Orica secures Hydrogen Headstart funding

Orica (ASX: ORI) has been conditionally awarded $432m in funding to support the operation of the Hunter Valley Hydrogen Hub (HVHH) in NSW.

The funding has been conditionally awarded under Round One of the Australian Renewable Energy Agency’s (ARENA) competitive Hydrogen Headstart program.

The program supports large-scale renewable hydrogen projects to accelerate the development of Australia’s hydrogen industry, while helping Australia connect to new global hydrogen supply chains.

The funding aims to provide partial revenue support in the form of production credits once the project is commercially operational and is an essential component to bridging the commercial gap for first mover renewable hydrogen projects in Australia.

Headstart funding complements support already announced by the NSW and Federal Governments to establish the HVHH at Kooragang Island.

Orica’s HVHH aims to deliver a safe, reliable and commercial-scale renewable hydrogen supply chain in the Newcastle industrial and port precinct.

The proposed facility, which received development approval in May 2024, will produce renewable hydrogen via electrolysis using recycled water and renewable electricity via a grid-connected 50MW electrolyser in the first phase.

Renewable hydrogen manufactured at the hub is planned to gradually replace natural gas feedstock in the production of low-carbon ammonia and ammonium nitrate. These products are essential for various industries across Australia, including resources, agriculture, health and food.

The first phase of the HVHH is expected to produce about 12t/day of renewable hydrogen, reducing Orica’s daily natural gas demand for chemical feedstock by about 7.5% per cent, releasing gas back into the grid for domestic consumption.

The estimated annualised emissions benefit at phase one of full production is equivalent to taking about 26,500 cars off the road each year.

Orica considers the HVHH to have significant merit with the differentiating benefits of a strategic location at the Port of Newcastle and established end markets in the resources and agriculture industries.

Orica’s Kooragang Island ammonia plant is also the only ammonia plant operating on Australia’s east coast with direct access to a deep-water port for international customers and the Port of Newcastle’s Clean Energy Precinct.

Orica’s proposed offtake via direct pipeline, and its existing customer base in the resources and agricultural industries, underpin the commercial attractiveness of this project.

The first phase of the HVHH is expected to generate 4,700tpa of renewable hydrogen, enough to produce approximately 26,600tpa of low-carbon ammonia and will create about 160 construction jobs and up to 10 ongoing jobs.

Orica managing director and chief executive Sanjeev Gandhi says the company has been operating the Kooragang Island facility for over 50 years and has committed to ensuring both the manufacturing facility and the Hunter Valley region remain sustainably competitive.

“Through the Hunter Valley Hydrogen Hub, we hope to further contribute to our domestic and international customers’ decarbonisation goals by offering low-carbon products, while supporting Orica’s next phase of decarbonisation,” he said.

“We are thankful for the support of ARENA and both the Federal and the NSW governments, and we look forward to continuing to work in partnership with the ministers and the responsible agencies on the decarbonisation of Orica’s Kooragang Island manufacturing facility and the Hunter Valley region.

“We see the possibilities for renewable hydrogen in our manufacturing operations and the potential to support the future of Australia’s hydrogen industry as well as the growth of future jobs and economies in the region.

“Orica operates heavy manufacturing sites in a hard-to-abate industry. Such abatement projects are extremely expensive and complex to execute. Ensuring we secure cost competitive gas contracts as a transition feedstock and cost competitive renewable electricity, and recycled water will be critical enablers of this long-term project.

“A supportive regulatory environment and continued collaboration with government and energy providers is required to solve some of the more complex challenges facing the manufacturing industry in Australia and secure a Future Made in Australia.”

ARENA chief executive Darren Miller says hydrogen has an important role to play in decarbonising heavy industry.

“Renewable hydrogen is an important decarbonisation lever for applications like ammonia production where hydrogen has traditionally been produced with fossil fuels,” he said.

“By replacing natural gas-derived hydrogen with clean, renewable alternatives, projects like Orica’s are helping to decarbonise core industrial processes while preserving domestic manufacturing and unlocking new export opportunities.”

The HVHH also brings an opportunity to partner with Traditional Owners and other First Nations community members, as well as the wider local residential and business communities, to ensure benefits of the renewable energy economy are shared appropriately.