Big profits from lignite plant say promoters

More locally produced fertiliser for New Zealand pastures would come from the new urea plant planned for Southland by state owned coal company Solid Energy and the Ravensdown co-operative. Photo / Brett Phibbs.

Solid Energy is confident a $1.4 billion lignite-to-urea fertiliser plant it is investigating building in Southland would be viable at the upper range of carbon pricing.

The state-owned coal miner and fertiliser firm Ravensdown hope early next year to make a decision on the plant that could create 500 new jobs and produce enough urea for the country to become self-sufficient in the nitrogen fertiliser and potentially, export it.

"We see this as creating the equivalent of a $1 to $2 billion export industry in five years," said Solid Energy chief executive Don Elder.

The company says the vast lignite reserves are a world-scale energy resource and investigations into lignite-to-diesel and briquette making for export were already well under way.

"There are people who will say that is not something the world or New Zealand wants - it's quite the opposite. If you can have a fertiliser plant and not transport the product half way around the world you keep all the costs in New Zealand and all the benefits in New Zealand," Elder said.

The viability of the project was not pegged to the relatively modest $25 a tonne carbon cap announced last week.

Elder said if the plant went ahead it would not be built until 2014 - two years after the cap runs out for such a project.

"This is a plant that will have to be fully carbon compliant with whatever legislation New Zealand ever has."

Carbon prices were hitched to the price of energy and commodities - such as fertiliser - which increased together.

Developing a urea plant before a lignite-to-diesel plant, which would be five times as big, would allow the development of an advanced gasification industry at an earlier stage for the larger developments.

Ravensdown chief executive Rodney Green said boosted domestic supplies of urea would reduce exposure to international commodity prices.