UPDATED: 04/17/2017 — see Change Log

OWNER: OCI Partners LP (OCI NV)
PROJECT: Ammonia plant restart & expansion[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

RESTART:
COST (reported): None given
JOB CREATION (reported): 108 permanent, 1,000 construction — see Job Openings [LINK]
START-UP DATE (reported): 2011

EXPANSION:
COST (reported): $240-250 million (primarily for the methanol plant)
JOB CREATION (reported): None given — see Job Openings [LINK]
START-UP DATE (reported): 2015

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia	231,000 mtpy	331,055 mtpy	[Membership required]	[Membership required]
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] OCI announcements. Sources: linked below. [3] [Membership required]. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Operational
OCI Partners restarted the Beaumont methanol-ammonia plant at the end of 2011, and completed a debottlenecking project in 2015 with minor delays and cost over-runs. Since then, the ammonia plant has been producing at record levels, with output slightly more than 100% capacity in 2016. In December 2016, Dutch majority owner OCI NV launched an all-stock buyout offer to acquire the remaining ~20% of OCI Partners, but this was shelved in April 2017 and the offer terminated.

RESTART:
COST: None given
JOB CREATION: 108 permanent, 1,000 construction
START-UP DATE: December 2011
LIKELIHOOD: Done — see Methodology

EXPANSION:
COST: $260-270 million estimate, originally $170 million (primarily methanol plant)
JOB CREATION: Minimal — see Job Openings [LINK]
START-UP DATE: April 2015
LIKELIHOOD: Done — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia	231,000 mtpy	2011 RESTART: 265,000 mtpy 2015 DEBOTTLENECK: 305,000 mtpy CURRENT TOTAL: 331,000 mtpy 907 mtpd	332,727 mtpy	2011 RESTART: 297,078 mtpy 2015 DEBOTTLENECK: +35,649 mtpy CURRENT TOTAL: 332,727 mtpy total
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] OCI 2016 10-K. Sources: linked below. [3] US EPA: PSD Permit. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; based on air permit. See Methodology.

FEEDSTOCK: Hydrogen, byproduct of methanol production from natural gas feedstock
END PRODUCTS: Ammonia

RESEARCH NOTES:
In December 2016, OCI Partners LP announced that it had received a buyout offer from its parent company, OCI NV. I wrote in more depth about the offer here. In April 2017, this transaction was terminated “after negotiations with the conflicts committee established by the OCI Partners board of directors reached an impasse.”

The conflicts committee declined to accept OCI’s proposal of an exchange ratio of 0.5200 OCI N.V. shares for each publicly held common unit of OCIP …

OCI believes that since there is potential for a significant increase in OCI’s share price in the future over current levels, increasing the exchange ratio is not in the interest of its shareholders and, therefore, no acceptable definitive agreement can be reached with the conflicts committee at this time regarding the proposed transaction.
OCI NV press release, 04/14/2017

OCI had previously disclosed in November 2016 that it would enter “a phase of consolidation,” and “may also seek disposal of non-core assets and / or seek partnerships in certain stakes.”

The Beaumont methanol plant was built by DuPont in 1967, on a 28-acre site by the Neches River. In 1997, Terra Industries, which owned the plant at that time, decided to add an ammonia synthesis loop, to use the hydrogen byproduct from the methanol process as feedstock for ammonia production. The 250,000 ton per year ammonia plant started up in 2000, built by Foster Wheeler using technology from Haldor Topsoe. Terra idled the methanol-ammonia plant in 2004, when the price of natural gas feedstock rose too high, and sold it to Eastman Chemical in 2007. The plant remained idle until 2011.

In May 2011, the plant was purchased by Pandora Methanol LLC for $26.5 million. It took about 5 months to bring the ammonia plant online, with full production starting in December 2011; the methanol plant started up in August 2012.

Pandora was a joint venture between Egyptian company OCI Nitrogen (now Dutch company OCI NV, following the nitrogen division’s demerger from Orascom Construction Industries) and Janus Methanol AG (“a Swiss project development company [that] covers the world market searching for new ideas for methanol and RNG supply”). In November 2011, a few weeks before starting ammonia production, OCI bought out Janus’s share and renamed the company OCI Beaumont LLC.

