The inaugural session of the event saw the hosts joined by guests Jennifer Willis-Jones – Head of Nitrogen and Alex Derricott – Senior Analyst for Fertiliser Costs and Emissions from ’Fertiliser Week’, to deconstruct both the link between ammonia markets and CO2 supply and the fertiliser sector’s current situation today, in 2022.
With as much as 46% of the merchant CO2 in the UK produced from ammonia – the raw material of the fertiliser industry – diversification has never been a more pertinent topic than now, a time when shortages and supply chain issues are becoming more frequent.
Providing an update on the current situation in fertilisers, ammonia, and CO2, Willis-Jones was first up.
Stating that this year has seen major events in the ammonia market, Willis-Jones said that there have been ‘significant and sustained’ price increases since the start of 2021.
“These prices were initially driven by demand for agricultural products and multiple events have driven prices higher,” she said.
With natural gas a key component of ammonia cost, higher prices have been compounded by the ongoing war in Ukraine and the Trinidad power outages, which have curtailed production in another key ammonia exporter.
“Limited relief could be available as Saudi Arabian mining giant Ma’aden launches the third Ras Al-Khair ammonia plant,” added Willis-Jones.
The relief could be essential in abating shortages caused by the war in Ukraine, which has essentially crippled ammonia trade flows.
“There are two ports, the Baltic Sea Port and the Black Sea ports. The Black Sea port is using the port in Ukraine, this is extremely important for ammonia,” she said.
The closure of the pipeline has caused gas flow to decrease and prices are set to skyrocket further.
Ammonia is the key intermediate product for a range of nitrogen fertilisers and is critical for food security, with countries that are heavily exposed to Russian gas flows, such as Poland and Ukraine, being at highest risk of food shortages.
With global gas prices spiking over the past year, downstream ammonia prices have begun to catch up with the new gas price environment, but the current conflict has intensified the situation. Any potential for falling gas prices were curtailed by the stopping of the Nord Stream 2 pipeline.
Willis-Jones added, “Ammonia prices are set to skyrocket further. There’s a lot of upwards pressure on ammonia prices at the moment.”
Trinidad & Tobago
Trinidad has traditionally supplied between 20-25% of globally traded ammonia. A major power cut occurring on 16th February caused nearly all ammonia production to go offline.
“Exports will recommence in 2022, but it couldn’t come at a worse time for a market that’s already very tight,” said Willis-Jones.
“We need the Trinidad plants back in order to balance the market a little bit more but it still won’t make up for this huge shortfall in ammonia by the closure essentially of ammonia exporters from the CIS.”
Additional ammonia could be provided from the Ma-aden – III project. With new supply commissioning in 2022, the current shortage could be supplemented.
Vulnerability of the market
With market shortages unforeseen just 18 months ago, vulnerability has become a major talking point. Just how vulnerable are these markets? And how can such dramatic risk be averted?
Discussing food security, Derricott stated that, with a rising global population and fertiliser being essential for food, fertiliser demand will continue to increase with nitrogen being the dominant product.
He added, “Food security will always take precedence, but CO2 emissions from the ammonia industry could bring around a second ‘Green Revolution.”
Carbon capture and storage (CCS) could contribute to this ‘Green Revolution’, in addition to carbon taxes.
“A great example of this is China. At the moment China has an operating emissions trading scheme, now it is just for the power industry but it has been made perfectly clear that synthetic ammonia production via coal and natural gas will be targeted with some sort of emissions trading scheme.”
Green ammonia projects could be key to mitigating CO2.
“It uses renewable electricity to generate hydrogen which is fed into the Haber-Bosch process,” said Derricott.
“This process removes hydrocarbons as a raw material, significantly reducing emissions associated with ammonia production.”
Though, due to high power and capital cost, this process is not yet cost competitive compared to ‘grey’ ammonia.
The ongoing events in Ukraine have caused a ripple effect in multiple sectors of industry, from crude oil and staples such as wheat, to rare gases such as neon, used in chips that power our phones, computers, and televisions. But how could sanctions impact Europe’s ammonia supply?
“We foresee continued volatility, especially because we’ve already factored in a lack of availability from the Black Sea, but we’re also now looking at what’s going to happen over in the Baltic Sea,” explained Willis-Jones.
“We see continued issues and it’s not just the capacity. While Trinidad is not exporting as much as it was previously that is going to cause problems as well.”
Future ammonia market, hydrogen, and CO2
With clear links between ammonia and the rapidly accelerating energy transition powered by renewable fuels such as green hydrogen, what role does CO2 play in this future?
“It’s safe to say there’s going to be a fundamental shift,” said Derricott. “We’re going to see reduced or attempted reduced CO2 availability.”
“Ultimately we’ll have to see what happens to carbon taxes, that will be the driver. Fundamental change it coming, but I can’t tell you when.”
All sessions of gasworld’s virtual ‘Europe CO2 Summit’ will be available to watch on-demand.