Category: Analysis

The Water Intensity of Ammonia

Agrium continues to plan for the potential restart of its ammonia-urea plant in Kenai, Alaska: its draft water permit is now entering a 30-day public comment period.

However, the fact sheet for the draft permit contains one particularly interesting chart, which follows below, to illustrate the water flows throughout the ammonia-urea plant. In an industry that holds its data close, this is a refreshingly detailed flow chart.

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What does “capacity” mean?

Capacity can be a confusing word, with different meanings for different users: it can be a guarantee of minimum design, an estimate of maximum production, a benchmark for performance appraisal, or a valuation tool.

Many users of this site contact me to ask how to interpret capacity data. I'm grateful to a handful of industry leaders who kindly contributed their interpretations of "capacity" to the following discussion, to help me illustrate different approaches to the idea.

Additionally, I've just published over 50 years of raw data, courtesy of USGS, which may help for those looking for historical production, consumption, and capacity data.

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Rentech has merged with CVR

CVR Partners closed its merger with Rentech today, giving birth to a new subsidiary, East Dubuque Nitrogen Fertilizers, LLC, which will now operate the nitrogen plant in East Dubuque, IL.

CVR Partners previously ran just one nitrogen plant, the Coffeyville, KS, ammonia-UAN plant, which gets its pet coke feedstock from its sister refinery (owned by CVR Energy, the parent company of CVR Partners).

So, this merger "provides the partnership with an expanded geographical footprint, diversification of its raw material feedstocks, wider customer reach and greater potential for cash-flow generation."

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Ammonia plants in the pipeline. Will they, won’t they?

While we wait for the current slate of new ammonia plants to start up this year, here's a reminder of the projects that are still in development across North America.

More than a dozen major ammonia plants are in various stages of planning or financing. None of these have started construction yet. Some have been stuck in limbo for years, while others keep making progress. The project pipeline represents a potential investment of over $20 billion and additional ammonia capacity of more than 9 million tons per year.

Obviously, not every project will move ahead - in fact, conventional wisdom says none will - but new trends are emerging that may influence their success or failure.

A list of the biggest projects follows below, summarizing their evolving costs, pushed-back schedules, and changing EPC contractors.

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2016 in preview: US ammonia capacity to increase by a third

This will be a transformative year for the ammonia industry. Four world-scale ammonia plants are scheduled to begin production, as well as three smaller plants, a couple of expansions, and a "clean coal" behemoth.

If all these projects start up successfully this year, they will add more than five million tons of ammonia capacity.

The new projects scheduled for 2016 will increase North American capacity by more than a quarter - and, because only one of these projects is in Canada, will increase US capacity by more than a third.

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2015 in review: start-ups and cancellations, but mainly delays

Nine ammonia projects were supposed to start up in 2015. Two succeeded.

OCI's debottleneck at Beaumont, TX, came on-stream in April 2015, and PotashCorp completed its expansion at Lima, OH, in October 2015.

So: in 2015, less than 200,000 mtpy of new ammonia capacity came on-stream.

Of the seven other projects slated for 2015, two were cancelled and the rest have been pushed into 2016.

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Market share in North America: with mergers, and without

Two major mergers have been announced in the last seven days - CVR Partners with Rentech, and CF Industries with OCI.

It's fair to say that the competitive landscape for ammonia will soon change, but you could look at both these transactions as companies running fast to stay still.

Any gain in market share caused by each merger is likely to be short-lived, because there are no less than 15 expansion projects already under construction, with more yet to get underway.

Any market share projections that fail to take these expansions into account will be short-sighted, so I've put together some charts ...

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August 2014: Ammonia Capacity projection

North American ammonia capacity will double by 2019 - if every project now in development becomes operational.

This scenario would see capacity growing to 35.21 million metric tons per year in 2019, from 17.65 million mtpy in 2011.

This won't happen, of course, because not every project will get financed.

What will happen is this: 5.67 million metric tons of ammonia will come online by 2019. This is the minimum capacity expansion we can expect.

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January 2014: Ammonia Capacity

Ammonia capacity in North America is not likely to double in the next five years – but it will if every new plant and expansion project being pursued today goes into production.

Much more likely is that 6.65 million tons of annual ammonia capacity will come online between 2014 and 2018, based on the information available in January 2014. Read more