The AdBlue Saga Continues in Australia
This edition explores ongoing AdBlue and urea issues in Australia and their potential implications on supply chains and highlights some unexpected features of the first U.S. electric fire truck
Almost 9 months ago, I wrote about AdBlue and urea shortages which were threatening to grind Australian logistics and farming to a halt. At that time, I made an argument that China’s environmental policy seeking to reduce coal imports had been a significant causal factor for this shortage. The crisis was somewhat averted with some intervention from the Australian Government and, even through, AdBlue supplies are currently relatively high, AdBlue prices haven’t returned to their previous levels.
The main reason for the high prices appears to be the imminent closure of the Gibson Island facility, Australia’s only urea manufacturer (urea is the main active component in AdBlue) in December 2022. Incitec Pivot, the plant owner, reported that the inability to “secure an affordable long-term gas supply” was the main reason behind the plant’s closure. The facility produced 498,500 tonnes of urea in the 2021 financial year and its closure will likely affect both logistics chains which rely heavily on AdBlue and food supply chains which rely on urea as a fertilizer. As always, however, there’s a bit more to the story than meets the eye. Environmental policy strikes again you say?
“We reluctantly decided to cease manufacturing at our Gibson Island facility, after being unable to secure an affordable long-term gas supply. Looking to the future, we’re excited about the potential to transition the facility to green ammonia production, which we’re investigating in partnership with Fortescue Future Industries.” (Incitec Pivot, 2021 Annual Report)
AdBlue is a diesel exhaust fluid, made of around one third urea and two thirds deionised water, which is consumed by catalytic converters in diesel engines to lower nitrogen oxides emissions. Urea is industrially produced by reacting ammonia with carbon dioxide at high temperatures and ammonia is usually produced through steam reformation of methane. This production process requires methane gas for both heating and as a production input. Given that wholesale gas prices have spiked between May and August to around A$ 40/gigajoule (e.g. 7 July 2022), as opposed to A$ 14-18/gigajoule (on 21 April 2022 and 25 August 2022), the argument that the lack of an affordable gas supply has been the main factor behind the Gibson Island facility closure appears reasonable.
The Tangled Web We Weave
Interestingly, however, access to gas supplies may not actually be such a pungent issue. In 2017, the Queensland government (where the Gibson Island facility is located) released a tender for exploiting methane gas from the Sunat Basin under the condition that the gas extracted would be used for domestic uses. Central Petroleum was awarded the tender in a 50-50 joint venture with Incitec Pivot. The basin, initially estimated to hold 180-petajoules (PJ) was later revised to 270 PJ. Basin exploration started shortly after the tender was awarded, was paused during the pandemic, and was restarted in early 2022. Gas, therefore, seems not to be in short or unaffordable supply.
Incitec’s annual report statement about pursuing green ammonia is also quite curious. Green ammonia is typically produced from green hydrogen and nitrogenand green hydrogen is produced from water electrolysis, a process which consumes up between 50-55 MWh per tonne of hydrogen produced. Of course, for the hydrogen (and ammonia) to be considered green, the electricity used in the production process must be renewable. Renewable electricity which, in Queensland, is in relative short supply considering it represents 11% of the states’ electricity fuel mix with most of the remainder (77%) being coal. The high electricity requirements of electrolysis also make it quite expensive– around twice the cost of the traditional process, depending on electricity prices. So does manufacturing green ammonia at higher cost make more sense than the current production?
To sum up, Australia’s only urea manufacturing facility is closing because insufficient affordable methane gas is available while concurrently exploring manufacturing a similar product using a production process that is more energy intensive (and more expensive), with electricity produced from currently inexistent sources. The justification for this decision-making process may lie in the shareholders’ pursuit of the Net Zero agenda, which is advocating for “no new coal, gas or oil developments could proceed beyond this year, in order to limit global warming to 1.5°C”. As noble as this Net Zero agenda may sound, the decisions being made endanger food security. The question that is becoming increasingly obvious is what are the lengths to which Australia and Western society is willing to go to reduce emissions? This question becomes increasingly poignant when considering that Australia and Western world emit around one third of the world’s anthropogenic carbon and despite sustained efforts over the past 20 years, emissions have dramatically increased from outside these regions (see figure below).
It is unclear whether actual shortages will happen or whether the supply uncertainty will be a mechanism to maintain an inflate prices for AdBlue and urea fertilizers. Nonetheless, both the supply uncertainty and high prices are likely to have significant flow-on effects on Australian logistics and food supply chains. And, I’m afraid that any emission reductions achieved will be quickly overshadowed by the 176 GWh of coal power plants currently under construction outside of Australia.
In Other News
U.S.’ First (Not So) Fully Electric Fire Truck
The U.S.’ first fully electric fire truck (and the fourth in the world) has just been delivered to the Los Angeles Fire Department. The truck features a 132-kWh battery pack which gives it a range of roughly 200 kilometres. For those of you anxious about range, no need to worry. The electric fire truck comes with a range extender, a 6-cilinder diesel engine. These innovative features brought the cost of this fire truck to around 3-times more than the traditional alternative.
If you’re wondering why isn’t this truck called diesel-electric like many other vehicles that use diesel engines to generate electricity (see diesel-electric locomotives and ships), it’s because the power generated by the range extender is first stored in the vehicle’s battery before being used to power the electric motors. Because the vehicle is a plug-in, it might even be able to participate in vehicle-2-grid charging to deliver green electricity to the grid - even if some of it may be generated by the range extender.
And, if you’re concerned about the emissions generated while the range extender is in operation, rest assured that this is not like other dirty fossil fuel engines. This one works on an innovative emissionless fuel: Direct Injection Environmentally Sustainable Exploding Liquid (DIESEL for short).
Australia’s Electric Vehicle Strategy Reloaded
The Australian Government is currently working on its new Electric Vehicle Strategy. The old one, published in November 2021 (under the previous Liberal Government, the site mentions) can be found here. No comment.