Run on Ammonia: Shale Gas Drives Fertilizer Projects in the US
According to the IHS report, two priorities guide the location of most ammonia production—production of ammonia is generally either sited close to its end market, either industrial or agricultural, or else it is located close to a source of abundant, low-cost feedstock. This explains the two predominant drivers in terms of current global ammonia production expansion trends.
The Cost Factor: Cheap Gas Fuels Fertilizer Plant projects
Said Keel, “Since the cost of natural gas is typically the main determinant of global cost competitiveness, the availability of an abundant supply of low-cost natural gas feedstocks in North America has revitalized the U.S. ammonia and nitrogen fertilizer industry. Plant operating rates have risen, idle capacity has been restarted, and there is a long list of potential greenfield/brownfield projects being announced. Several projects are under construction in Louisiana and Iowa, and we at IHS expect completed, large-scale capacity additions by 2018 totaling 5 million metric tons or more.”
The sharp rise in North American ammonia capacity based on shale-based energy resources, noted the IHS report, will drive considerable multi-year increases in regional ammonia production and cause a sizable shift in global ammonia trade. The U.S. is currently the largest ammonia importing country by a wide margin, though sizable changes are underway as shale-based capacity is being developed.
Pressure Expected: How to Compete With Low–Cost Shale Gas?
New, world-scale capacity projects plus restarts and debottlenecks already under way in states such as Kansas, Oklahoma, Iowa and Nebraska, will sharply reduce U.S. imports of ammonia and other derivatives, especially from producers in more distant regions. Knock-on effects, said IHS, will drive production cut-backs and plant closures of higher-cost units in multiple regions.
Said Keel, “We believe regions with higher-cost ammonia production will experience the greatest pressures during periods of excess capacity and oversupply. Regionally, we expect producers in Western Europe, Central Europe, and in particular, the Ukraine and parts of China could be forced to shutter older or inefficient production, and even in lower cost regions, expansion plans could be delayed or cancelled.” The IHS report covers historical developments and future projections for supply, demand, capacity and trade in the global ammonia markets for 2008 to 2023.