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Researched by Industrial Info Resources (Sugar Land, Texas)--Effects from the rising price of natural gas have rippled through the global energy and chemical markets, with ammonia producers feeling some of the strongest impact. With the exception of the "green" variety, ammonia is sourced from natural gas, but has seen relatively stronger price increases as it is more closely tied to global, rather than domestic, natural gas prices, according to the U.S. Energy Information Administration (EIA). About 14% of total U.S. ammonia consumption is met by imports, according to the EIA, but Industrial Info is tracking about $13 billion worth of active, U.S.-based ammonia-production projects, more than $9 billion of which is found in Texas.
International natural gas prices have far outpaced the U.S. Henry Hub benchmark since mid-2021, with the sharpest increases in Western Europe and Northeast Asia. Natural gas prices in those two regions have risen from $6 per million British thermal units (MMBtu) in early March 2021 to about $35 per MMBtu in the last week of March 2022, according to the EIA. In comparison, U.S natural gas prices went from $2.60 to $5 per MMBtu over the same period--but U.S. ammonia prices are more closely tied to global natural gas prices, given the significant presence of ammonia imports.
Click on the image at right for an EIA graph detailing natural gas and ammonia prices since early 2020.
That isn't to say the U.S. has been slacking in ammonia production--in fact, domestic production has nearly doubled since 2012, according to the EIA, and the 14% of U.S. supply that was imported in 2021 is far below the 37% that was imported in 2012. Nonetheless, the 17 million metric tons of U.S. ammonia production in 2021 pales when compared with China's 47 million metric tons and Russia's 19 million metric tons.
One of the largest ammonia-production projects under construction is Gulf Coast Ammonia LLC's (Texas City, Texas) $950 million ammonia plant in Texas City. The 1.35 million-metric-ton-per-year facility began construction in late 2020 and is set to be completed by the end of 2023. It will be supported by a $500 million SMR/ASU plant that will supply it with hydrogen produced via a steam methane reformer (SMR) and nitrogen produced via an air separation unit (ASU). Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can read detailed project reports on the ammonia plant and SMR/ASU plant.
Air Products and Chemicals Incorporated (NYSE:APD) (Lehigh Valley, Pennsylvania), which is performing engineering, procurement and construction (EPC) services for the Texas City project, is planning its own blue hydrogen and blue ammonia project in Geismar, Louisiana. The primary product for the facility will be blue hydrogen, which is produced using natural gas, with carbon capture and sequestration (CCS) technology used to reduce CO2 emissions. A portion of the blue hydrogen will be distributed via Air Products' Gulf Coast hydrogen pipeline network, and the remainder will be used for ammonia production. Subscribers can learn more from Industrial Info's project report.
Air Products also is at work on blue hydrogen and blue ammonia projects in Canada and the Middle East. For more information, see April 28, 2022, article - Alberta Pursues Blue Hydrogen in Earnest, and April 15, 2022, article - Middle East Invests in Green Hydrogen.
Frontier Natural Resources Incorporated (Bellefonte, Pennsylvania) and KeyState Opportunity (Las Vegas, Nevada) are proposing a blue hydrogen/ammonia plant in Beech Creek, Pennsylvania, which would produce blue hydrogen and nitrogen--and synthesize blue ammonia--from a liquefied natural gas (LNG) feedstock. The project, which is in its early design phase, is currently set to begin construction in late 2023. Subscribers can learn more from Industrial Info's project report.
Koch Nitrogen Company, a subsidiary of Koch Industries Incorporated (Wichita, Kansas), is upping its production of traditionally developed ammonia with a $150 million unit expansion at its Fort Dodge Nitrogen Plant in Duncombe, Iowa, which will increase the unit's capacity from 331,100 to 416,100 metric tons per year. The project began construction in October and is expected to wrap up toward the end of this year. Subscribers can learn more from Industrial Info's project report.
Green Ammonia in the Spotlight
One alternative to ammonia produced via natural gas is green ammonia, which is created using hydrogen made by electrolysis of water, a process that can be powered by renewable energy. As such, the price of green hydrogen is not directly tied to the cost of natural gas. While green ammonia is considerably cleaner than blue or traditionally produced ammonia, it is much more expensive to develop.
CF Industries Holdings Incorporated (NYSE:CF) (Deerfield, Illinois) is among the companies pursuing green ammonia. CF Industries is preparing to begin construction this summer on a $450 million green ammonia unit at its nitrogen complex in Donaldsonville, Louisiana. The company expects to begin production of green ammonia in 2023 at Donaldsonville, which already is expected to produce up to 1.7 million tons of blue ammonia starting in 2024. Subscribers can learn more from Industrial Info's project report.
"We continue to advance the Green Ammonia project at Donaldsonville Complex and have placed orders for all major equipment," said Chris Bohn, the chief financial officer of CF Industries, in a recent quarterly earnings-related conference call. "The construction of the CO2 compression and dehydration facility at Donaldsonville is expected to be complete in 2024, enabling us to be first to market with the significant volume of blue ammonia once sequestration is initiated."
The growing demand for blue and green ammonia is driven, in part, by public and civic support for environmental, social and governance (ESG) projects. For more information, see March 24, 2022, article - IIR Webinar: ESG Initiatives Take Larger Role in Chemical Project Spending.
CF Industries estimates green ammonia will cost about three times as much as conventional ammonia to produce, but estimates that it could earn about eight times as much as traditionally produced ammonia in the alternative energy marketplace, according to Chemical & Engineering News.
