GAS supply to Phosphate Hill will cost the company that provides it an additional $50 million a year.
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Incitec Pivot owns what it describes the biggest fertiliser plant in Australia – based 150 kilometres south of Mount Isa.
Industry and political sources believe the company’s gas costs, which increased since February, will jeopardise the economic viability of Phosphate Hill.
The fertiliser plant is linked to the company’s Mount Isa-based sulphuric acid plant, and between the two employs 450 workers.
A company spokesman said there was an independent relationship between the acid plant and Glencore operations because the plant could convert Mount Isa Mines emissions to sulphuric acid.
It then uses the sulphuric acid as a key ingredient in its fertiliser made at Phosphate Hill.
Member for Mount Isa Rob Katter said the scheduled 2016 closure of Glencore’s copper smelter could further harm the operations of the sulphuric acid plant and Phosphate Hill.
Mr Katter said the gas price could make Phosphate Hill’s operations unfeasible for Incitec Pivot.
“It’s certainly a threat, that’s why we’re so aggressively pursuing the gas pipeline (from the Territory) which is a big step in solving our energy issues into the North West region,” he said.
“It’s been an issue the last three years and I’ve spoken with representatives from IPL (Incitec Pivot Limited) and other large industry users.”
Mr Katter believed the cost of gas had recently increased in the region from $4 to $10 a gigajoule. But he warned it could go higher if nothing was done to make gas supply more competitive.
Mr Katter said it was difficult to tell the exact price of gas because of confidentially between the suppliers and receivers.
“It’s difficult for the government to have an up-to-date transparent picture in the gas market because of that set-up.”
The company released its financial reports to the Australian Stock Exchange last week, which detailed that the negative impact of rising gas prices was $38 million in the 2015 financial year.
“This cost increase is expected to be offset by the benefit of increased production in 2015,” the report said.
“Phosphate Hill aims to produce about 900 kilotons with the goal of achieving nameplate (full) capacity of 950kt.”
Phosphate Hill’s Earnings before Interest and Tax (EBIT) increased by $37 million in six months, which meant the gross amount was $55.3 million.
The EBIT records profits were recorded from last September and were not impacted by the full scope of the highest gas increase which began February.
A company spokesperson would not confirm whether rising gas prices would force cut-backs or closure of its operation. The spokesperson did say the company was looking at more affordable gas supply – but could not confirm the current price it pays.
The current gas contract for Phosphate Hill closes in 2016.
“As a business Incitec Pivot is doing our bit to encourage more suppliers by supporting medium sized gas producers in development opportunities and looking at gaining access to new pipelines,” the spokesman said.
The spokesman and Mr Katter were referring to the $900 million gas pipeline the Northern Territory government seeks to link its gas supplies to the east coast – with a proposed route from Tennant Creek to Mount Isa.
Northern Territory chief Minister Adam Giles said last week the pipeline was likely to be built by 2018, and that the company selected to build it would be announced in September. The route is still to be decided but another option could link the pipeline to Moomba, South Australia.