Focus: Facing green push on farm, fertilizer makers look to sea for growth

Hafnia

20/01/2021 12:00

By Rod Nickel and Victoria Klesty
    WINNIPEG, Manitoba/OSLO, Jan 20 (Reuters) - Two of the
world's biggest fertilizer producers, CF Industries Holdings Inc
and Yara International Asa, are seeking to cash in on the green
energy transition by reconfiguring ammonia plants in the United
States and Norway to produce clean energy to power ships.
    The consumption of oil for transportation is one of the top
contributors to global greenhouse gas emissions that cause
climate change, and fertilizer producers join a growing list of
companies adjusting their business models to profit from a
future lower-carbon economy. 
    By altering the production process for ammonia normally used
for fertilizer, the companies told Reuters they can produce
hydrogen for fuel or a form of carbon-free ammonia used
either as a carrier for hydrogen or as a marine fuel to
power cargo and even cruise ships. 
    The shift may improve their standing with environment-minded
investors as fertilizer emissions attract greater government
scrutiny in North America and Europe.  
    But the green fuels are not yet commercial and will
require significant investment to turn a profit - a reality
that has the world's largest fertilizer producer, Canada's
Nutrien Ltd  NTR.TO , staying out of the space for now.
Oslo-based Yara  YAR.OL  is seeking government subsidies to
proceed. 
    Still, renewable ammonia represents a 6 billion-euro ($7.25
billion) opportunity for fertilizer producers by 2030, according
to Citibank, based on 20 million tonnes of annual sales globally
for clean power and shipping fuel compared with virtually none
now. Global ammonia sales currently amount to 180 million
tonnes. 
    "We absolutely could be known more for being a
clean energy company than an ag supplier," CF  CF.N  Chief
Executive Tony Will said in an interview, speaking of long-term
prospects for the Illinois-based company.
  
    'EVERYBODY IS LOOKING FOR SOLUTIONS'
    Fertilizer plants separate hydrogen from natural gas and
combine it with nitrogen taken from the air to make ammonia,
which farmers inject into soil to maximize crop growth. 
    Production generates carbon emissions that CF says it can
avoid by extracting hydrogen instead from water charged with
electricity. It can then combine that hydrogen with nitrogen to
make green ammonia, which the marine industry is testing as
fuel. 
    CF is in discussions about selling green ammonia to a
Japanese power consortium including Mitsubishi Corp  8058.T ,
but buyers will break most of it down to pure hydrogen for use
in transportation sectors.
    "This is a market that easily can exceed what the total
ammonia (fertilizer) market is," Will said. "We're going to grow
into that over the next 20-25 years."
    Adopting green ammonia or green hydrogen to replace crude
oil-based fuel would help the International Maritime
Organization (IMO) meet a target to reduce emissions, and is
suited to both short- and long-haul vessels.
    Methanol and liquefied natural gas (LNG) are other clean
alternatives.
    "Everybody is looking for solutions and I think the jury is
still out," said Tore Longva, alternative fuels expert at
Oslo-based maritime advisor DNV GL. "Of all the fuels, (green
ammonia) is probably the one that we are slightly more
optimistic on, but it's by no means a given."
    Ammonia remains toxic and corrosive, requiring special
handling on ships, Longva said. 
    Furthermore, combusting ammonia may produce nitrous oxide, a
greenhouse gas, that ships would need to neutralize to prevent
emissions, said Faig Abbasov, shipping director for European
Federation for Transport and Environment, an umbrella group of
non-governmental organizations. Fuel cells are another potential
marine use for ammonia and hydrogen.  
    Still, Abbasov sees ammonia and hydrogen as the greenest and
most practical shipping fuel alternatives, and cheaper than
methanol. 
    Development of ammonia and hydrogen for shipping fuel holds
decarbonization potential but is at the pilot stage for small
vessels, while LNG and methanol are in use on ocean-going ships,
an IMO spokeswoman said.
    South Korea's Daewoo Shipbuilding & Marine Engineering
 042660.KS , one of the world's biggest shipbuilders, plans to
commercialize super-large container ships powered by ammonia by
2025, a spokesman said. 
    
    THE PLANS
    CF is reconfiguring its Donaldsonville, Louisiana, plant to
produce green ammonia. It plans to spend $100 million initially
to enable the plant to produce by 2023, about 18,000 tonnes. By
2026, production across its network could reach 450,000 tonnes,
and 900,000 tonnes by 2028, Will said.
    The hydrogen it will sell may have nearly 10 times the
margin of ammonia fertilizer, according to CF, making the
75-year-old farm company's newest product its most profitable.
    Yara is developing a green ammonia project with power
company Orsted  ORSTED.CO  in the Netherlands and also has green
projects running in Australia and Norway.
    Unlike CF, Yara is seeking government subsidies because
green ammonia costs could be 2-4 times higher than conventional
production, said Terje Knutsen, Yara's head of Farming
Solutions. 
    "The technology behind this is not mature enough today," he
said. 
    Yara, which aims to cut all CO2 emissions from its 500,000
tonnes-a-year Porsgrunn ammonia plant in Norway, wants funding
from the Norwegian government to switch the plant's production
process to electricity by 2026.
    Norway already supports hydrogen and green ammonia through a
tax exemption on electricity used to produce hydrogen, Minister
of Climate and Environment Sveinung Rotevatn said in an email.
    "Hydrogen and hydrogen-based solutions, such as ammonia,
will be important in reducing greenhouse gas emissions in the
future," Rotevatn said.
    Global ammonia production would need to multiply five-fold
if it is to replace all oil-based shipping fuel, Abbasov said.
But given the abundance of nitrogen in the air, potential supply
is almost unlimited if production costs drop, he said.
    Nutrien is looking into green ammonia, but sees high costs
and insufficient prices as major obstacles, Chief Executive
Chuck Magro said. 
    Industry efforts underway to produce small volumes of green
ammonia are largely "window-dressing," said Nutrien Executive
Vice-President, Nitrogen, Raef Sully. 
    "The reason (for Nutrien) to look at it is to position
ourselves for when people are willing to pay," Sully said. 
    "The problem is we're just right at the start of
development."

 (Reporting by Rod Nickel in Winnipeg, Manitoba and Victoria
Klesty in Oslo; additional reporting by Jonathan Saul in London;
Editing by Caroline Stauffer and Marguerita Choy)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))