The EPC firm working on OCI's world-scale nitrogen complex in Iowa was supposed to hand over the keys to the plant two years ago. While IFCo is now operating and managing the site, the EPC firm is still there, finishing up, and the formal hand-over ("project acceptance") hasn't happened ... despite the fact that OCI held a ribbon-cutting ceremony back in April.
Blame the opossum, who knocked out the power for a while.
The viability of producing ammonia using renewable energy was one of the recurring themes of the recent Power to Ammonia conference in Rotterdam. Specifically, what cost reductions or market mechanisms would be necessary so that renewable ammonia - produced using electrolytic hydrogen in a Haber-Bosch plant - would be competitive with normal, "brown" ammonia, made from fossil fuels.
A number of major industry participants addressed this theme at the conference, including Yara and OCI Nitrogen, but it was the closing speech, from the International Energy Agency (IEA), that provided the key data to demonstrate that, because costs have already come down so far, renewable ammonia is cost-competitive in certain regions today.
The Institute for Sustainable Process Technology (ISPT) recently published a detailed analysis of three business cases for producing renewable ammonia from electricity: Power to Ammonia. The feasibility study concludes that, in the near term, ammonia production using clean electricity will likely rely on a combination of two old-established, proven technologies: electrolysis and Haber-Bosch (E-HB). To reach this conclusion, however, the study also assessed a range of alternative technologies, which I summarize in this article.
The Power-to-Ammonia feasibility study includes an assessment of the costs and benefits of producing ammonia from renewable energy at OCI Nitrogen's existing production site in Geleen.
Of all the companies who joined forces in the Power-to-Ammonia project, OCI is the only ammonia producer. Its business case for making carbon-free ammonia is especially interesting therefore: not just because of the company's deep understanding of the ammonia market and available technologies, but also because it faces corporate exposure to the financial, operational, and social risks of relying upon a fossil-fueled technology in a carbon constrained future.
"IFC was ready to make it official. The company was at 100 percent operation. It was time for the ribbon cutting."
Well, yes and no.
Yes, Iowa Fertilizer Company held a ribbon-cutting ceremony to celebrate its greenfield at Wever. No, Wever is hardly 100% complete: the ammonia plant is operational, but the downstream plants may be months away.
The Institute for Sustainable Process Technology has just published a feasibility study that represents a major step toward commercializing renewable ammonia.
It examines the "value chains and business cases to produce CO2-free ammonia," analysing the potential for commercial deployment at three companies with existing sites in The Netherlands: Nuon at Eemshaven, Stedin at Goeree-Overflakkee, and OCI Nitrogen at Geleen. The project is called Power to Ammonia.
The team behind it is an industrial powerhouse with serious intentions, and this feasibility study is the first part of their plan: next come the pilot plants and demonstrations. As OCI Nitrogen explains, "there are still many hurdles to be overcome. By setting up pilots for this new technology, we can identify these and find ways to solve them."
Over the last few weeks, Iowa Fertilizer Company and its parent, OCI NV, have been busy with the commissioning phase of their major greenfield at Wever, IA. However, they've also been restructuring bond payments, which was necessary "to ensure the successful completion of construction and first year of operations."
In the process, we've seen the bond rating downgraded, the IRS launch an examination, disclosures of project costs rising further, and hints at future mergers & acquisitions.
OCI has successfully refinanced the project. They hope to start producing ammonia soon but, if history is any guide, defining "soon" may be difficult.
CF Industries terminated its proposed merger with OCI this morning.
"The Treasury announcement on April 4, 2016 materially reduced the structural synergies of the combination. Since that time, both companies have worked together collaboratively ... However, the companies were unable to identify an alternative acceptable to both parties and, therefore, agreed to terminate the combination."
There's plenty of new news about OCI's Iowa Fertilizer Company and its world-scale greenfield nitrogen plant at Wever, IA.
In the last two weeks, we've had earnings reports both from OCI and from the project's EPC contractor, Orascom, which is OCI's sister company. Plus, we had a response and countersuit in the ongoing lawsuit between Orascom and one of the project's subcontractors.
To make urea, fertilizer producers combine ammonia with carbon dioxide (CO2), but when farmers apply that urea to the soil, an equal amount of CO2 is emitted to the atmosphere. No CO2 is permanently stored or sequestered through the production of urea.
This is a statement of the obvious, I'm told, but it's worth stating for three reasons. First, not everyone knows it. Second, there was zero data in the academic literature supporting the fact, until now (see below). And third, next generation ammonia-urea plants with "zero-emissions" are becoming a reality, despite some of these new technologies relying on fossil fuel feedstocks.
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.
If you want to know whether - or when - the US will become a nitrogen exporter, read what the fertilizer company CEOs say during the latest round of quarterly earnings calls.
These guys should have formed pretty solid opinions by now about how the capacity expansions will affect long-term supply and demand, and how they're going to gain/keep market share and competitive advantage. But it can be a challenge to infer what those opinions might be.
I've summarized the pertinent parts of the debate here, with quotes from Agrium, CF Industries, KBR, LSB Industries, OCI, Potash Corp, and Yara.
Updates came in last week from the various entities that I call Orascom, including OCI Partners, with its expansion underway at Beaumont, TX, and OCI NV, which owns the Iowa Fertilizer Company greenfield at Wever, IA.
The Beaumont plant's expansion has been pushed back to 2015: four weeks of turnaround work will now begin in January, "in order to avoid the holiday season," and other more technical reasons. The debottlenecking project's cost has also ticked up by another $20 million. Members will find an updated project summary in my Research Note.
The Wever greenfield is still on schedule for start-up at the end of 2015, but costs have risen by $100 million to a new total of $1.9 billion. Again, a full project summary is available for Members in my Research Note.
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.
SUMMARY STATUS: Operational
OCI announced the start-up of the ammonia plant in April 2017 but, while the site is mechanically complete and all the downstream plants are capable of production above nameplate capacity, the ammonia plant is having trouble ramping up and the EPC firm has yet to finish testing and project hand-over. Despite OCI's first-mover advantage, the Wever plant is now two years delayed and more than a billion dollars over budget. OCI wanted to do mergers and acquisitions but didn't have much success: it failed to merge with CF Industries in 2016 and failed to buy out its subsidiary, OCI Partners, in 2017.