It will use methane gas produced from Santos’ as yet unapproved Narrabri gas project.
According to Kevin Gallagher, CEO and Managing Director of Santos, said at the signing of the agreement that the Narrabri Gas Project is able to provide enough gas to supply up to half of NSW’s needs, while the agreement for Perdaman is for the supply of 14.5 PJ/y of coal seam gas over a 20-year period, subject to of course, the ultimate approval of the project by the NSW Government.
It is proposed that the plant, to be located near Narrabri, is to use both 'appraisal and early-development gas', exploiting the current loophole in NSW planning controls which allows gas retrieved under an exploration licence to be used commercially.
Such a strategy would potentially allow further development of gas sites under the exploration licence, allowing a "backdoor" avenue for commercial development as long as the use of the gas was deemed to be ‘beneficial’. The plant would also use further gas from the Narrabri Project to provide electricity for it to operate.
And of course the ammonium plant is a job winner, we are told it is expected to support at least 700 jobs during construction and 100 direct and 100 indirect ongoing jobs. Additionally, the gas project is ideally placed for new manufacturing projects as it is near to the new Inland Rail, which 'links key east coast ports and the national highway system'.
But what is Perdaman and why is an ammonium nitrate plant desirable in this rural setting?
Perdaman is a diversified corporation, with a product and service range that includes pharmaceuticals, analytical labs, energy, commercial properties, fund management and the curiously named "Global Services".
Perdaman Global Services (formerly Perdaman ISA Group) are an immigration and overseas recruitment firm with, 'a strong track record in providing visa and immigration services not only to individuals, but to businesses of all sizes'.
The corporation is based in Western Australia but has offices in the UK, Singapore, India, the Philippines and China. The fertiliser arm of the corporation, Perdaman Industries (chemicals & fertilisers) is said to have its 'current focus on the production of urea, the most commonly traded nitrogenous fertiliser'. This is a new area of business for Perdaman with only one contract so far in this sector, recently awarded in partnership with Woodside in WA.
Perdaman claims the total investment for the WA urea plant and other infrastructure will be of the order of $4 billion. The project is expected to produce two million tons of urea per annum, most of which will be exported. Perdaman sees the international urea fertiliser business expanding worldwide with and foreseeing increasing demand for agricultural products and a future shortage of fertilisers.
Urea also has the benefit of being safe and easily transported claims Perdaman, though is volatile in air, a major limitation of the product. The same can be said for ammonium nitrate, the key product of the Narrabri plant. While it is a stable fertiliser to move and handle, it is also a key ingredient for explosives and has resulted in serious explosions at ammonium nitrate facilities in the U.S.
So Perdaman, who started as a small visa bridging company in 2001, has been successful enough to diversify into a number of multinational portfolios, of which fertilisers is the latest and as yet, unproven component. Though, its CEO Vikas Rambal has attempted other fertiliser projects before.
On top of this, the volume of gas proposed for use by Perdaman equates to approximately 20 per cent of Santos’s total production at full capacity – stated often by Gallagher at being up to half the state’s yearly supply needs.
Of course, full production is not likely to be reached in the near future and Santos and Perdaman are hoping to commence the ammonium plant operation at a reduced capacity. Under this situation the proportion of gas produced by Santos siphoned off by Perdaman could be more than 20 per cent of the total.
All this seriously questions the rhetoric by Gallagher on the ability of Santos to supply half the State's gas needs from Narrabri if this Perdaman deal goes ahead. "Massaging the figures" as it were, a practice not unknown to the gas sector. Not that the gas was ever intended for the domestic market.
Perhaps a reason for the likely export outcome for Perdaman’s products is the situation of the local market with a large number of existing suppliers of nitrogen products including urea and ammonium-based fertilisers and various blends.
This demand is not likely to increase given Australia’s gloomy outlook for agricultural production. Big players in the manufacture and wholesale of fertilzer products in Australia are dominated by two who obtain product from the gas sector are Incitec Pivot and Koch Industries.
The Perdaman website states that Vikas Rambal, its Chairman and Managing Director, has a 'proven track record in delivering world-class businesses'. However, his corporate history in Australia has not been without controversy.
India-born, Rambal’s career started at Bharat Petroleum (formerly Shell). He then established a range of projects including refineries and the manufacture of fertilisers. Moving to Western Australia in 2000, he focussed on the use of methane gas for downstream industry, particularly the manufacture of ammonia for the international fertiliser market.
From there his empire grew and diversified.
However, Rambal’s first incursions into the fertiliser business ran into trouble, with his first project, the Burrup ammonia fertiliser plant.
Mr Rambal was forced to exit following a bitter split with his former business partner Mr Pankaj Oswal. Mr Oswal ran the Burrup Fertilisers until he ran into trouble with the his creditor the ANZ Bank where it was alleged Mr Oswal siphoned $150 million from the business for his personal use and he forged European security documents for Australian loans, which Mrs Oswal confirmed in court. He later sued and fled the country in 2010 with his family.
Mr Rambal’s $87.4 million payout as a result of the Burrup ammonium plant affair in 2007 brought him into conflict with the Australian Tax Office. The matter was solved out of court, but the timing of the affair created much doubt about his next project, his plans for a $3.5 billion coal project near Collie.
The WA Government subsequently took this project off their books in 2018, with considerable loss to the taxpayer.
After having walked away from his first two fertiliser ventures Rambal then partnered with Woodside in 2018 for a new urea plant, also to be built on the Burrup Peninsular. Amid the glowing announcements, The West Australian reported that the plant and Memorandum of Understanding was Woodside’s latest attempt to ‘develop new demand for gas’ highlighting the fact that this gas is not in short supply in WA.
This Woodside backed Project seems to have the relevant approvals now and is planned to go ahead, amid concerns of possible impacts on the local cultural heritage of the Burrup Peninsular, along with all the other development of the area. Concerns that Mr Rambal has not taken the time to comment on.
What makes the Santos and Perdaman agreement different from that undertaken with Woodside is that there is no real over-supply of gas for Perdaman to utilise at Narrabri without a significant cut in the output from the new field, which is likely to be limited. How the economics of this operation stack up under these circumstances is not clear.
There is no increasing demand for agricultural fertiliser product in this country which also raises questions about its final use, if not exported, then perhaps for the mining industry where it would be invaluable to assist further mining expansion in the region. Interestingly, neither Mr Gallagher or Mr Rambal mentioned what the ammonium nitrate is to be used for at their media exercise last week.
There are also questions to be answered regarding the propriety of the owners of Perdaman and their ability to deliver on this project without some kind of major financial scandal taking place. There seems to be big question marks on the need and viability of this project.
Overall, it seems more to be about just another way Santos have attempted to enhance the market value of the Narrabri Gas Project. The future of the Narrabri Gas Project however still hangs in the balance.
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