All posts by hlancey@bloomberg.net

Achema Receives €122 M Grant for Decarbonization

Ammonia, Carbon Dioxide, Clean Ammonia, Europe, Hydrogen, Lithuania, Low-Carbon, Natural Gas, Nitrogen

Lithuanian nitrogen producer Achema was announced as the recipient of a €122 million ($133 million) aid package from the European Commission for decarbonizing its fertilizer production process. The aid will be delivered as a direct grant to fund the installation a 171 MW alkaline electrolyzer at Achema’s production site in the Kaunas region of Lithuania.

Achema currently uses natural gas-based hydrogen to produce ammonia. The electrolyzer will produce renewable and low-carbon hydrogen that will be used to produce ammonia. The hydrogen produced by the electrolyzer will replace 30% of the hydrogen currently produced from natural gas, thereby reducing carbon dioxide emissions and demand for natural gas.

The electrolyzer is expected to start operating in 2026. Once completed, the project will abate the release of at least 5.8 million tons of CO2 over the 19 years of expected operation of the electrolyzer.

The project will contribute to the EU Hydrogen Strategy and the European Green Deal targets, while helping to end dependence on Russian fossil fuels in line with the REPowerEU Plan, according to the European Commission’s press release.

MIT Studies Risk of Switching Ships to Ammonia Fuel

Ammonia, Clean Ammonia, Low-Carbon, Nitrogen

The maritime shipping industry accounts for roughly 3% of global carbon dioxide emissions annually and ammonia has the potential to reduce this as a low-carbon fuel, but a new MIT study indicates safety concerns with air quality when switching ship fuel from diesel to ammonia. 

The study, led by Anthony Wong and funded by the MIT Climate and Sustainability Consortium, highlighted that nitrous oxide, a greenhouse gas that is 300 times more powerful than carbon dioxide, is created when ammonia is combusted. Nitrogen in the form of nitrogen oxides and unburnt ammonia may also leak, which forms fine particulate matter in the atmosphere that can cause health problems such as heart attacks, strokes, and asthma.

Under current legislation, the study indicates that switching the global fleet of ships to ammonia fuel from diesel could have a net impact of up to 600,000 additional premature deaths each year due to air quality concerns. With stronger regulations and cleaner engine technology, however, the study found that switching to ammonia could lead to roughly 66,000 fewer deaths than currently caused by maritime shipping emissions, along with a lower impact on global warming.

“The results of this study show the importance of developing policies alongside new technologies,” said Noelle Selin, one of the authors. “There is a potential for ammonia in shipping to be beneficial for both climate and air quality, but that requires that regulations be designed to address the entire range of potential impacts, including both climate and air quality.”

Ammonia Costs Compared in H2Global Auction

Ammonia, Clean Ammonia, Egypt, Germany, Green Ammonia, Low-Carbon

Fertiglobe has been named the winning bidder for a contract value of up to €397 million to supply renewable ammonia out of Egypt into Rotterdam as part of the H2Global pilot auction with the ammonia having a delivered price of €1,000 per ton until 2033 (GM July 12, p. 27).

Recent analysis done by BloombergNEF using the Green Markets Western Europe Carbon Adjusted Ammonia Price has shown that the price being paid to Fertiglobe and the average green ammonia price received in the auction are both more than double the current price for gray ammonia in the region.

The auction also revealed that €811/mt of the €1,000/mt of green ammonia price is the production price in Ain Sokhna, Egypt, while the remainder represents costs associated with transport, logistics, and import duties into Rotterdam. H2Global, through the intermediary Hintco, will bridge the gap between the supply price and demand price with funding from the German Government.

The difference between the Western Europe Carbon Adjusted Ammonia Price and the €1,000/mt contracted price to Fertiglobe suggests that H2Global could subsidize up to €535/mt of green ammonia, although it could be less if end users are willing to pay a premium for green ammonia over gray ammonia.

Texas Fertilizer Facilities Shuttered Ahead of Beryl; Widespread Power Outages Linger Days After Storm

Ammonium Sulfate, Amthio, Featured, NPK, Texas, U.S.

Interoceanic (IOC) on July 8 announced that its affiliate, PCI Nitrogen, halted ammonium sulfate and sulfuric acid production at its Pasadena, Texas, production facility as a precautionary measure ahead of Hurricane Beryl to ensure employee safety.

NeuAg LLC also confirmed that it closed its storage and distribution center in Freeport, Texas, on July 8 as Beryl made landfall near the city of Matagorda, Texas, as a Category 1 hurricane. The facility is adjacent to BASF’s caprolactam production plant in Freeport and consists of a 100,000-square-foot structure with 80,000 st of dry ammonium sulfate storage, a 67,500-square-foot packaging plant, and a 57,000-square-foot NPK bulk blending warehouse.

