Australia feeds off Asia's appetite for prawns
GEOFF HISCOCK, contributing writer
SYDNEY -- A combination of Asia's hunger for seafood and Australia's desire to develop its sparsely populated northern region underpins a massive new aquaculture venture that is on track to begin exporting prawns in late 2018.
Project Sea Dragon is a 10-year, 1.45 billion Australian dollar ($1.06 billion) undertaking to build the country's biggest fish farming operation across the vast Legune cattle station in the Northern Territory, with the ultimate goal of producing 100,000 metric tons a year of high-value black tiger prawns for Asia-Pacific markets. The project envisions saltwater ponds stretching for 10,000 hectares, equivalent to 80,000 Olympic-sized swimming pools.
China, the world's biggest producer and consumer of prawns, is a key target, along with India, Japan, South Korea and the U.S.
The Australian federal and Northern Territory governments on July 27 jointly announced that Sea Dragon has been accorded "major project status," which gives it coordinated access to national and territory services and helps to ensure that the various approval processes -- such as environmental and biosecurity -- run as efficiently as possible.
Perth-based Seafarms Group, Australia's biggest prawn farmer and the project's backer, said it welcomed support from the two governments in "developing the necessary public infrastructure."
After several years of preparatory work, the company has just raised A$16 million for a bankable feasibility study, and expects to make a final investment decision on the project at the end of next year.
If all goes as planned, work will start on the first 1,000-hectare ponds in mid-2017, with a target to start exporting prawns to Asia in late 2018. The first stage will cost around A$150 million, according to a company estimate earlier this year.
Sea Dragon would be the biggest aquaculture project in Australia, where total farmed prawn output is currently about 5,000 tons a year, according to Managing Director Chris Mitchell.
"In our first stage, we will produce 10,000 tons. Our base case is that on completion of all five stages, we will grow at least 100,000 tons a year," Mitchell told the Nikkei Asian Review. "But it's a long ramp-up, over seven years."
The various processes and milestones of the project are "on track," he said. Weather is a significant variable in terms of construction planning. In northern Australia "the key thing is that you can only work in the dry season," Mitchell said. The project has certain infrastructure and logistical requirements, he said, given its location on the 180,000-hectare former cattle property near the border with Western Australia.
Legune is about 340km southwest of the Northern Territory capital of Darwin -- where a hatchery and breeding facility will be located -- and about 130km east of Kununurra, Western Australia, where the company intends to build a processing plant.
The processed prawns will be exported mainly to Asian markets -- potentially by air from Kununurra, or by sea from the nearby port of Wyndham or via Darwin. At full capacity, about 700 people will work at Legune, 600 at Kununurra, and another 300 at Darwin and associated facilities at Wyndham and Exmouth in Western Australia.
Aquaculture is a $150 billion global industry and accounts for almost half the 160 million tons of seafood consumed worldwide every year. That share is expected to grow to 62% by 2030, according to the United Nations Food and Agriculture Organization. Prawns account for about 4 million tons of the total 74 million tons of farmed seafood produced around the world.
The biggest prawn producers are China, India, Thailand, Indonesia, Vietnam and Ecuador, all of which farm mainly the cheaper whiteleg variety, plus smaller amounts of the more expensive black tiger type. The biggest consumers are China, the U.S. and the European Union. Australia is not yet a significant producer or exporter, and imports about 30,000 tons of its annual demand of 55,000 tons. That equation will change if Project Sea Dragon comes to fruition. Assuming a price of A$15 per kilogram, first-stage output of 10,000 tons would generate revenue of A$150 million a year, rising to A$1.5 billion at full production of 100,000 tons.
Seafarms Group became the biggest prawn farmer in Australia following its acquisition of a major prawn operation at Cardwell on the Queensland coast last year. It sells these prawns under its Crystal Bay brand to Australian supermarkets, competing with farmed whiteleg imports from Thailand and Vietnam, and wild-caught prawns from the Gulf of Carpentaria in northern Australia.
In February, Seafarms Group took a three-year option over Legune station, which was once an outstation of the giant Victoria Station cattle property and sits between the estuaries of the Victoria and Keep rivers.
About a third of Legune is floodplain, and it already has a 55,000-megaliter dam that will supply water to combat evaporation in the prawn-growing ponds. Nearby is the Ord River Irrigation Area, an agricultural scheme that dates back to the 1960s and has been identified for potential expansion as a "food bowl" in the federal government's white paper on northern development.
Australia's Deputy Prime Minister Warren Truss said July 27 that granting "major project status" to Sea Dragon recognized its potential to "provide significant economic opportunities" to the Northern Territory and to kick-start private investment across the north.
One of the key approvals Seafarms Group must obtain is a land-use agreement with the traditional indigenous owners. It must also obtain sacred site clearances from the Aboriginal Areas Protection Authority.
Mitchell told the Nikkei Asian Review that the company was continuing to talk to the traditional owners about their involvement, and the process would take "as long as it takes."
There has been speculation Seafarms Group would bring in an international investor as it ramps up production, but Mitchell said Project Sea Dragon was "not locked into any particular model" when it came to agreements on buying and selling future production, noting that the company was talking to a range of overseas and domestic parties.
Apart from securing finance, skilled labor and all the necessary approvals, feeding the prawns is another challenge for the project, given that wild-caught fish are currently the prime ingredient in feed. This is where new technology may come into play. Seafarms Group will look at the possible use of Novacq, the world's first fish-free prawn feed and developed by the national science agency, CSIRO.
Matthew Briggs, technical project manager for the animal nutrition group Ridley AgriProducts, told the Nikkei Asian Review that since acquiring the licence to produce and market Novacq from CSIRO two years ago, Ridley has been testing the product in the laboratory and in field trials. The results showed that Novacq "could increase the growth of prawns by up to 70%," enhance feeding efficiency by up to 20%, improve resistance to disease and eliminate the need to use wild-caught fish in the feed.
In a sign that the Sea Dragon project is already having knock-on effects, Briggs said that Ridley aims to set up a commercial-scale Novacq production center in Australia in late 2015 to supply the farmed prawn industry.