"The geopolitical issues in Europe, particularly Russia's invasion of Ukraine, only increase the importance of the role North American farmers play, as well as the rest of the supply chain in providing food for the world," said Tony Will, the chief executive officer of CF Industries, in the company's conference call. "The last year has underscored the critically important role of ammonia to the world both for fertilizer and industrial applications. It has also confirmed our belief that new demand for ammonia in clean energy applications will grow significantly in the coming years."
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
International natural gas prices have far outpaced the U.S. Henry Hub benchmark since mid-2021, with the sharpest increases in Western Europe and Northeast Asia. Natural gas prices in those two regions have risen from $6 per million British thermal units (MMBtu) in early March 2021 to about $35 per MMBtu in the last week of March 2022, according to the EIA. In comparison, U.S natural gas prices went from $2.60 to $5 per MMBtu over the same period--but U.S. ammonia prices are more closely tied to global natural gas prices, given the significant presence of ammonia imports.
Click on the image at right for an EIA graph detailing natural gas and ammonia prices since early 2020.That isn't to say the U.S. has been slacking in ammonia production--in fact, domestic production has nearly doubled since 2012, according to the EIA, and the 14% of U.S. supply that was imported in 2021 is far below the 37% that was imported in 2012. Nonetheless, the 17 million metric tons of U.S. ammonia production in 2021 pales when compared with China's 47 million metric tons and Russia's 19 million metric tons.
One of the largest ammonia-production projects under construction is Gulf Coast Ammonia LLC's (Texas City, Texas) $950 million ammonia plant in Texas City. The 1.35 million-metric-ton-per-year facility began construction in late 2020 and is set to be completed by the end of 2023. It will be supported by a $500 million SMR/ASU plant that will supply it with hydrogen produced via a steam methane reformer (SMR) and nitrogen produced via an air separation unit (ASU). Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can read detailed project reports on the ammonia plant and SMR/ASU plant.
Air Products and Chemicals Incorporated (NYSE:APD) (Lehigh Valley, Pennsylvania), which is performing engineering, procurement and construction (EPC) services for the Texas City project, is planning its own blue hydrogen and blue ammonia project in Geismar, Louisiana. The primary product for the facility will be blue hydrogen, which is produced using natural gas, with carbon capture and sequestration (CCS) technology used to reduce CO2 emissions. A portion of the blue hydrogen will be distributed via Air Products' Gulf Coast hydrogen pipeline network, and the remainder will be used for ammonia production. Subscribers can learn more from Industrial Info's project report.
Air Products also is at work on blue hydrogen and blue ammonia projects in Canada and the Middle East. For more information, see April 28, 2022, article - Alberta Pursues Blue Hydrogen in Earnest, and April 15, 2022, article - Middle East Invests in Green Hydrogen.
Frontier Natural Resources Incorporated (Bellefonte, Pennsylvania) and KeyState Opportunity (Las Vegas, Nevada) are proposing a blue hydrogen/ammonia plant in Beech Creek, Pennsylvania, which would produce blue hydrogen and nitrogen--and synthesize blue ammonia--from a liquefied natural gas (LNG) feedstock. The project, which is in its early design phase, is currently set to begin construction in late 2023. Subscribers can learn more from Industrial Info's project report.
Koch Nitrogen Company, a subsidiary of Koch Industries Incorporated (Wichita, Kansas), is upping its production of traditionally developed ammonia with a $150 million unit expansion at its Fort Dodge Nitrogen Plant in Duncombe, Iowa, which will increase the unit's capacity from 331,100 to 416,100 metric tons per year. The project began construction in October and is expected to wrap up toward the end of this year. Subscribers can learn more from Industrial Info's project report.
Green Ammonia in the Spotlight
One alternative to ammonia produced via natural gas is green ammonia, which is created using hydrogen made by electrolysis of water, a process that can be powered by renewable energy. As such, the price of green hydrogen is not directly tied to the cost of natural gas. While green ammonia is considerably cleaner than blue or traditionally produced ammonia, it is much more expensive to develop.
CF Industries Holdings Incorporated (NYSE:CF) (Deerfield, Illinois) is among the companies pursuing green ammonia. CF Industries is preparing to begin construction this summer on a $450 million green ammonia unit at its nitrogen complex in Donaldsonville, Louisiana. The company expects to begin production of green ammonia in 2023 at Donaldsonville, which already is expected to produce up to 1.7 million tons of blue ammonia starting in 2024. Subscribers can learn more from Industrial Info's project report.
"We continue to advance the Green Ammonia project at Donaldsonville Complex and have placed orders for all major equipment," said Chris Bohn, the chief financial officer of CF Industries, in a recent quarterly earnings-related conference call. "The construction of the CO2 compression and dehydration facility at Donaldsonville is expected to be complete in 2024, enabling us to be first to market with the significant volume of blue ammonia once sequestration is initiated."
The growing demand for blue and green ammonia is driven, in part, by public and civic support for environmental, social and governance (ESG) projects. For more information, see March 24, 2022, article - IIR Webinar: ESG Initiatives Take Larger Role in Chemical Project Spending.
CF Industries estimates green ammonia will cost about three times as much as conventional ammonia to produce, but estimates that it could earn about eight times as much as traditionally produced ammonia in the alternative energy marketplace, according to Chemical & Engineering News.
"The geopolitical issues in Europe, particularly Russia's invasion of Ukraine, only increase the importance of the role North American farmers play, as well as the rest of the supply chain in providing food for the world," said Tony Will, the chief executive officer of CF Industries, in the company's conference call. "The last year has underscored the critically important role of ammonia to the world both for fertilizer and industrial applications. It has also confirmed our belief that new demand for ammonia in clean energy applications will grow significantly in the coming years."
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
