Upstarts Are Challenging the CFs and Nutriens in Green Ammonia

For chemical companies, adding heft to create economies of scale and savings in areas like procurement is a tried and tested route to success. Beware, some smaller companies see green chemistry as much more of a level playing field.

Take the consolidated market for fertiliser, where dominant suppliers like Nutrien, Yara, OCI and CF Industries have announced initial moves into the world of blue and green ammonia. Shoulder to shoulder are also companies like LSB Industries, roughly 1/30th the size of Nutrien, but with an equal ambition to be a first mover.

Apart from an odd cargo of blue ammonia shipped by Saudi Aramco to Japan to generate electricity, there are really no sales of the low carbon stuff to speak of and green is a way-off yet.

“You are in a nascent market,” said Mark Behrman, chief executive officer of LSB, in an interview with chemicalESG. “The largest players can say they are the largest, but a smaller player like us can actually get in early and be a first mover. I don’t think they take it very seriously. They feel like we are the biggest and the baddest so we’ve got to be a leader in this otherwise it doesn’t look right. We look at this as a real business.”

Behrman is looking to green chemistry as a catalyst to change the complexion of the group. It was only a few years ago when the company explored selling itself. Ironically, it was a 30-year investment banker in the form of Behrman who pushed for a turnaround instead of a sale. With the balance sheet now restored, partners have been brought in to back and accelerate LSB’s sustainability push.

Desperate for a solution to climate change, the wider world is embracing the idea of hydrogen and green ammonia, using renewable energy powering and water electrolysis. But talking to an expert at a larger player can be a somewhat sobering experience: the sheer scale of the transition and the funds needed are laid bare. In the finance departments, they balk at the cost of an electrolyser and the scale of infrastructure investment needed to replace natural gas, while in the labs and on the factory floor, chemists and plant operators who have spent years making the traditional process more efficient scratch their heads at what they regard as an inefficient electrolysis process and the sheer amount of energy needed to make a sustainable molecule that’s identical to the synthetic one. For them, the numbers don’t really stack up in the current natural gas market, distorted as it is by Russia’s invasion of Ukraine, and there’s been an over-reaction to the hydrogen economy. More mileage can be had from technologies like urea nitrification inhibitors.

Behrman is on the bullish end. He has seen “green waves” get crushed before, and feels this time it’s different. LSB was once upon a time North America’s largest maker of ground source heat pumps for homes. Just as the HVAC technology was gaining traction as a greener way to heat homes, around 2007, fracking really took off and Trump loosened environmental regulations. Suddenly, no-one cared about geothermal HVACs.

Blue ammonia, by contrast, has “global momentum,” according to the CEO.

“It’s got governments behind it and a lot of private capital chasing opportunities in clean energy,” Behrman said. It’s likely the fertiliser industry “will have to be forced into using it,” while transport and energy story will be the first through the door.

LSB has two existing projects, but Behrman said he’s exploring the construction of a brand new green ammonia plant and a number of potential parties have approached the company about getting involved. The location could be in the Gulf, given access to waterways, or one of the southern sites like El Dorado, where the infrastructure is already in place and there’s plenty of acreage.

LSB’s projects announced so far include plans to capture and sequester carbon at its largest facility in Arkansas for converting into blue ammonia or another low-carbon product that can command a premium price. Cresta Fund Management, a Dallas-based middle market infrastructure investment firm, is putting up the cash for the project, expected to be the first of a number of CCS sites.

Green will take longer, according to the CEO. Costs need to come down first and hopes are building in the fertiliser industry that US Congress will soon sign off on a tax credit to help get projects underway.

One challenge is the intermittent nature of renewable power, unless you have expensive energy storage.

The reality is LSB will still produce standard ammonia from natural gas, but with a “modified front end” so that electrolysis can be used when renewable power is available. Behrman is conducting a feasibility study to put in 30 MW’s worth of electrolysers at its Pryor, Oklahoma facility capable of making 30-35,000 tons of the green stuff. Bloom Energy will own and operate the unit, and Thyssenkrupp will build it. That could happen in the next 12-18 months. At this point in time, the estimated cost could be in the region of $30-45 million, Behrman said.

By all accounts, for green ammonia to work, a very stringent regulatory environment will be needed, given it will flow in the same pipelines and infrastructure as grey. That means certification for those volumes using wind- or solar-power. Geography could be less of an issue, Behrman said. LSB’s certificate for producing green ammonia at landlocked Pryor, could be traded or attached to equivalent volumes sitting at a more logistically advantage place like Trinidad.

“In the beginning for green, it’s going to be less about price,” Behrman said. “It’s going to be small pockets of people that have a need or desire to de-carbonise and if they have to pay some premium for it, so be it.”

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