UPDATED: 04/18/2018 — see Change Log

OWNER: Philipp Brothers Fertilizer (Phibro LLC / Energy Arbitrage Partners)
PROJECT: Ammonia plant conversion[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

COST (reported): $450 million
JOB CREATION (reported): 110 permanent, 1,000 construction
START-UP DATE (reported): 2020

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		1,500 mtpd	[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] Press reports. Sources: linked below. [3] [Membership required]. No permit data available yet. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Planning Phase
In January 2016, investors announced plans to re-establish Phibro, the storied commodities trader. Five months later, in May 2016, Phibro announced its intention to purchase the gasification units of a decommissioned “clean coal” power plant, which it would use to produce ammonia from petroleum coke. Since then there has been scant news, except of preparations for debt financing and staff hires, but project developers describe solid progress. In April 2018, the project submitted its air permit application.

COST: $450 million conversion cost, purchase price not disclosed
JOB CREATION: 110 permanent, 1,000 construction
START-UP DATE: Q4 2020
LIKELIHOOD: Possible — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		1,500 mtpd		547,500 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] Press reports. Sources: linked below. [3] No permit data available yet. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; based on press reports. See Methodology.

FEEDSTOCK: Petroleum coke
END PRODUCTS: Ammonia

RESEARCH NOTES:
In May 2016, Phibro announced that it had purchased a syngas plant in Indiana and planned “to innovatively convert the plant to an ammonia fertilizer production facility.”

There has been very little news about this project since then, except for my update in July 2017 and the announcement that Phibro’s operational partner Quasar Syngas hired an ex-CB&I executive to be “responsible for managing the ongoing engineering phase.”

That announcement, from September 2017, went on to state that “Quasar expects that the project will achieve COD [commercial operation date] in 4Q 2020.”

In April 2018, project developers submitted their application for an air permit renewal to the Indiana Department of Environmental Management. While permit approval may be some months away, this was the first step toward receiving regulatory authorization to begin construction. A permit application also implies that a significant amount of engineering and design work has been completed on the project, including technology selection, allowing detailed emission parameters to be defined in the permit application.

Phibro’s $450 million project would give new life to the existing gasifiers, which had been due to be decommissioned in 2016, by using them as the front-end of a 1,500 metric ton per day ammonia plant.

Compared to other new ammonia plants, this plan to repurpose existing assets significantly reduces the required investment because Phibro only needs to build the ammonia loop, much like the Yara/BASF project in Freeport, TX. I understand that Phibro’s ammonia loop will be a new build, although neither the technology licensor nor the EPC partner has been disclosed.

The original announcement stated that Phibro was “targeting a mid-2018 completion date,” although this probably referred to financial close rather than actual start-up. As I understand it, based on conversations with project developers in July 2017, both the equity and the debt are in place to finance construction and the project has targeted a commissioning date in the fourth quarter of 2020.

The Wabash River power plant, a 262MW “clean coal” IGCC plant, began operations in November 1995. The original plant cost a total of $438 million to build and operate during its four year demonstration phase; half of this cost was funded by the US DOE. The project was a 50:50 joint venture between Destec Energy, a subsidiary of Dow Chemicals, and PSI Energy, later acquired by Duke Energy.

In 2000, the power plant changed fuel, transitioning from a 2,500 mtpd bituminous coal feed to a 2,000 mtpd petroleum coke feed. The plant was restarted in 2005, when SG Solutions took over the syngas plant and the Wabash Valley Power Association (which also owns most of SG Solutions) took over the power generation units.

The gasification technology, called “E-Gas,” was originally developed by Dow Chemicals and used to provide power at its chemical complex at Plaquemines, LA. The E-Gas technology is now owned by ConocoPhillips and licensed by CB&I.

Assuming Phibro begins producing ammonia, it will be the second nitrogen plant in the US to use a petcoke feedstock, alongside CVR Partners’ UAN plant in Coffeyville, KS. Phibro claims to have secured a 10 year supply of petcoke for “about 50 cents per million British thermal units,” which it equates to being “about 75 percent less than [natural] gas.” According to Phibro’s partner, quoted in local news reports, “the facility will process 511,000 metric tons of petcoke a year.”

