Creating Certainty In Uncertain Times
OPINION: If there's one thing farmers understand better than most, it's uncertainty.
A major new 1.5 million tonne per year urea fertiliser project is set to be developed in Southland, offering an environmentally innovative and strategically significant alternative to imported urea fertiliser.
The proposed $3 billion project, intended to be located about 30 kilometres northeast of Invercargill, will give New Zealand’s agricultural sector self-sufficiency, which is critical to the long-term security and performance of an economy heavily dependent on agriculture.
Developed by Australian-based Victorian Hydrogen, the project will also deliver significant investment and employment opportunities in Southland.
“The Southland lignite-to-urea project represents a transformative opportunity for New Zealand’s fertiliser supply chain,” says Victorian Hydrogen executive director Allan Blood.
“By combining proven global technologies with local innovation, we aim to deliver high-quality urea at competitive prices while supporting long-term sustainable agricultural growth and addressing climate challenges.”
New Zealand currently imports 500,000 tonnes of urea annually. In addition New Zealand manufactures 265,000 tonnes, but falling gas supply means domestic production might end.
Ballance Agri Nutrients, which operates the Kapuni urea plant in Taranaki, is facing gas supply issues.
It has been mulling snowballing the country’s only ammonia-urea manufacturing facility.
The proposed facility aims to:
- Enhance domestic supply and reduce reliance on volatile international markets.
- Stabilise fertiliser costs and mitigate foreign exchange and cost risks for farmers.
- Produce additional products such as AdBlue, a diesel exhaust additive to reduce emissions.
- Support peaking power electricity demand of up to 114 MW at any one time by temporarily reducing production.
The Southland facility will employ a proven lignite gasification process:
- Lignite is reacted with oxygen at high temperatures and low pressures to produce syngas.
- Syngas is reacted with steam to produce hydrogen.
- Hydrogen is combined with atmospheric nitrogen to produce ammonia.
- Ammonia is then reacted with captured carbon dioxide from previous reactions to produce urea.
Blood says the technology is well established globally.
The world’s latest urea plant, using technology identical to that to be used in Southland, was commissioned in Zambia in late 2025.
“The Southland project is about applying this existing technology in a smarter and cleaner way,” Blood says.
“We are committed to mitigating the greenhouse gas impacts before the project proceeds, not after.
“Environmental management will be central to the project’s design, with various opportunities being looked at. These include using CO₂ to make algae-based cattle feed, liquid fuels, construction materials, and in inhibitor technologies to reduce nitrous oxide emissions.”
Blood emphasises the company’s dedication to transparent engagement with stakeholders, including local iwi, Ngāi Tahu rūnanga, councils, farmers and landowners across the 3,141-hectare exploration area that has been applied for.
“Mining operations will be designed to minimise disruption, with progressive rehabilitation and more-than-fair compensation for affected landowners,” he says.
The project is expected to apply for approvals under the fast-track regulatory process. Key milestones include:
Applying for regulatory consents and engaging with landowners.
Completing initial geological and hydrological studies by spring 2026.
Progressing to detailed engineering and process design.
A targeted three-year pathway from the conclusion of the very detailed studies currently underway, to full production.
“The initial economic analysis looks very good indeed and hence the desire to move forward quickly,” Blood says.
“New Zealand is currently exposed to global fertiliser shocks it can’t control. This project is about providing national self-sufficiency for the next 50 years plus - producing what farmers need in New Zealand, with world-class technology and robust environmental safeguards,” Blood says.
