Deploying Best-Available Low Emissions Technology In Australia For The First Time

ABSTRACT

To accelerate Orica’s progress towards achieving its 2030 emissions reduction target and ambition to achieve net-zero emissions by 2050, the $37 million public-private investment into the Kooragang Island Decarbonisation Project adopts a collaborative economic and business model to deploy low-emissions abatement technology in Australia for the first time. The technology is being installed between October 2022 and mid-2023 at manufacturing plants used in the production of ammonium nitrate at Orica’s Kooragang Island facility. The project is one of Australia’s largest industrial emissions reduction projects and will eliminate 567,000 tCO2-e per year, reducing the site’s total emissions by 45 per cent and GHG emissions from Australia’s industrial chemical sector by around 12 per cent. The economic viability and deployment of tertiary catalyst abatement technology to mitigate GHG emissions, specifically nitrous oxide (N2O) from nitric acid production, relies on four key business model components coming together: 1. Carbon Market Development; 2. Carbon Contracting; 3. Transition Finance; 4. Technology Performance. The resultant Kooragang Island Decarbonisation Project is a private-public partnership, and success has required bringing together partners across Federal and State government, global engineering and technology vendors, local community groups and local carbon advisors to overcome financial barriers.

KEYWORDS

Industrial decarbonisation, chemical manufacturing, chemical engineering, private-public partnership

1. ACTION ON CLIMATE CHANGE

Orica is one of the world’s leading mining and infrastructure solutions providers, from the production and supply of explosives, blasting systems, mining chemicals and geotechnical monitoring to our digital solutions and comprehensive range of services. Orica’s purpose is to sustainably mobilise the earth's resources through providing our customers with smarter solutions, optimising our operations and partnering for progress.

To deliver on this purpose, Orica has embarked on an ambitious strategy to reduce Scope 1 and Scope 2 greenhouse gas (GHG) emissions by at least 40 per cent by 2030 (based on 2019 levels), with a further ambition to achieve net zero GHG emissions by 2050. Orica has also committed to a renewable electricity target that will see operations powered by 100 per cent renewable electricity by 2040. Our decarbonisation strategy is founded on implementing practical evidence-based initiatives, deployment of mature technologies, technical investment into emerging solutions, and access to support incentives to reduce GHG emissions in an economically sustainable manner. 

Orica’s Climate Change Policy is aligned with the objective of the United Nations Sustainable Development Goal for Climate Change, accepting that human activities are influencing global warming. We support the global response to pursue efforts to limit temperature rise to 1.5°C relative to pre-industrial levels. We believe a transition to a net zero emissions economy is required to limit global warming in line with the goals of the Paris Agreement, and the path to net zero must represent a ‘just’ transition and encourage sustainable development. As a founding member of the Australian Industry Energy Transitions Initiative (AIETI), Orica is committed to working with government, industry, customers, and community to forge a pathway towards decarbonisation through tangible action and collaboration.

2. GREENHOUSE GAS EMISSIONS IN AUSTRALIA’S INDUSTRIAL CHEMICAL SECTOR

The industrial chemical sector (UNFCCC category 2.B) in Australia emitted 4.7 megatonnes of carbon dioxide equivalent (MtCO2-e) in 2020 (Australian Government, Department of Climate Change Energy, the Environment and Water, 2020), representing around 0.9 per cent of Australia’s total greenhouse gas (GHG) emissions (Australian Government, Department of Climate Change Energy, the Environment and Water, 2020). These emissions are material to the industrial organisations and their associated supply chains, in light of increasing global pressure to address climate change and demonstrate we are meeting our respective targets and commitments. 

2.1 Orica’s Industrial Chemical Manufacturing in Australia

As the world’s largest provider of commercial explosives and innovative blasting systems to the mining, quarrying, oil and gas and construction markets, and a key player in the Australian chemical manufacturing industry, Orica understands we play an important role in decarbonising the sector. 

