The company that supplies much of the explosives used to blast ore out of Australian mines has decided that its future also runs on hydrogen. Orica, the Melbourne-based maker of commercial explosives, said in a regulatory filing on Wednesday that it had taken a final investment decision on a renewable hydrogen hub in the Hunter Valley, a project that would be the largest of its kind in Australia at this scale.
The plant, planned for the coal country north of Sydney, would use recycled water and renewable electricity to produce about 4,700 metric tons of hydrogen a year. Most of that hydrogen would feed the production of 26,600 tons of low-carbon ammonia annually, cutting Orica’s consumption of natural gas feedstock by roughly 7.5 percent. Construction is set to begin this year, with production expected in early 2029.
The project matters well beyond Orica. Australia has spent years talking about becoming a global hydrogen exporter, but the industry has struggled to convert ambition into shovels in the ground. Last year, BP pulled out of a A$36 billion, or about US$25 billion, hydrogen project, a withdrawal that cast doubt over the country’s plans and spooked investors in the sector. Orica’s decision gives the industry a working example at a time when it needed one.
The economics are still far from easy. Green hydrogen remains expensive to produce, and the market for low-carbon ammonia is only beginning to form. What makes Orica’s project different is that it has a buyer with its own needs: the ammonia will feed the company’s explosives business, which uses ammonium nitrate to serve the mines that generate most of Australia’s export revenue. The hydrogen hub is, in effect, a way to make a raw material the company already consumes, rather than a bet on a future export market.
Orica is one of two projects to receive funding in the first round of the Australian government’s A$2.25 billion program supporting large-scale renewable hydrogen. The government has framed the program as seed money for an industry it expects to mature over the coming decade, and officials said Orica’s final investment decision shows the approach is working. Environmental groups have been more cautious, noting that the project’s climate benefits depend on the renewable power behind it being genuinely additional.
The Hunter Valley is a fitting location. The region has been an engine of Australian coal for more than a century, and its workforce and infrastructure are built around heavy industry. Local officials have welcomed the project as a bridge to a cleaner economy that keeps industrial jobs in the area, even as coal mines wind down. The hydrogen hub would employ hundreds during construction and a smaller number in operations, a modest but symbolically important addition.
For the wider hydrogen sector, the project offers a template that other companies are studying closely. Most proposed hydrogen developments have stalled on the question of who will buy the output; Orica sidestepped that problem by being its own customer. Industry analysts said that model, an anchor consumer inside the same corporate family, may prove more durable than projects built around speculative export contracts.
The numbers behind the project show why it is possible where others stalled. The Australian government’s support program covers part of the upfront cost, and Orica’s existing ammonia and nitric acid plants in the region give the hydrogen a guaranteed destination without new transport infrastructure. The company has also contracted renewable power at prices that make the project viable at today’s hydrogen costs, a condition that many proposed developments could not meet.
The company’s own position in the energy transition is complicated. Orica’s core business is tied to the mining of coal, iron ore and other commodities, and its explosives are essential to that industry. Executives have acknowledged the tension, arguing that the ammonia plant is part of a strategy to reduce the carbon footprint of its own supply chain while keeping the mining economy running.
Construction in the Hunter Valley is expected to begin within months, and Orica said it would provide updates as the work proceeds. The project will not be finished until 2029, and the industry’s troubles are not over: hydrogen costs remain high, and the export market that Australia once dreamed of has yet to arrive. But for a sector that has grown used to cancellations, a final investment decision is a form of progress. The project also carries lessons for the government programs that back it. Australia’s hydrogen support has been criticized for slow disbursement and for tying funding to conditions that few projects could meet. Orica’s decision suggests the design is workable when a company has its own demand, but officials acknowledged that the second round of funding, which targets export projects, faces a harder task. Export markets for green ammonia are still forming, and buyers are not yet paying a premium for low-carbon product.
Even the mines, it seems, will one day be blasted with cleaner explosives.