NeuAg reported on July 10 that the facility sustained “only superficial damage” and was back up and running. IOC on July 10 said the PCI Nitrogen facility remained offline, however, with no timeline for a restart. The company offered no details on possible damage or other impacts from the storm.

The PCI facility is located directly on the Houston Ship Channel and is the largest producer of synthetic granular ammonium sulfate in North America. Annual production volumes are estimated at 600,000 st of ammonium sulfate, 100,000 st of ammonium thiosulfate, and 640,000 st of sulfuric acid, according to Green Markets data.

American Plant Food Corp. (APF) did not respond to inquiries about the operational status of its facility in Greens Port, Texas, near the Houston Ship Channel. The US Coast Guard on July 9 announced that it was reopening ports and waterways following “waterway assessments and coordination with federal, state, and local partners.”

“The Captain of the Port (COTP) Houston-Galveston has set Port Condition Recovery, Tuesday, for the ports of Houston, Texas City, Galveston, and Freeport, and the Gulf Intracoastal Waterway from the Colorado Locks east to High Island Bridge,” the Coast Guard reported late on July 9.

Beryl weakened to a Tropical Storm after making its third landfall on the Texas Gulf Coast, producing 80 mph winds and torrential rain in southeast Texas and creating widespread blackouts that cut electricity at one point to more than 2.5 million customers. At least seven deaths were reported as a result of the storm.

Two days after Beryl made landfall, almost 1.4 million customers of CenterPoint Energy Inc., Houston’s largest electric utility, were still without electricity while the city sweltered under a heat advisory. While CenterPoint confirmed that it had restored electricity to more than 1 million customers by Wednesday afternoon, at least 1 million homes and businesses were likely to be without power until at least Wednesday night.

Texas Gov. Greg Abbott told Bloomberg News that he would instruct the Public Utility Commission (PCU) of Texas to conduct a study about why electricity disruptions are “repeatedly happening” in Houston.

“They should not be losing power,” he said. “I want to find out, was there a structural flaw with regard to the electrical delivery system? Was that the cause of it? If so, what needs to be done to shore it up? Or was this a personnel issue of not having enough power personnel in all the right locations to get power back up and going again?”

“I want the PUC to provide information to both me and to the Texas legislature so that we will be able to act on it next year to make sure that events like this never happen again,” Abbott added.

With no working outage map available from the city’s largest electric utility, Houston residents were forced to rely on the Whataburger app to monitor outages by identifying which of the fast-food chain’s restaurants were closed during business hours, Bloomberg reported.

The outages from Beryl are higher than those caused by Hurricane Ike in 2008. In the wake of that disaster, the Houston mayor commissioned a report on electric reliability for the region. It found that most of the outages from Ike were due to falling trees and branches across power lines and it recommended CenterPoint improve its tree-trimming practices. The study also said that the city needed to identify critical facilities such as fire and police stations and make sure they had backup generation.

Beryl’s cost in the US, counting both damages and economic losses, could reach $28-$32 billion, AccuWeather Inc. estimated.

Incitec Pivot Abandons Potential Sale of Fertilizer Business to PKT

Ammonia, Australia, Featured, NPK, Phosphate, Urea

Melbourne-based fertilizer and explosives company Incitec Pivot Ltd. (IPL) announced on July 10 that it has ceased negotiations with Indonesian company PT Pupuk Kalimantan Timur (PKT) for the potential sale of its Incitec Pivot Fertilizer (IPF) business.

IPL confirmed in May that it was in advanced negotiations with PKT (GM May 17, p. 1) and the two have been in talks since last summer (GM July 28, 2023). PKT operates 13 plants, including five ammonia plants with capacity of 2.7 million mt/y, five urea plants with capacity of 3.4 million mt/y, and three NPK plants with capacity of 300,000 mt/y.

In a July 10 release to the ASX, however, IPL said the decision to walk away from the deal followed careful consideration of how to maximize value for shareholders while balancing the risks of completing the transaction in a reasonable timeframe.

“Throughout the sale negotiations with PKT, we were focused on completing a sale transaction in a timely manner to allow us to commence our on-market share buyback of up to $900 million,” said IPL CEO and Managing Director Mauro Neves. “We have determined we are unlikely to achieve this outcome with PKT in an acceptable timeframe, and as a result we made the decision to cease negotiations with them.”

Analysts had earlier suggested several possible sticking points to the sale (GM Aug. 11, 2023), including availability and supply of natural gas and sulfur for the company’s Phosphate Hill ammonium phosphate plant; gaining approval from Australia’s Foreign Investment Review Board for the sale of Australia’s only phosphate producer; and farmer fears that the Australian phosphates might go to Indonesia instead of Australia.

Neves said IPL will “continue to assess options for the structural separation” of its two businesses and said the company’s long-term goal remains to offload IPF. He cautioned, however, that IPL is “not actively engaged in any negotiations” at this time.