Orica has two key industrial chemical manufacturing sites in Australia, one in Kooragang Island, Newcastle, and one in Yarwun, Queensland . These two sites together contribute approximately 37 per cent of Australia’s total industrial chemical emissions. Orica’s Kooragang Island manufacturing site operates an ammonia plant, three Nitric Acid Plants (NAPs) and two ammonium nitrate (AN) plants. In FY2022, Orica’s Kooragang Island site produced approximately 370,000 tonnes of AN and contributed 59 per cent of Orica’s gross overall Scope 1 and 2 GHG emissions, approximately 1,154 ktCO2-e per annum.

Around 27 per cent of Australia’s industrial chemical sector’s GHG emissions come directly from Orica’s manufacturing plant at Kooragang Island (Australian Government, Department of Climate Change Energy, the Environment and Water, 2020). Production of nitric acid generates a significant quantity of nitrous oxide (N2O) emissions, a greenhouse gas 265 times more potent than carbon dioxide (CO2) (Australian Government, Clean Energy Regulator, 2022). Orica currently operates nine NAPs globally, with nitrous oxide emissions representing 50 per cent of our total Scope 1 and 2 operational emissions. Since 2018, we have continued to focus our decarbonisation studies and trials on these continuous manufacturing facilities where we are targeting substantial reductions in our N2O emissions. 

Over the past four years we have completed upgrades and trials at each of our major continuous manufacturing sites, summarised in Table 1.

Table 1 – Past and planned N2O abatement initiatives

Figure 1 – Global NAP emissions intensity (Scope 1 N2O only) (tCO2-e per tonne nitric acid) 

Building on these successful operational abatement trials and emissions reductions activities at manufacturing sites across the group, we are confident our emission reduction target is underpinned by a credible and achievable pathway, with a focus on the reduction of Scope 1 and 2 emissions across our global operations (see Figure 2). 

Figure 2 – Orica Decarbonisation Pathway

Our emissions reduction pathway includes a continued focus on industrial process emissions including investigation of lower carbon feedstocks for ammonia manufacture, energy efficiency, heat recovery, carbon dioxide capture and utilisation, and renewable energy sourced through strategic, long-term power purchase agreements. However, the focus of this paper is the priority area of reducing N2O emissions by implementing proven low-emissions technology through public-private partnerships and effective delivery models.

3. BUSINESS MODEL

Orica recognises that successful decarbonisation and adaptation to climate change impacts requires a collaborative approach. We acknowledge the need to work together with our peers, governments, customers, and industry to better understand and develop economically sustainable pathways towards a decarbonised future. We continue to support national and sub-national government efforts to implement effective policy frameworks to support decarbonisation that would be otherwise uneconomical.

Tertiary catalyst abatement technology is a proven technology delivering significant emissions reductions. While opportunities exist to deploy best available tertiary catalyst technology and reduce more than 95 per cent of nitrous oxide emissions from unabated levels, there are currently limited incentives for chemicals producers to deploy these technologies. They derive no economic benefit in the absence of a financial penalty on emissions or a ‘green premium’ on lower-emissions intensive products. 

However, with government financial incentives and carbon market participation, some financial return can be derived, improving the economic viability of tertiary abatement technology. The economic viability and deployment of tertiary catalyst abatement technology to mitigate N2O from nitric acid production relies on four key business model components coming together: 1. Carbon Market Development; 2. Carbon Contracting; 3. Transition Finance; 4. Technology Performance. 

In 2019, the business model was adopted at our Carseland, Canada manufacturing plant. Following successful implementation, the Kooragang Island Decarbonisation Project was initiated with the business model being replicated in Australia between 2020 and today. The Kooragang Island Decarbonisation Project is a $37 million private-public investment.

3.1 Carbon Market Development

Participating in carbon markets and originating carbon credits through transformational and additional emissions avoidance activity can offer a return on capital. The Australian Emissions Reduction Fund (ERF) was identified as a suitable regulatory scheme in which tertiary catalyst abatement qualified for registration. 

To further understand the opportunities available, Orica invested in employee’s technical carbon market capability, and facilitated travel to the Carseland, Canada site to understand the application of the business model for the Carseland tertiary abatement project. Following completion of initial project engineering, Orica subsequently developed the business case for the Kooragang Island Decarbonisation Project. This included formal application to the ERF for the Kooragang Island Decarbonisation Project to be a registered carbon credit project.    

