Ballance threatens short shutdown of Taranaki urea plant without ‘affordable gas’

Thursday, 7 August 2025

Ballance Agri-Nutrients, a farmer and grower-owned co-operative, is threatening a short-term shutdown of its Kapuni urea plant in South Taranaki unless it is able to secure an “affordable gas supply”.

The Kapuni urea plant, operational since 1982 and employing 120 people, manufactures one third or 260,000 tonnes of New Zealand’s urea annually, specifically for use as a nitrogen-rich fertiliser.

The company is the second largest corporate user of gas from the Maui field, consuming around 6.5-7.3 petajoules of gas annually, after Methanex, which takes about 90 PJs each year. The two companies serves as a crucial source of firm demand, underpinning more than half of current natural gas demand.

Most of the rest of the full output of Maui is consumed by large industrial and power companies, with just 10% used by households, schools and hospitals.

For years the likes of Methanex and Ballance were paying below NZ$10 per gigajoule or thereabouts for an abundant feedstock, but now, reserves are low, and the country’s gentailers are paying upwards of $50 a gigajoule for gas, pricing the likes of Ballance out of the market.

Ballance chief executive Kelvin Wickham said the business was planning for a range of eventualities and working to keep options open should it not secure gas before its current contract ends on 30 September with Greymouth Gas, which sells gas that is delivered into the Maui pipeline.

'Our current provider, Greymouth Gas does not have gas available for us from the end of September,” Wickham told The Post.

“We are working hard to find short-term supply and remain optimistic that once we are through the peak gas use season, more gas will become available. We still need a longer-term solution which we continue to explore.'

The chief executive said it was “prudent to plan for a short-term shutdown”, even realising the significant impact that would have on employees, shareholders, the wider agricultural sector and the Taranaki regional economy.

Ballance had secured contingency supplies of nitrogen for farmers and growers for spring, but if the shutdown of the country’s only ammonia-urea plant went too long, it could mean price rises for New Zealand farmers and food and protein production in general, because international urea supply is highly volatile and sensitive to geopolitical currents.

Wickham emphasised the vital role of soil nutrients in driving New Zealand’s economic prosperity through food and fibre exports, with around 41% of the country’s agricultural exports enabled by Ballance fertiliser.

“While this situation is disappointing, we’re fortunate our business is in a strong underlying position and we’ve factored various scenarios into our forward planning.”

Gas problems

The inevitable decline of the country’s known natural gas supply has vexed users, energy market commentators and governments for several years.

An EY report from the end of 2023 found demand was decreasing, and new supply was not really being developed, with new oil and gas exploration effectively banned under the last Government. The development of biogas and biomethane as options to bridge the gap were “on the horizon” but not being developed in sufficient volumes or quickly enough. It meant a possible gap in the country’s energy mix.

“In all the scenarios considered, the best estimate of commercially viable future natural gas production …is estimated to be insufficient to meet demand at some stage between 2025 and 2027,” the report said.

Methanex has signalled it would be likely to leave New Zealand by 2029, when its gas contracts expire, or possibly earlier, whereas Ballance is still in a partnership with Hiringa Energy to build New Zealand’s first green hydrogen project in Taranaki. But it is still a way off.

In the meantime, the coalition Government overturned the ban on oil and gas exploration last week, on the basis it believes gas production is needed to help fuel local industry and prevent future electricity price crunches.

Today, Resources Minister Shane Jones is quoted in Energy News as saying the Government was looking at rationing natural gas supplies amid fears of further industrial plant closures after those of the Kinleith and Karioi mills and Tangiwai sawmill, with priority going to industrial users over electricity generators, who were encouraged to burn coal as a thermal backup.

'When you have a scarce good - vitally important - and where the electricity companies are outbidding everyone, which is having the effect of deindustrialisation, unemployment, hollowing out regions - that shows the market's not working,' he told the publication.

Environmental concerns

Environmental groups such as Greenpeace Aotearoa are opposed to fossil fuel use, but also believe urea needs to be phased out altogether.

The group the widespread adoption of synthetic fertilisers has fuelled intensive dairy farming, more climate emissions and elevated nitrate levels in water.

Spokesperson Amanda Larsson said urea, “no matter how it’s made, and should be phased out.

“Since production of urea at Kapuni began, the use of synthetic nitrogen fertilisers has increased nearly sevenfold in New Zealand, primarily to supply the intensive dairy sector which has seen cow numbers increase by 82% between 1990 and 2019,” says Larsson.

“The consequences for New Zealand’s rivers are plain to see with algal blooms making popular swimming sites unsafe and increased contamination of source water. For the sake of people’s health, a stable climate and healthy freshwater ecosystems, Ballance needs to phase out the production of urea.”

Greenpeace, together with several hapū of Ngāruahine, opposed Ballance’s hydrogen-urea plant in court.

Fertiliser woes

The issue over gas supply is not the only hurdle for Ballance this year.

In early June the company said it would wind down its single super phosphate manufacturing facilities in Mount Maunganui with the loss of 60 jobs, although it intended to continue using the site for storage and distribution, as well as maintaining its national support office there.

The company had been at the site for almost 70 years, employing 94 at the location. But operations to produce single super phosphate (SSP), one of the first commercial mineral fertilisers, had become uneconomic because offshore entities were supplying product cheaper into this market, albeit some believed it to be “substandard”.

Ballance chief executive Kelvin Wickham told The Post at the time that for superphosphate in New Zealand, “there is more supply than demand.” The cost of carry was also high - it was the same price to bring product in from China than to move it from the South Island to the North Island.

As a result of the oversupply the site had been running at 50% capacity with demand dropping, and would require “millions” in investment over the next 15 to 20 years to keep it running.

The company would continue manufacturing phosphate in Invercargill and urea in Taranaki, and was sourcing imported ingredients from Canada, Morocco, China, Southeast Asia, Europe and Australia.

Competitor Ravensdown also stopped manufacturing superphosphate at its Dunedin site earlier this year, with the loss of 30 jobs.

The company’s two other manufacturing sites in Napier and Christchurch received investment to bolster their manufacturing capability as a result of the Dunedin manufacturing line closure.

Clarification: The last paragraph of the story has been clarified to reflect that Ravensdown did close its Dunedin superphosphate manufacturing line, and that capability was moved to its other sites in Napier and Christchurch.