With drought and frost ravaging much of this year’s barley crop, malt prices have been an issue slated to affect the price of beer in Australia.
However, another key requirement for beer – carbon dioxide – is in short supply due with shortages potentially driving up price.
Australian supplier, Air Liquide, is facing potential production issues caused by ageing facilities that could disrupt the CO2 supply and is already beginning to have an impact on breweries.
Balter Brewing CFO Andrew Langton told Brews News that Queensland craft breweries could see CO2 prices double as soon as next year if an alternate supplier cannot be secured.
Balter is currently contracted to Air Liquide, which is a major Queensland supplier of CO2. Air Liquide acquires its CO2 from fertiliser company Incitec Pivot Limited, which operates a facility just off the coast of Brisbane on Gibson Island.
Andrew explained that because of the advanced age of the facility, there have been suggestions the site could be decommissioned in 2019.
“What that means for Balter, if Gibson Island is shutdown and we’re under contract with Air Liquide, that ultimately means that we’ll be forced into paying force majeure prices, which ultimately doubles the price of what our current CO2 is,” Andrew said.
Force majeure is a contractual term that comes into play when an event that is beyond the control of either party prevents or hinders the performance of a contract.
“As far as I know, there are no immediate plans to put anything else in place, there’s definitely nothing that’s been publicly released that they’ve got another source,” Andrew said.
“They do ship in from overseas but obviously that will cost more money for us.
“That’s my biggest concern with CO2 at the moment.”
Andrew said that Balter may have to decide between two options, break its contract with Air Liquide and find another CO2 supplier, or pay double what it is currently paying for the gas to meet the increased logistics costs incurred by Air Liquide having to source its CO2 from further afield.
A spokesperson for New South Wales-based gas company BOC, one of Australia’s largest suppliers, told Brews News that in Australia, CO2 comes from a range of sources but primarily from byproducts in natural gas processing, ammonia production and ethanol fermentation.
“CO2 is primarily used for carbonation of beverages, as a chilling agent in the food industry, for PH control on PH-balancing applications and as an industrial solvent,” the BOC spokesperson explained.
“These byproduct feed-gas streams are purified and liquified to high standards through various production processes located near the source to make them available to various industries.”
The main CO2-producing industries are natural gas processing, ammonia production and ethanol fermentation. According to the BOC spokesperson, “there is growth in [natural gas processing] in line with the expansion of liquified natural gas exports”.
“Ammonia production is a stable market as it is a base for explosives used in the mining sector and also fertiliser for the agricultural sector.
“Ethanol fermentation is a growth area for low carbon fuels, particularly with government increasing mandates for ethanol as a transport fuel.
“High capital requirements and limited viable sources – located near population centres, infrastructure requirements – make establishing additional sources of CO2 difficult.”
Scenarios in which CO2 supplies may dwindle or stop altogether happen when there’s a shutdown of the source plant for maintenance or breakdowns.
The BOC spokesperson advised Brews News that closures need to be managed very closely between the supplier and gas company to minimise downtime and impact on customers.
BOC experienced its own issues last year, when the feed gas supplier for its Kwinana CO2 plant in Western Australia experienced an unplanned outage that lasted six months.
At Victoria’s new Brick Lane Brewing Co, head brewer Jon Seltin told Brews News that he too is experiencing CO2 supply issues.
Also contracted with Air Liquide, Seltin said that Brick Lane gets its supply from natural gas that’s mined in the Bass Straight and processed at a Primaweld Group facility in Lang Lang, Victoria.
“What we’ve found is with more and more demand, with small breweries that aren’t self-sufficient with CO2, we’re finding that there are constraints really, around availability, price, risk and security of supply,” Jon explained
“It turns out that there’s more CO2 in the atmosphere than what we’ve got to available to ship out to the industrial consumers of CO2.”
Jon said that Lang Lang is experiencing similar wear and tear problems to Gibson Island and because of that, is experiencing the force majeure effect.
For Air Liquide, Jon explained, they’ve got to supply their bigger customers like Coca Cola and Schweppes before they have to worry about clients like Brick Lane.
With carbon dioxide a byproduct of the brewing process, it’s come as a surprise to some that the CO2 produced cannot be fed back into the brewery – rather it comes down to economies of scale.
Jon told Brews News that because of the amount of investment in infrastructure involved, to install a CO2 recovery and reprocessing plant is really only the dominion of big brewers.
Despite the fact that Brick Lane has an impressive production facility, currently at just under three million litres per year and with a capacity of about 30 million litres per year, Brick Lane’s volume is a “drop in the ocean” compared to the likes of CUB and Lion that may produce up to four million hectolitres per year at any one production facility.
“You’d think that putting in CO2 reprocessing would help [environmentally] but it’s not necessarily that easy,” Jon explained.
“These things take a lot of electricity to run and it’s not like we’re getting free CO2 for nothing.
“It’s a real knotted sort of issue. What we’re looking at is ways to mitigate the risk around our CO2 supply,” Jon said.
“What we’re thinking about now is CO2 for me has always been something that’s turned up when I’ve needed it and now that we are a slightly larger company, or a company for which downtime starts to cost us real money, it’s really only over the past couple of days that we’ve had a wakeup call about unavailability or scarcity of supply.”
This past northern summer has seen the UK and parts of Europe hit by gas shortages due to multiple plants going offline.