The project was approved in March 2021 by the Clean Energy Regulator, under the ERF’s  Facilities method, to participate in Australia’s carbon market through the generation of ACCUs. The Facilities method “provides a high-level, activity-neutral framework to calculate abatement from facilities that report under the National Greenhouse and Energy Reporting (NGER) scheme” (Australian Government, Clean Energy Regulator, 2021). The Facilities method credits improvements in emissions intensity over seven years across one or more production variables, in this case ammonia and ammonium nitrate production. 

3.2 Carbon Contracting

While originating carbon credits gives rise to a new financial asset, the units are exposed to market dynamics and price fluctuations. This uncertainty is unwanted in making any capital investment decision. One mechanism to establish price certainty is to secure long-term offtake agreements. In this case, the Australian government conducts regular reverse carbon auctions, helping underwrite ERF projects.

The Kooragang Island Decarbonisation Project was successful in participating in the April 2021 auction and awarded the first optional Carbon Abatement Contract under the Facilities method for the purchase of around 3.4 million ACCUs by the Australian Government. This project represents the largest industrial ERF project in the last three years, and the 10th largest ERF Carbon Abatement Contract ever. 

3.3 Transition Finance

To facilitate the transformational project, Orica applied for grant funding through the High Emitting Industries Fund offered by the New South Wales Government’s Net Zero Industry and Innovation Program. Orica was awarded a co-investment of $13.06 million, and together with Orica’s $24M contribution the project’s economic viability was improved. 

In addition, Orica secured financing through the Federal Government’s Clean Energy Finance Corporation (CEFC). The CEFC provided a $25M debt finance facility to fund Orica's capital contribution to the Kooragang Island Decarbonisation Project. This debt instrument is linked to successful attainment of emissions reduction KPIs, outcomes and performance targets. 

This project is the first major direct investment by the CEFC in the manufacturing sector, it also represents one of the largest single abatement projects financed by the CEFC.

3.4 Technology Vendor Performance

As an Australian-first application of tertiary catalyst abatement technology, Orica’s partnership with global technology vendor thyssenkrupp Industrial Solutions provided access to best-available technology and engineering services to ensure successful installation. The state-of-the-art EnviNOx® technology  features catalyst beds filled with iron zeolite catalysts, located in a reactor between the final tail gas heater and the tail gas turbine, resulting in almost complete removal of nitrous oxide (thyssenkrupp Industrial Solutions, 2022). According to thyssenkrupp Industrial Solutions, the European Union authorities declared this technology to be Best Available Technique (BAT) for permitting purposes within the EU (thyssenkrupp Industrial Solutions, 2022).

The business model for the Kooragang Island Decarbonisation Project includes contractual obligations to achieve the forecast emissions reduction outcomes, so this partnership and the ongoing, demonstrated performance of the technology, are critical to Orica.

4. ENVIRONMENTAL AND SOCIAL IMPACT

4.1 Environmental Benefits

The Kooragang Island Decarbonisation Project represents an opportunity to make a significant impact on the hard-to-abate industrial chemicals sector, projected to reduce the site’s total emissions by approximately 567,000 tCO2-e per year, which represents a reduction of 45 per cent, and equates to a 12 per cent reduction of the whole-of-Australia sector’s emissions.

2 EnviNox® technology by thyssenkrup Industrial Solutions AG, Dortmund, Germany.

Previously, secondary N2O abatement technology deployed at Kooragang Island has resulted in a 9 per cent reduction in N2O emissions intensity per tonne of acid produced, compared to an FY2019 baseline. Absolute Scope 1 and 2 emissions from the KI site have reduced 10% over the same period, as shown in the chart below.

Figure 3 – GHG emissions reduction at Kooragang Island through the optimisation of N2O catalysts beginning in 2019

GHG emissions are set to further reduce following completion of tertiary abatement installation in early 2023 on all three NAPs. The technology became operational from November 2022 for the largest NAP, and will be followed by the remaining two NAPs from April 2023 and June 2023. Although tertiary abatement on NAPs has successfully been deployed overseas, this project will be the first time the technology has been retrofitted in Australia.

