” Plenty River executive director Peter Streader said.
“Agrium was of the view that the total cost estimate by [German engineering group] Uhde and Thiess was too high.”
While local representatives of Agrium declined to comment on reasons for the split, the company’s president and chief executive officer, Mike Wilson, provided candid insights at a chemical conference in New York.
Speaking last month, when the consortium members were still in discussions, Mr Wilson said: “To be quite honest, our partners are ready to go and we’re not.
“The capital cost needs to be squeezed by another $US75 million [$A110 million].
“Australia needs a plant; it will be a large growth scale facility, and it’s close to South-East Asia, but I just want to get it clear that we won’t do it unless we get the capital down.
“It’s sitting at around $US725 million right now and we need to get it closer to $US650 million.”
Perth-based project director Ken Beynon played down the significance of Mr Wilson’s comments, saying the cost of the project would be affected by numerous factors, including exchange rate fluctuations and government infrastructure support.
Mr Beynon said Agrium “remained optimistic” it would be able to finalise an internationally competitive project in the near future.
Plenty River’s Peter Streader said his company and Thiess had signed a new cooperation agreement for the joint development and management of the project.
He added that Plenty River and Thiess were seeking an additional equity partner, or possibly two new partners, to assist with funding of the project.
The split has left the State Government with the task of deciding which group should have access to the land allocated to the project.
State Development Minister Clive Brown said the Government would write to each of the former consortium members, inviting each to apply within a 28-day period for the formerly allocated land.
These developments follow the Federal Government’s announcement early this month that it would provide $35.4 million for the development of infrastructure on the Burrup.
The infrastructure will primarily support UK-based GTL Resources’ planned $700 million methanol project, but will be available to other future projects on the Burrup. This followed Canadian company Methanex’s announcement that it would not proceed with its planned $800 million methanol plant. Indian company Burrup Fertilisers is presently constructing a $645 million ammonia plant and several other groups are assessing possible gas-processing projects.
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