UPDATED: 02/21/2018 — see Change Log

OWNER: The Mosaic Company
PROJECT: Ammonia plant debottleneck and brownfield ammonia plant[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

EXPANSION:
COST (reported): $300-$350 million
JOB CREATION (reported): none given
START-UP DATE (reported): none given

BROWNFIELD:
COST (reported): $1.1 billion
JOB CREATION (reported): 53 permanent, 1,400 construction
START-UP DATE (reported): 2016

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia	508,000 mtpy	455,000 stpy EXPANSION: 20%	[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] Mosaic 10-K 2017; KBR press release. [3] [Membership required]. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Operational
Faustina has been producing ammonia since 1968. Mosaic chose to implement an emissions reduction project in 2017 instead of a debottleneck at Faustina. In October 2013, Mosaic abandoned plans for a $1.1 billion ammonia brownfield plant, because it became “unnecessary” after Mosaic acquired CF Industries’ phosphate operations. In early 2018, Mosaic derated the capacity at Faustina.

EXPANSION:
COST: $300-$350 million
JOB CREATION: None
START-UP DATE: Q1 2017
LIKELIHOOD: Dead — see Methodology

BROWNFIELD:
COST: $1.1 billion
JOB CREATION: 53 permanent, 1,400 construction
START-UP DATE: 2016
LIKELIHOOD: Dead — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia	508,000 mtpy	455,000 mtpy EXPANSION: 20% BROWNFIELD: 2,200 mtpd	1,750 stpd TOTAL: 1,980 stpd	579,464 mtpy EXPANSION: 115,893 mtpy BROWNFIELD: 803,000 mtpy
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] Mosaic does not publish capacity data; expansion scale announced in KBR press release. [3] LDEQ air permit documents. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; based on permitted capacity. See Methodology.

FEEDSTOCK: Natural gas
END PRODUCTS: Ammonia, MAP, DAP, MES

RESEARCH NOTE:
The Faustina site has been producing ammonia since 1968, when Gulf Oil Corporation built a 350,000 mtpy plant. The site has since been owned and operated by Williams, Freeport-McMoRan, and IMC-Agrico, before Mosaic was formed in the 2004 merger of IMC-Agrico and Cargill.

Mosaic’s ammonia plant now has a capacity of roughly 500,000 mtpy and most of its output is upgraded on site into MAP, DAP, and MES fertilizers, by combining the ammonia with phosphoric acid delivered by barge from Mosaic’s plant at Uncle Sam, which sits on the opposite bank of the Mississippi River.

According to Mosaic’s 2016 Annual Report, “We typically purchase approximately 18 million MMbtu of natural gas per year for use in ammonia production at Faustina.” However, in its 2017 Annual Report, published in February 2018, Mosaic derated its ammonia capacity at Faustina from “~500,000” down to 455,000 mtpy, and stated that “We typically purchase approximately 12 million MMbtu of natural gas per year for use in ammonia production at Faustina.”

The 2017 10-K also stated that “Gross margin was negatively impacted by approximately $40 million related to planned and unplanned downtime at our Faustina, Louisiana ammonia facility, mostly in the second quarter of 2017.”

Future ammonia plant debottleneck
For a few years, between early 2013 and mid-2017, Mosaic talked about the possibility of expanding its existing ammonia plant. This debottlenecking project, slated for 2017, did not take place.

In its March 2016 air permit modification, Mosaic got permission to embark on one of two projects: either the ammonia plant debottleneck or an emissions reduction project, “only one of which Mosaic will implement.” As shown in the June 2017 air permit, in which Mosaic transferred responsibility for the permit to its wholly-owned subsidiary Tampa Port Services, LLC, “the Ammonia Plant Reformer Emissions Reduction Project was implemented at the Faustina Plant rather than the Ammonia Plant Debottleneck Project.”

Back in July 2015, according to previous air permit documents, “Mosaic [had] not yet made a final decision,” on which project to implement because “key business decisions remain pending.” For the potential debottleneck, Mosaic had been talking about construction starting “as early as 3Q 2015,” for start-up “by 1Q 2017.”

Given the sharp drop in the price of ammonia and concerns of industry overcapacity, I assume that Mosaic’s decision was to delay the expansion, pending a more inviting investment climate.

In December 2014, KBR announced that it had been awarded “the license and engineering contracts” for the FEED (the existing plant is built on KBR technology).

KBR had announced the scale of the expansion as “20%” of the existing capacity (or 350 stpd, for a total capacity of 2,100 stpd). However, in its 2016 air permit application, Mosaic cited the expanded capacity as being 1,980 stpd, closer to a 13% increase.