The reduction in absolute GHG emissions from the Kooragang Island site translates to a reduced emissions intensity for Kooragang Island’s ammonium nitrate (AN) products. Following installation of tertiary abatement on all three NAPs, it is anticipated that, for every tonne of AN we sell, our NSW mining customers will be receiving AN products that are almost 50 per cent less emissions intensive than Orica’s current offering. Orica has already been recognised as a 'first mover’ in the explosives and fertiliser sectors by its customers, enjoying successful contract renegotiations with a strong ESG outlook.

4.2 Economic Benefits

Together with environmental outcomes, the project will deliver investment certainty for our domestic manufacturing operations and contribute to the local economy. Approximately one third (34 per cent) of the $37M project will be spent with local NSW suppliers. This builds on Orica’s history of supporting local socio-economic development, with two-thirds of suppliers to the site being in the Hunter Valley (67 per cent) and an additional 24 per cent across NSW [Orica, 2021, Kooragang Island economic effects analysis]. Local spend will occur in areas such as site development, piping, electrical instruments and controls, local engineering and installation expertise, and bulk construction items procured through local NSW agents. This translates into an injection of an additional $12.4M into the economy (not taking into account any multiplier effects of this capital expenditure spend).

Such a large foundation abatement project now gives Orica investment confidence to further pursue market and customer diversification opportunities in the Hunter Valley. For example, pursuing the adoption of new technology such as green hydrogen and ammonia (hydrogen produced from renewable energy sources) as a long-term transition pathway.

5. CONCLUSIONS AND NEXT STEPS

First demonstrated in Carseland, Canada, and implemented at Kooragang Island, Australia, this innovative business model demonstrates how strong collaboration between industry and government can lead to rapid, large-scale decarbonisation in hard-to-abate industries. Orica’s decarbonisation ambition is not limited to the Kooragang Island site, with learnings identified through the implementation of the Kooragang Island decarbonisation strategy to be applied to Orica’s other manufacturing sites, both in Australia and internationally. Our other major Australian manufacturing site, Yarwun, is in pre-feasibility stages for tertiary catalyst abatement installation, following registration of that project with the ERF in 2022. 

As demonstrated by the tertiary abatement project, Orica works closely with state and federal governments, as well as regulators such as the NSW Environment Protection Authority, to develop and implement sustainability programs. Findings from the Kooragang Island Decarbonisation Project will also act as case studies for broader industry.

It is anticipated that demonstrating the impact and role of best-available abatement technology will encourage more manufacturers to set and achieve equally ambitious sustainability targets.

ACKNOWLEDGEMENTS

Orica would like to acknowledge the collaborative partnership, support and where relevant, financial contributions offered by the NSW Government, Clean Energy Finance Corporation, thyssenkrupp Industrial Solutions, and suite of corporate advisors including Ndevr Environmental, Tasman Environmental Markets, Herbert Smith Freehills and Ashurst.   

Orica acknowledges 26th World Mining Congress as publisher of the conference proceedings.

REFERENCES

Australian Government, Clean Energy Regulator. (2021). Facilities method. Retrieved from Emissions Reduction Fund: https://www.cleanenergyregulator.gov.au/ERF/Choosing-a-project-type/Opportunities-for-industry/facility-methods/facilities-method

Australian Government, Clean Energy Regulator. (2022, June 02). National Greenhouse and Energy Reporting, Global Warming Potentials. Retrieved from https://www.cleanenergyregulator.gov.au/NGER/About-the-National-Greenhouse-and-Energy-Reporting-scheme/global-warming-potentials

Australian Government, Department of Climate Change Energy, the Environment and Water. (2020). Paris Agreement inventory. Retrieved from Australia's National Greenhouse Accounts: https://ageis.climatechange.gov.au/

Incitect Pivot Limited. (2022, November 15). IPL delivers record $1bn NPAT for FY22 with continued momentum in strategy execution. Retrieved from ASX Release: https://company-announcements.afr.com/asx/ipl/e79152fb-6463-11ed-b396-8ef19c9a4c56.pdf

thyssenkrupp Industrial Solutions. (2022). EnviNOx - reduce NOx emissions to a minimum. Retrieved from thyssenkrupp: https://www.thyssenkrupp-uhde.com/en/products-and-technologies/fertilizer-technologies/nitrate-plants/nox-reduction-with-envinox