So far, no new permit documents are available through the Indiana Department of Environmental Management’s website. As I understand it, however, the expected emissions from ammonia production will be similar to or lower than the levels permitted in the site’s pre-existing Title V air permit for syngas production. Therefore, Phibro, through its operating partner Quasar Syngas LLC, has applied for a Title V permit renewal rather than submitting a new application.

The ammonia end product will be sold to the local fertilizer market, within a 50-mile radius. There may be some competition in this area now: this is also the territory of Cronus Chemicals’ proposed world-scale ammonia-urea plant in Tuscola, IL, and it is not much farther from Midwest Fertilizer’s planned plant at Mt Vernon, IN.

The long-term investment decision is described in a May 2016 Bloomberg article, when Phibro’s new owner says that “there are some interesting logistical arbitrage plays in the fertilizer market with the very wide differentials between Gulf Coast and midcontinent prices.”

In addition, Phibro’s West Terre Haute “growth plans include potentially doubling ammonia output and adding equipment to make urea fertilizer” (only one of the two installed gasifiers has been in operation in recent years so, presumably, this plan would mean restarting the second gasifier).

Beyond Indiana, Phibro talks of “another deal to buy a second facility to make fertilizers, and … eventually build a fertilizer trading and marketing business.”

Phibro, which has a long and storied history, was originally established by the Philipps brothers in Germany in 1901, began operations in the US in 1915, and was eventually closed by Occidental Petroleum in 2014. In January 2016, Phibro’s brand and “certain assets” were purchased by Energy Arbitrage Partners (EAP), a new investment firm founded by Simon Greenshields, the ex-head of commodities at Morgan Stanley.

EAP’s partner in the West Terre Haute project is a “boutique investment firm,” Quasar Energy Partners, operating as Quasar Syngas LLC. In June 2016, Quasar’s CEO presented the project to local agencies with the intention of putting together a tax-exempt bond offering by the end of the summer. Although I believe that this bond offering was not completed, the developers informed me that project debt is in place.

According to a January 2016 Bloomberg article, the new Phibro planned “to acquire assets and trade in both physical commodities and derivatives.”

“The continued volatility in [commodity] markets, in addition to the departure of several formerly large and important players, has created an environment where an entrepreneurial merchant firm can create value by capitalizing on market dislocations …

While most commodity investment approaches have an inherent long bias, our strategy is not premised on making directional predictions about commodity prices. Instead it is based on a proven track record of relative value arbitrage combined with disciplined risk management and strong client relationships.”
Phibro CEO Simon Greenshields, Phibro press release 01/26/2016

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ADDRESS: 444 West Sandford Avenue, West Terre Haute, IN 47885, United States

WEBSITE: http://www.phibro.com/
WEBSITE: http://www.qepartners.com/

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• Permit Documents: IDEM permit search (search Source ID: 167-00091) [LINK]
• County Council Minutes: Vigo County Document Center [LINK]
• US DOE: NETL IGCC PROJECT EXAMPLES, WABASH RIVER COAL GASIFICATION REPOWERING PROJECT [LINK], Wabash River Operations Update 2008 [PDF]

NEWS SOURCES:

• 09/01/2017: Quasar Syngas press release, received by e-mail [NO LINK]
• 08/01/2016: Bloomberg: Phibro Taps Morgan Stanley Commodities Veterans for Top Posts [LINK]
• 06/29/2016: My Wabash Valley: Possible 1,110 Jobs To Valley [LINK]
• 06/29/2016: Tribune-Star: Vigo County Council to vote today on supporting fertilizer plant [LINK]
• 05/17/2016: Bloomberg: Phibro to Refurbish Clean-Coal Plant to Make Cheap Fertilizer [LINK]
• 05/17/2016: Phibro press release: Phibro Group Acquires Coal Gasification Plant To Repurpose It For Fertilizer Production [LINK]
• 04/15/2016: Tribune-Star: Workers mourn Indiana power plant shutdown [LINK]
• 01/26/2016: Bloomberg: Legendary Trading Firm Phibro Gets New Life After Purchase [LINK]
• 01/26/2016: Phibro press release: PHIBRO LLC ACQUIRED BY ENERGY ARBITRAGE PARTNERS [PDF]