Even though this project has not materialized, Mosaic began counting its financial benefits (the reduced cost of produced versus purchased ammonia) as early as February 2015. In that month’s investor presentation (see “Phosphate Gross Margin Impact,” p14), their assumptions priced in the potential “Raw material savings based on increased NH3 manufacturing based on de-bottlenecking vs. CRU published prices for 2018.”

However, ammonia prices began to fall steeply and it didn’t surprise me that Mosaic delayed its investment in the debottleneck project. Mosaic may return to this project when market prices make it attractive again.

While Mosaic never issued any press releases to announce this debottleneck, it had been discussed during earnings calls since at least Q2 2013, in January 2013. At that time, the project cost was estimated to be “in the $300 million to $350 million range,” for a “debottlenecking and expansion” of “200,000 to 300,000 tonnes.”

2016 brownfield ammonia plant, cancelled
In December 2012, Mosaic announced that it was considering building a $700 million brownfield ammonia plant on its existing site, because Louisiana’s cheap natural gas would let them “bring back more ammonia production from overseas.” At that time, Mosaic planned to make its final investment decision in mid-2013, construction would have begun in 2014, and the plant would have been operational in 2016. In January 2013, the FEED contract was awarded to Technip, who were also preparing the EPC contract. The new plant’s capacity was to have been 2,200 metric tons per day, using synthesis technology licensed from Haldor Topsøe.

In October 2013, Mosaic announced that it was purchasing CF Industries‘ Florida phosphate business (this deal was completed in March 2014) and entering into two “strategic supply agreements” to buy ammonia from CF Industries, which had consequences for Mosaic’s Faustina brownfield plans. Under the contract, Mosaic buys “up to 725,000 tonnes annually for 15 years” from CF Industries, at a cost “based on a formula tied to the prevailing price of U.S. natural gas.” Delivery was expected to begin “prior to January 2017,” so this is effectively an offtake agreement for CF Industries’ new ammonia plant in Donaldsonville, two miles up the Mississippi that started up in 2016. This contract made Mosaic’s brownfield plant “unnecessary,” and so Mosaic avoided an investment that had escalated to $1.1 billion. Mosaic wrote off the “approximately $25 million” that it had already spent developing the project and “recorded a corresponding tax benefit of $9 million”. In the second CF supply contract, Mosaic bought “approximately 270,000 tonnes annually for three years” from Point Lisas Nitrogen, CF Industries’ joint venture in Trinidad & Tobago. The cost of this ammonia was calculated using “CFR Tampa market-based pricing.”[/memberful]

View larger map with all ammonia plants.

ADDRESS: 9959 Highway 18, St James Parish, Louisiana, 70086, United States
WEBSITE: http://www.mosaicco.com/Who_We_Are/locations_…_faustina.htm

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• EPA Emissions data: Greenhouse Gas Emissions from Large Facilities: Mosaic Faustina [LINK]
• Risk Management Plan: Right to Know Network: Mosaic Fertilizer, LLC, Faustina Facility [LINK]
• LDEQ air permit documents: Ammonia plant, Tampa Port Services LLC (search AI 200116) [LINK] / Phosphate plant, Mosaic Fertilizer LLC (search AI 2425) [LINK]
• US Securities and Exchange Commission regulatory filings: EDGAR Search Results, Mosaic Co, CIK#: 0001285785 [LINK]

NEWS SOURCES:

• 02/21/2018: Mosaic report: 2017 10-K [PDF]
• 08/01/2017: Seeking Alpha, Earnings Call Transcript: Q2 2017 [LINK]
• 02/11/2015: Seeking Alpha, Earnings Call Transcript: Q4 2014 [LINK]
• 12/22/2014: KBR press release: KBR Awarded FEED Contract for Mosaic Ammonia Plant Revamp [LINK]
• 10/28/2013: Mosaic press release: The Mosaic Company to Acquire Florida Phosphate Business from CF Industries for $1.2 Billion [LINK]
• 01/04/2013: Seeking Alpha, Earnings Call Transcript: The Mosaic Management Discusses Q2 2013 Results [LINK]
• 01/03/2013: Technip press release: Technip awarded FEED contract by The Mosaic Company for proposed new ammonia plant in Louisiana [LINK]
• 12/21/2012: Mosaic / Louisiana Economic Development press release: The Mosaic Company Announces Potential $700 Million Ammonia Plant in St. James Parish [PDF]