In 2015 and 2016, OCI NV had hoped to merge with CF Industries, which would have cemented CF’s dominance of the North American market. The merger was cancelled, however, following new US Treasury Department rules in the US, designed to thwart tax stripping, which “materially reduced the structural synergies of the combination.”

The Beaumont plant’s historical ammonia capacity was 250,000 mtpy but, when it restarted at the end of 2011, this expanded to 265,000 mtpy.

In 2013, OCI announced a debottlenecking project to increase ammonia capacity by an additional 15%, to 305,000 mtpy, and methanol capacity by 25%, from 730,000 mtpy to 912,500 mtpy (in daily terms, from 726 mtpd to 835 mtpd ammonia, and from 2,000 to 2,500 mtpd methanol). However, these figures were less than was described in the August 2014 air permit. “With the proposed construction, modifications and optimizations, the methanol capacity of the plant will be increased to 1,098,000 metric tons per year and the ammonia plant will have a 12% increase in production to 332,727 metric tons per year.”

In its 2015 Annual Report, published in April 2016, OCI NV reported the site’s post-debottleneck capacities as 331,000 mtpy ammonia and 913,000 mtpy methanol. The 2016 10-K, published in March 2017, repeated these capacity numbers, although actual production in 2016 was slightly more than 100% of capacity, at 331,501 metric tons.

I note that the plant’s daily production must have been in excess of nameplate capacity, as it achieved this level of annual production despite being offline for 8 days in 2016. Its average daily production rate in 2016 was therefore 926 mtpd.

Looking forward, OCI expects the ammonia plant to require a four-week turnaround, for maintenance, “once approximately every four years coinciding with the turnaround of our methanol production unit.”

The cost of the 2015 debottlenecking for both methanol and ammonia plants, along with planned turn-around work and “environmental upgrades,” “increased by $50 to $60 million, to a total of $220 million to $230 million,” and then increased by a further $20 million to $240-$250 million, according to the company’s financial reports from August and November 2014 respectively. In August 2014, management explained these cost increases as being “due to additional piping and structural steel quantities needed to complete the project, as well as, an increase in labor and crane costs.” In December 2014, the reasons given were that “we see general increase in the labor rates. We see also it’s getting very difficult to get qualified personnel to work here. So we see an increase in per diem to get the people out to work here and we are also kind of struggling with managing the productivity.”

The EPC contractor was Orascom E&C USA Inc, OCI’s sister company.

In November 2014, the company had announced that it was pushing back the implementation of the debottlenecking project by a couple months: the four weeks of turnaround work was to take place in January 2015. Various reasons were given for this delay. In its press release for Q3 2014 results, OCI stated that they decided to delay “in order to avoid the holiday season and to ensure that all pre-turnaround construction activities are complete.” In the associated earnings call, CEO and President Frank Bakker explained that “we had some late deliveries of equipment plus we had some kind of design changes on structural steel.”

The expanded plant came back on stream in April 2015.

The debottlenecking project was partly funded by OCI Partners LP’s IPO, with the rest of the capital coming through intercompany loans or additional equity from OCI NV. The cost overruns were funded through a $60 million capital contribution by the parent company in November 2014, for which it received significant additional equity, giving it a total “ownership percentage of 79.04 of the total common unit[s] outstanding” at that time. In April 2015, OCI NV (through its subsidiaries OCIP Holding LLC, OCI USA, and Pluto Holding Ltd) made another capital contribution, of $60 million, $20 of which was additional to the sums previously announced, suggesting further cost overruns and increased control.

OCI Partners LP launched its IPO in 2013, although only 21.7% of the company was floated. In December 2016, when OCI announced its intended buyout of OCI Partners, OCI’s ownership had increased to 79.88%.

The parent company, OCI NV, based in The Netherlands, owns fertilizer plants in The Netherlands (Geleen), Egypt (EFC and EBIC), and Algeria (Sorfert Algerie).

The ultimate owners are CEO Nassef Sawiris, his brother Samih Sawiris, and their father, Osni Sawiris, the company’s founder and patriarch of “Egypt’s wealthiest family” (the other brother, Naguib, took over the telecoms side of the business). As of August 5 2014, the Sawiris collectively owned 63.88% of OCI NV according to data from Euronext stock exchange (although OCI’s August Investor presentation gave their ownership as 57%). Interestingly, Bill Gates also owns about 10%, as of August 2014; his investment was reported to be around $1 billion.