“Our IPF business remains focused on value-accretive market-share growth and is in a strong position for the agricultural season ahead,” he said. “The structural separation of the business and the potential transaction of the fertilizer business is still the strategy. The strategy hasn’t changed; we have to find another way to execute it.”

Neves said IPL will continue to manage the Dyno Nobel explosives and IPF businesses separately.

“IPF will continue to deliver on its strategy of providing value-add fertilizers and soil-health services that increase productivity for agricultural customers,” he said. “Dyno Nobel will focus on delivering its strategy to expand its position as a leading global, premium explosives business that provides its customers with safe and cutting-edge technology, solutions and services.”

Falling Commodity Prices, Lower Demand Weigh on CHS

Earnings, Featured, U.S., UAN

CHS Inc. on July 10 reported a drop in net income and revenues for the third quarter and first nine months of fiscal year 2024, citing weaker commodity prices, weaker grain and oilseed demand in the company’s Ag segment, and less favorable refining margins in its Energy segment.

Quarterly net income was reported at $297.3 million on revenues of $9.6 billion, compared with $547.5 million and $12.0 billion, respectively, in last year’s third quarter. Nine-month net income came in at $990.5 million on revenues of $30.1 billion, down from a record $1.6 billion and $36.1 billion, respectively, in the previous year.

“Through the first nine months of our fiscal year, we have delivered strong financial results, including the third highest net income in our history,” said CHS President and CEO Jay Debertin. “Although we continue to feel the adverse impacts of softening margins for ag and energy commodities, CHS is well positioned to navigate this commodity cycle downturn through a strong focus on cost control and efficiency.”

The company’s Ag segment posted pretax earnings of $108.5 million for the third quarter, down $125.0 million from last year’s $233.5 million. CHS cited lower crush margins in oilseed processing due to weaker meal and oil demand, as well as decreased margins for wholesale and retail agronomy products, partly offset by higher sales volumes.

Nitrogen production reported pretax earnings of $52.4 million for the quarter, down $3.9 million from last year due to lower market prices for urea and UAN. “Our equity method investments, led by our CF Nitrogen investment, performed well in evolving market conditions, CHS said.

The Energy segment posted pretax earnings of $97.9 million for the third quarter, down $101.1 million from last year. CHS cited decreased refining margins due to higher industry capacity utilization rates bringing additional refined fuel supply to the market, partially offset by lower costs for renewable fuel credits. The company also noted higher costs for heavy Canadian crude oil.

In its Corporate and Other segment, CHS reported pretax earnings of $51.1 million for the quarter, down $18.2 million from last year due primarily to lower equity income from Ventura Foods, which CHS said experienced less favorable market conditions for oil-based food products.

Fire Destroys Nutrien Ag Solutions Facility in Virginia

Featured, U.S.

Nutrien Ltd. reported this week that it is reviewing damage and any inventory losses at a Nutrien Ag Solutions warehouse in in South Hill, Va., after a woman on July 6 crashed her car into the structure and hit a propane tank inside, causing the tank to rupture and shoot flames that ultimately consumed the facility.

Nutrien told Bloomberg in an emailed statement that it is working with the local fire department, third-party remediation experts, and state and federal agencies as they investigate the cause of the accident and the extent of damage.

Nutrien employs a staff of nearly 24 at the site, according to local news reports, but no employees were in the facility at 2 p.m. when the accident took place. The woman, later identified as 41-year-old Jennifer Fields, was airlifted to a hospital where she died from burn injuries.

More than 150 firefighters from the South Hill Volunteer Fire Department and at least eight other agencies responded to the fire, and 15 firefighters were reportedly treated at VCU Community Memorial Hospital for injuries related to chemical and fire exposure, heat exhaustion, and minor scrapes and burns, local news outlets reported.

A temporary evacuation order was given for residents and businesses within a half-mile radius of the fire from 3 p.m. on July 6 until 12:30 p.m. on July 7, while voluntary evacuations and shelter-in-place orders were reportedly in effect for a two-mile radius. The fire was fully contained by 8 p.m., but crews stayed on the scene overnight to monitor hot spots and air quality.

The warehouse was completely destroyed in the blaze, but Nutrien said it will rely on its broader retail network to minimize any disruption in the supply of farm inputs to growers in the region.

Saudi Arabia Targets Budget Cuts as Part of Vision 2030; NEOM Slated for 20% Reduction in Allocation

Clean Ammonia, Featured, Green Ammonia, Green Hydrogen, Low-Carbon, Saudi Arabia

Saudi Arabia is likely to cut billions of dollars in spending on some of its biggest development projects, and place other plans on hold, as the kingdom grapples with the scale of its vast economic makeover, Bloomberg reported on July 11.

