Incitec Pivot will close its major fertiliser plant in Brisbane in just over a year, citing gas supply costs, amid a study into converting it into a green ammonia plant.
The company says it has been unable to source economically-viable natural gas supplies for the Gibson Island facility, which makes urea and sulphate of ammonia, when the current contract expires at the end of December 2022.
Incitec Pivot chief executive Jeanne Johns says the company will try to support the 170 workers affected by the closure, which will end the company's domestic manufacturing operations.
"We appreciate and thank them for their dedication which has resulted in the safe and reliable operation of the facility," she said.
"We will be working with our people and offering them whatever assistance we can."
The announced comes less than a month after the Queensland government and billionaire Andrew "Twiggy" Forrest launched a feasibility study on converting the site into a green ammonia plant.
The chemical is key ingredient in hydrogen, an industry the state has been heavily investing in to provide an alternative revenue and employment source to fossil fuels.
Ms Johns confirmed that Incitec Pivot was looking at repurposing the site and would continue to use its Brisbane distribution centre at Pinkenba after December next year.
"It is disappointing for our people and Australian manufacturing that we could not reach a suitable commercial gas supply agreement to continue the operation of the Gibson Island facility from processing natural gas," she said.
"However we look to create new opportunities aligned to the company's forward strategy."
Federal Energy Minister Angus Taylor questioned the company's reason for the "disappointing" decision to close the plant, suggesting that domestic gas prices should not have been a major factor.
He said domestic users had been "protected" from significant gas price spikes seen overseas, such as a 4000 rise in the United Kingdom.
"The gas-fired recovery is working," Mr Taylor said in a statement to AAP.
"Business turnover in the manufacturing sector has now grown every month for the past five months."
Comment has been sought from the Queensland government.