Orascom Construction Industries started in the 1950s and grew into “Egypt’s most valuable publicly-traded company.” Its subsidiaries include Contrack, which built US military bases in Afghanistan, BESIX, which built the world’s tallest building in 2004, and the Weitz Company, which is building OCI NV’s next fertilizer plant, Iowa Fertilizer Company in Wever, IA.

Orascom’s expansion into fertilizers is impressive: in 2008, it owned only a minority interest in one Egyptian fertilizer plant but, by 2012, it produced almost 7 million metric tons of fertilizer, putting it “among the world’s largest nitrogen‐based fertilizer producers.”

In 2013, Orascom staged an inverse takeover, becoming owned by its Dutch subsidiary – beyond following its new asset base, this relocation may have been driven to some extent by the ongoing political upheaval in Egypt (the Sawiris family has a Coptic Christian background and was not fond of the Mohamed Morsi regime).

The Beaumont plant distributes ammonia by pipeline (40% of 2016 sales) to nearby industrial customers (Lucite and DuPont), by barge (53% of 2016 sales) to other customers (Transammonia, Interoceanic Corporation (the new owner of Rentech‘s Pasadena site), and Koch Industries), and by truck (7% of 2016 sales).

For additional hydrogen feedstock, the plant is connected to Air Products’ Gulf Coast Connection Pipeline. [/memberful]

View larger map with all ammonia plants.

ADDRESS: 5470 N. Twin City Highway, Nederland, TX 77627, United States

WEBSITE: http://www.ocipartnerslp.com (US)
WEBSITE: http://www.oci.nl (The Netherlands)

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• EPA Emissions data: Greenhouse Gas Emissions from Large Facilities: OCI Beaumont LLC [LINK]
• Risk Management Plan: Right to Know Network: OCI Beaumont LLC [LINK]
• PSD Permitting: US EPA: OCI Beaumont air permit documents [LINK / PSD Final Permit, 2014 [PDF]
• US Securities and Exchange Commission regulatory filings: EDGAR Search Results, OCI Partners LP CIK#: 0001578932 [LINK]
• Stock Exchange listing: Euronext Amsterdam, OCI NV [LINK]

NEWS SOURCES:

• 04/17/2017: OCI Partners press release: OCI N.V. Terminates Negotiations to Acquire All Publicly Held Common Units of OCI Partners LP [LINK]
• 04/14/2017: OCI press release: OCI N.V. TERMINATES NEGOTIATIONS TO ACQUIRE ALL PUBLICLY HELD COMMON UNITS OF OCI PARTNERS LP [LINK]
• 03/13/2017: OCI Partners press release: 2016 Fourth Quarter Results [LINK]
• 12/06/2016: OCI press release: OCI N.V. MAKES OFFER TO ACQUIRE ALL PUBLICLY HELD COMMON UNITS OF OCIP [LINK]
• 12/06/2016: OCI Partners press release: OCI Partners LP Receives Buyout Offer from OCI N.V. [LINK]
• 05/23/2016: OCI press release: TERMINATION OF PROPOSED COMBINATION OF CF INDUSTRIES WITH OCI’S EUROPEAN, NORTH AMERICAN AND GLOBAL DISTRIBUTION BUSINESSES [LINK]
• 04/23/2015: OCI press release: OCI Partners LP Announces Restart of its Ammonia and Methanol Production Lines [LINK]
• 11/11/2014: Seeking Alpha transcript: OCI Partners Q3 2014 earnings call [LINK]
• 11/11/2014: OCI press release: OCI Partners LP Reports 2014 Third Quarter Earnings and Quarterly Cash Distribution [LINK]
• 11/07/2012: Air Products press release: OCI Signs on to Air Products’ New Gulf Coast Connection Hydrogen Pipeline [LINK]
• 11/21/2011: OCI press release: OCI Fertilizer Group Signs Agreement to Acquire Minorities in Texas-based Subsidiary [DEAD LINK]
• 05/16/2011: OCI press release: OCI Nitrogen Acquires Integrated Ammonia-Methanol Plant in Texas through a Joint Venture with Janus Methanol AG [DEAD LINK]