CF
Industries Holdings Inc. expects production at its 20,000 st/y green ammonia
project at Donaldsonville, La., to start within the next few weeks or in in
early January, the company announced on Dec. 4 at the BMO 2023 Growth & ESG
Conference.
CF first announced plans for the Donaldsonville green ammonia
project in October 2020 (GM Oct. 30, 2020). “We are excited to
be able to bring that project finally to fruition,” said CF CEO Tony Will on
Dec. 4. “It has been about three years in the making, and we are really excited
about it.”
Thereafter,
the company is moving toward the production of blue ammonia. Will said the next
project is the dehydration compression project for CO2 at Donaldsonville. The
company has signed an offtake agreement with ExxonMobil, who will be moving 2
million tons a year of CO2 into permanent geological sequestration.
“We
should be mechanically complete with the dehydration compression in about a
year, maybe into the beginning of 2025,” Will said. “We expect to be shipping
CO2 and sequestering at the beginning probably about the middle of 2025 at this
point.”
Will added that CF is excited about the CO2 project due to the 45Q tax credit. “We’ll start earning at a rate of $85 on a gross basis per ton of CO2 captured,” he said. “We’ve about, I think about $30-$35 worth of cost all in terms of being able to process and sequester the CO2. So we’ll be netting about $50 a ton on 2 million tons a year beginning kind of midway through 2025. So that is a very exciting project, and that is just on the CO2.”
As
for the green ammonia, Will said the company has been engaged in ongoing
discussions with a number of potentially interested parties. Will said CF’s
expectation is that the sales price needs to be commensurate with what the full
end cost structure looks like.
“So
while we are engaged in these conversations, it may take a while to find the
right applications where the counterparty is willing to pay that kind of
number, but we are confident we can get there,” he said. Asked by analysts as to
the ammonia price for a world-scale plant for green ammonia, Will noted that
the current Henry Hub natural gas price is sub-$3.00 mmBtu.
“So the energy content in a ton of conventional ammonia is $100/st,” he continued. “The energy content in a ton of green ammonia is closer to $450-$500/st. That’s before you get to the capital recovery on all of the investment, and it’s also before you have the energy cost associated with running an air separation unit that is a completely distinct part of a green ammonia project. So, realistically, the cost that you need to be able to recover, to cover energy costs and capital, is going to be pushing four figures on a green ammonia ton.”
“And right now, we’re just not seeing a lot of demand at the end market
side to really step up and say yes, give me more of that,” Will said, referring
to green ammonia. “There is a provision in the tax code where there’s a
hydrogen production credit that can certainly add some potential value and
basically buy down the cost of a ton of green ammonia.”
Will cautioned, however, that the rules on the hydrogen production credit
have not been finalized, adding that there are “rumors floating around” about a
Biden Administration proposal. “It’s suggesting that the rules for new
renewable energy additionality is going to be pretty stringent, which means it’s
even more difficult to get some of those projects approved,” he said.
As a result, Will said the time for a massive investment in green ammonia
production is not yet here. “In fact, I think it’s probably decades away,” he
added. “We’re really focused on what we can do with carbon capture, sequestration,
and blue projects because we think it’s a much lower cost alternative, still
delivering a very, very low carbon intensity product, and certainly miles ahead
of where we are today in terms of environmental impact.”
Will noted a high level of interest in blue ammonia, however. “Basically,
everyone that we’ve talked to has said, yes, we want some of that,” he said. “So
we’re beginning some of those conversations now.”
Will gave several examples of areas where blue ammonia demand is accelerating. “Interestingly enough, some of them happen to be in agricultural applications,” he said. “So to get a very low carbon intensity ethanol product that qualifies for the California low carbon fuel standard, there’s a lot of value associated with that, and having a low carbon fertilizer going into growing that crop is an important point.”
Will said Brazil is also making “sizable investments” in developing an
ability to produce sustainable aviation fuel, particularly for the European
market, and is looking at low carbon intensity fertilizer to help bring this
along.
“In addition, we’ve talked to a number of other applications, whether it
be on a mining services basis or other places like that, where there’s a lot of
interest, although quantification of premium is still in discussion right now,”
he said. “But suffice it to say there’s an awful lot of interested
counterparties and it really just is going to require settling out on the
value.”
In addition, CF continues to see blue ammonia potential for export
markets and recently inked Memorandums of Understandings (MOUs) with several offshore
partners.
“Mitsui, JERA, Lotte, POSCO, and others suggest that the demand is real
and it’s going to be coming in sizable amounts,” Will said. “The big question
is, what is the carbon intensity threshold that you have to hit and what are
the other requirements in terms of the Asian parties, equity investments, or
participation in the projects themselves?”
“We certainly are going to have a nice baseload to begin helping serve a developing marketplace based on what we’re doing at Donaldsonville and can replicate in other places,” he continued. “But I think longer term, the world is going to need more blue ammonia. I think we’re in an ideal position to add that capacity if and when it needs it.”
Referring to the “100 different projects” announced in the blue and green
ammonia space in recent years, Will described “a lot of frothiness” on the
supply side.
“Our expectation at that time was it’s easy to announce a project. It’s a
lot harder to actually build one and bring one online,” he said. “I think some
of the loss of luster might be because people are looking at what’s happening
across a number of these previously announced projects and see that they’re
either being canceled or deferred.”
He contrasted that, however, with what is happening on the demand side. “We’ve had people just very recently over in Japan visiting with JERA,” he said. “They are putting real capital in the ground. They are moving forward with their large tests, the Hekinan power facility. Our expectation is that that’s going to continue to move along at basically the pace that we thought it was.”
While noting that the Japanese government has “been a little bit slow in
terms of finalizing the subsidy schemes and the regulations around it,” Will
said this should not affect CF’s ability in the near term to supply that demand
out of Donaldsonville.
“What it might affect is either the type of technology or additional flue
gas capture that’s required if we go down the path of a greenfield plant,” he
said. “But those things are things that we can wait and see how it develops. It’s
not going to affect our ability to actually meet that demand as it emerges. I
think all of our expectations, including the end users in Asia, continue to
believe this is the path forward.”
Will also addressed the methanol versus ammonia debate on marine
transportation. “Although there is a carbon molecule as part of a methanol
atom, and so it doesn’t really get you our molecule, it doesn’t really get you
all the way to zero carbon,” he said. “Ammonia, on the other hand, does.”
“We firmly believe, based on our track record of safe handling and
storage and movement of ammonia, that the systems can be built that are 100%
reliable and can be deployed appropriately in marine vessels,” he added. “I
think one of the development points is really about the ongoing bunkering and
resupply piece from ammonia.”
While noting that ammonia is “already in and out of something like 175
ports globally,” Will said it needs to be built out into “every shipping port
out there” for ammonia shipping to become the propulsion energy source of
choice.
“And so, there is some time lag associated with that,” he said. “But we
believe that this will continue to be an ongoing developing source of new
demand, and it’s exciting in terms of how big this can ultimately be based on
the size of the fleet that’s out there.”