A government committee led by the de facto Saudi ruler, Crown Prince Mohammed Bin Salman, is close to completing a sweeping review of mega projects including the sprawling desert development known as NEOM, people familiar with the matter said, asking not to be identified as the information is private.

NEOM, which is being developed on the Red Sea coast and includes plans for the world’s largest green hydrogen production facility, is expected to be allocated 20% less than its targeted budget for this year, the people said.

NEOM Green Hydrogen Company (NGHC) last year announced that it had achieved financial close on the green hydrogen production facility, which is currently being built at Oxagon at a total investment value of $8.4 billion (GM May 26, 2023). The project is being financed with $6.1 billion in non-recourse financing from 23 local, regional, and international banks, and investment firms.

There was no word this week on whether the green hydrogen plant will be part of the trimmed NEOM budget. Chinese solar equipment provider JinkoSolar Holding Co. Ltd. recently signed an agreement to provide 1 GW solar modules to the project. The order was placed by Larsen & Toubro Ltd, an Indian engineering firm that oversees the renewable energy generation for the NEOM Project.

NGHC has also concluded the engineering, procurement, and construction (EPC) agreement at a value of $6.7 billion with Air Products as the nominated contractor and system integrator for the entire facility. NGHC has also secured an exclusive 30-year offtake agreement with Air Products for all the green ammonia produced at the facility.

The mega-plant is slated to integrate up to 4GW of solar and wind energy to produce up to 600 mt/d of carbon-free hydrogen by the end of 2026, in the form of green ammonia.

The investment cuts mark a shift in priorities for Saudi Arabia, which under its Vision 2030 plan to reshape the economy has announced projects costing an estimated $1.25 trillion. Lower oil prices, weaker-than-projected foreign investment, and at least three more years of deficits in the national budget means it must now decide what to focus on first and at what pace, Bloomberg reported.

“The reality is that this kind of spending would create some sort of overheating in the economy and that’s not really desirable,” said Jean-Michel Saliba, Bank of America Corp.’s Middle East and North Africa economist. “There’s also a risk to the profitability of projects if they go ahead sort of unabated without financial constraint.”

Saudi Arabia had said in December that some projects would be delayed or accelerated after the government reviewed its ability to finance its commitments without affecting its credit rating. Even though some spending will be crimped, Saudi Arabia will continue to be a big spender on construction. The kingdom has slated capital expenditures of more than $50 billion for 2024 to support mega projects, according to Bloomberg.

Evidence of Saudi Arabia’s funding challenges have been piling up. The kingdom recently raised more than $12 billion by selling shares in state-backed oil giant Saudi Aramco and has been one of the most active issuers of international sovereign debt among emerging markets this year, Bloomberg reported.

SABIC Secures Feedstock for Blue Ammonia Plant

Blue Ammonia, Clean Ammonia, Low-Carbon, Saudi Arabia, Urea

Riyadh-based SABIC Agri-Nutrients Co. Ltd. announced that it received approval from the Saudi Arabian Ministry of Energy on July 3 for allocating the required quantities of feedstock to build its 1.2 million mt/y blue ammonia plant in Jubail Industrial City.

The blue ammonia facility will be SABIC’s sixth plant in Jubail Industrial City and is expected to make 1.1 million mt/y of urea and specialized agri-nutrients in addition to blue ammonia.  The company will complete engineering studies to evaluate competing technologies prior to selecting the most efficient for energy and feedstock utilization.

Aslan Energy Gets Land for Green Ammonia Plant

Clean Ammonia, Green Ammonia, Green Hydrogen, Low-Carbon, Mexico

Aslan Energy, a subsidiary of Singapore-based LNG Alliance Pte Ltd., has signed a Memorandum of Understanding (MOU) to acquire 35,000 hectares of land in Sonora, Mexico, for the development of a green hydrogen and green ammonia production facility.

The plant is part of the Aslan Net-zero Energy Mexico (ANEM) project, which seeks to utilize abundant sunlight resources on the coastal area of Sonora for solar energy production to act as a feedstock for the green hydrogen and ammonia facility.

Commercial operations are scheduled to begin in 2028, with Phase 1 expected to produce 600,000 mt/y of green ammonia. The produced hydrogen and ammonia are slated to be used domestically initially while the potential to export to Japan and other markets will be evaluated.

“The MOU signing represents a significant milestone in our journey towards a greener, more sustainable future,” said Dr. Gho Wie Min, Vice President of Engineering for Aslan. “By leveraging Sonora’s abundant solar resources, we aim to not only produce clean energy but also contribute to the reduction of carbon emissions in Mexico.”

“This project holds immense potential to transform the energy landscape and drive positive change across multiple sectors, specifically green hydrogen for data centers and transportation,” he continued. “Green ammonia derived from the project delivers strengthened food security, while upholding energy self-sufficiency.”