Green ammonia could become the best bet for oil companies

The world’s biggest oil and gas firms are investing billions of US dollars in projects to produce low-carbon ammonia, a critical fertilizer chemical that also has the potential to become a clean fuel, including in the shipping industry .

Some major green ammonia projects have been announced in the United States in recent months, while the US Department of Energy (DOE) is also providing loan guarantees to help finance such projects planned to produce green ammonia for farmers in the Midwest.

Green ammonia potential

Ammonia, the key ingredient in fertilizers, has traditionally been produced using fossil fuels, making the process emissions-intensive and incompatible with clean energy and climate goals.

However, with the use of carbon capture technology, emissions from ammonia production would be removed and buried underground, making the process low to zero emissions.

This would make low-carbon ammonia an increasingly attractive proposition for processes and industries looking to reduce emissions, because when burned for fuel, ammonia produces no carbon emissions.

Big Oil has already come up with plans for multi-billion projects to produce low-carbon ammonia. The US government is also supporting clean energy solutions and low-carbon fuel production as part of the Biden Administration’s clean energy agenda.

These recent developments show that ammonia could be a promising element in lower-emission agriculture and transport, for example. However, they also show that the nascent industry of ammonia production with carbon capture needs either the deep pockets of Big Oil or government support and incentives – or both – to take off and become a scale clean energy solution.

Big Oil’s Big Ammonia Deals

Major deals involving some of the world’s largest international and national oil companies have been announced in recent weeks.

ADNOC, Abu Dhabi’s national oil company, earlier this month signed a deal with ExxonMobil to buy 35 percent of the US supermajor’s Baytown, Texas project, which is planned to produce low-carbon hydrogen and ammonia and be the largest such facility in the world. .

The facility is expected to convert U.S.-produced natural gas into virtually carbon-free hydrogen with about 98 percent of the carbon dioxide (CO2) removed, boosting U.S. competitiveness and supporting U.S. jobs, Exxon said.

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The project is also planned to produce more than 1 million tons of low-carbon ammonia per year. A final investment decision (FID) is expected next year, with an anticipated start-up in 2029.

“This is a world-scale project in a new global energy chain,” said Darren Woods, chairman and chief executive of ExxonMobil.

Last week, Exxon signed an agreement with Mitsubishi Corporation under which the companies will study a possible equity participation of the Japanese conglomerate in the project and the takeover of low-carbon ammonia. Ammonia is expected to be used in Japan for power generation, process heating and other industrial activities.

Dan Ammann, president of ExxonMobil Low Carbon Solutions, commented: “We look forward to building on our leadership position with Mitsubishi Corporation to advance low-carbon hydrogen and ammonia globally, helping the world achieve a future with lower emissions.”

US Government Support

As major corporations seek partnerships to invest billions of dollars in low-carbon ammonia and hydrogen, the US Administration is helping companies advance projects with loan guarantees.

This week, DOE’s Loan Programs Office (LPO) announced a conditional commitment for a loan guarantee of up to $1.559 billion to Wabash Valley Resources, LLC. The grant would help fund a commercial-scale waste-to-ammonia production facility using carbon capture and sequestration (CCS) technology in West Terre Haute, Indiana.

The ammonia produced will be used by farmers in the Midwest, and the project “would play a critical role in securing domestic fertilizer supplies for the region commonly known as the Corn Belt, contributing to both food security and climate goals.” , DOE said.

The project will repurpose an industrial gasifier to use petroleum coke while permanently storing carbon dioxide to produce 500,000 metric tons of anhydrous ammonia annually.

However, the loan guarantee would be part of a total investment of $2.4 billion that Wabash Valley Resources has yet to secure from private investors.

The company needs to raise about $800 million in equity capital and complete other project milestones before it can start receiving the loan, Chief Operating Officer Daniel Williams told The Wall Street Journal. About 75 percent of the equity financing is already in place, he added.

In addition to supporting low-carbon energy solutions, green ammonia projects like the one in Indiana are crucial to a diversified domestic supply chain, especially in light of the war in Ukraine that Russia, one of the largest producers of conventional ammonia from the world, beginning in 2022. , US officials say.

“It’s important for us to have a diverse supply chain and make sure we’re not dependent on other countries for this really important chemical,” said Jigar Shah, chief of the Energy Department’s Office of Loan Programs, in an interview for the Journal.

Apart from fertiliser, green ammonia could be used as a fuel in the shipping industry, which aims to reduce emissions from the sector, which accounts for around 2% of global energy-related CO2 emissions.

The International Energy Agency (IEA) estimates that ammonia could account for the largest share of final energy consumption in shipping at 44% in 2050. According to the agency’s Net Zero Roadmap, ammonia would account for more than biofuels or hydrogen, each. it is estimated to have a share of 19% of final energy consumption in the shipping industry.

By Tsvetana Paraskova for Oilprice.com

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