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11 August 2023
By Polly Martin
'World's largest' blue hydrogen-based
ammonia project shelved due to increased costs and lack of market
Fertiliser giant Nutrien has put the plant in
Geismar, Louisiana, on hold after announcing it only last year
Nutrien's Geismar complex in Louisiana.Photo:
Nutrien
Nitrogen fertiliser giant Nutrien has shelved
plans for a 1.2 million tonnes-a-year blue ammonia plant at its
complex in Geismar, Louisiana, having only announced its intention to
build “the world’s largest clean ammonia facility” last year.
Nutrien had scheduled construction on the $2bn
facility — which would use autothermal reforming (ATR) with carbon
capture and storage (CCS) to produce blue hydrogen from fossil gas
with 90% emissions reduction — to start in 2024, reaching full
production capacity in 2027, if it took a positive final investment
decision (FID) this year.
The Canadian firm had already signed a letter of intent with
Japanese conglomerate Mitsubishi for offtake of up to 40% of expected
production to supply “the Asian fuel market, including Japan”.
However, Nutrien has now suspended all work on
the project, citing “continued uncertainty on the timing of emerging
uses for clean ammonia” as one of its reasons for shelving the plant.
“Over the long term, we do have confidence that these new
sources of demand related to clean ammonia have a number of reasons
why they should emerge. But today, the evidence wouldn’t be sufficient
to justify the assumption of a premium, at least not in the near term,
emerging for clean ammonia,” said Mark Thompson, Nutrien’s chief
commercial officer on an earnings call last week.
The Geismar project was set to use existing carbon capture and
storage (CCS) infrastructure operated by Texas-based specialist
Denbury. But while blue hydrogen and ammonia are often expected to be
cheaper than green versions made via renewables-powered electrolysis,
and even compete on cost with unabated grey production with high
carbon prices, Nutrien has disclosed that the capital costs of the
project were higher than initially expected.
“We did see some cost escalation [during front-end engineering
and design]... about 15% to 20%,” said Nutrien’s CEO Ken Seitz, which
further tipped the scales away from taking a decision to invest in the
latter half of this year as planned.
“While we’ll continue to monitor that — those
markets for clean ammonia and certainly that opportunity — we came to
the conclusion just the way costs are going, that we’ll have better
opportunities for that capital in the near term,” Seitz added.
The tax credits for low-carbon hydrogen production and CCS
unveiled in the Inflation Reduction Act last year were “obviously a
bit of a tailwind or improvement... [but] didn't get us over the
hurdle in terms of the economics of the project at this point”, noted
Trevor Williams, Nutrien’s president for nitrogen and phosphates.
And while the company has not explicitly cancelled the Geismar
blue ammonia plant, “we really look at the delay probably being at
least a minimum of 24 months”, he added.
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