WEBVTT - Ammonia: From Fertilizer to Fuel of the Future 0:00:00.080 --> 0:00:02.600 This is Dana Perkins and you're listening to Switched on 0:00:02.720 --> 0:00:06.080 the BENIF podcast. Green hydrogen is one of the most 0:00:06.120 --> 0:00:09.680 talked about clean energy technologies today and that's for good reason. 0:00:09.960 --> 0:00:12.520 It has the potential as a fuel source to address 0:00:12.560 --> 0:00:14.680 the missions coming from some of the harder to abate 0:00:14.720 --> 0:00:18.040 sectors like transport or heavy industry. But equally talked about 0:00:18.079 --> 0:00:20.479 is the cost as well as how to get this small, 0:00:20.680 --> 0:00:23.880 light and flammable gas from where it's produced to where 0:00:23.880 --> 0:00:26.000 it needs to be used. But this isn't a show 0:00:26.000 --> 0:00:29.880 about hydrogen. We're going to talk about ammonia because recently 0:00:30.080 --> 0:00:32.680 one of BNF's analysts took a closer look at the 0:00:32.680 --> 0:00:35.159 things you can make with hydrogen, and in this instance, 0:00:35.320 --> 0:00:39.680 that's ammonia. Currently, production of ammonia accounts for anywhere between 0:00:39.720 --> 0:00:42.920 one to two percent of global emissions, and overall it 0:00:42.960 --> 0:00:45.959 could be as much as three percent of global emissions 0:00:45.960 --> 0:00:49.320 coming from ammonia's production and use. Now let's just stop 0:00:49.360 --> 0:00:53.480 there for a second, three percent of global emissions from ammonia. 0:00:54.000 --> 0:00:56.440 And while ammonia is best known as a fertilizer, and 0:00:56.520 --> 0:00:59.440 of course there are other use cases such as explosives, 0:00:59.600 --> 0:01:01.280 we're going to talk about those a little bit later 0:01:01.280 --> 0:01:03.640 in the show. For those that are closely watching the 0:01:03.720 --> 0:01:07.039 hydrogen space, they may also be thinking about ammonia as 0:01:07.040 --> 0:01:10.839 a potential for an innovative shipping fuel, or perhaps thinking 0:01:10.880 --> 0:01:14.920 about how we're gonna ship hydrogen itself. Well, ammonia could 0:01:14.920 --> 0:01:17.720 be an answer by converting hydrogen to ammonia and then 0:01:17.760 --> 0:01:20.320 back again. But really what does this mean for cost 0:01:20.480 --> 0:01:23.920 and just overall efficiency? Now to talk about this chemical, 0:01:24.000 --> 0:01:27.640 I'm joined by Dithya Bashem. He's an associate from Benef's 0:01:27.720 --> 0:01:30.800 hydrogen team. If you like this podcast, make sure to 0:01:30.840 --> 0:01:33.959 subscribe to receive updates on future episodes on your device, 0:01:34.319 --> 0:01:36.680 and give us a review on Apple Podcasts or Spotify, 0:01:36.720 --> 0:01:39.839 which will make us more discoverable by others. But right now, 0:01:39.959 --> 0:01:53.919 let's jump into my conversation with Addi about ammonia. Addie, 0:01:53.920 --> 0:01:55.559 thank you very much for joining us today. 0:01:55.840 --> 0:01:57.360 Great to be in the podcast. Thanks day Now. 0:01:57.520 --> 0:01:59.960 So we set off on this journey initially thinking let's 0:02:00.200 --> 0:02:03.880 let's do another show about hydrogen. It's an ever popular topic, 0:02:04.200 --> 0:02:05.760 and as it turns out, this is not a show 0:02:05.760 --> 0:02:08.480 about hydrogen at all. This is the show about ammonia, 0:02:08.600 --> 0:02:11.920 which certainly hydrogen is a part of the discussion, but 0:02:12.360 --> 0:02:17.320 it has such a let's say, fascinating history and future, 0:02:17.400 --> 0:02:20.320 So let's get started with that. First of all, give 0:02:20.360 --> 0:02:24.080 me a quick definition of what is ammonia for the 0:02:24.280 --> 0:02:25.160 novice chemist. 0:02:26.400 --> 0:02:29.120 Yeah, I mean that's how our journey started as well. 0:02:29.120 --> 0:02:31.960 In the hydrogen team. Ammonia is its own world. Ammonia 0:02:32.080 --> 0:02:36.079 is a molecule that is produced using hydrogen and nitrogen 0:02:36.120 --> 0:02:38.720 from the air combined over a catalyst at high temperature 0:02:38.720 --> 0:02:43.200 and pressure. And then that ammonia is really an intermediate product. 0:02:43.400 --> 0:02:45.160 You make a lot of other things with it. In 0:02:45.200 --> 0:02:47.320 eighty percent of the time, you make fertilizers with it, 0:02:47.400 --> 0:02:51.000 nitrogen fertilizers, which are used on fields and sustain about 0:02:51.000 --> 0:02:53.760 half of the world's food production. And about twenty percent 0:02:53.800 --> 0:02:56.160 of the ammonia that we produce today is used in chemicals, 0:02:56.240 --> 0:03:00.360 uses everything from textiles like nylon and refrigerans, pharmaceutical and 0:03:00.440 --> 0:03:02.360 a lot of things that people don't really think about. 0:03:02.520 --> 0:03:04.840 So it's a huge industry in itself, where hydrogen just 0:03:04.880 --> 0:03:06.200 plays a role as a feedstock. 0:03:06.600 --> 0:03:09.160 So ammonia has a lot of different use cases. But 0:03:09.200 --> 0:03:12.160 additionally it and I think we'll want to go into 0:03:12.160 --> 0:03:14.120 this in more detail, but as we first get started 0:03:14.120 --> 0:03:17.720 on the show, it's also easier to transport. So give 0:03:17.800 --> 0:03:20.800 us just a quick overview of the benefits of ammonia 0:03:20.840 --> 0:03:23.040 when you think about it versus hydrogen. 0:03:23.400 --> 0:03:25.440 Yeah, the problem with hydrogen is that it takes up 0:03:25.440 --> 0:03:28.040 a lot of space, so that makes it extremely costly 0:03:28.080 --> 0:03:31.120 to transport in bulk with ammonia. Once you combine that 0:03:31.200 --> 0:03:35.000 hydrogen with nitrogen, ammonia liquifies at minus thirty four degrees 0:03:35.120 --> 0:03:38.600 or ten bar atmosphere at ambient temperature. So because it 0:03:38.640 --> 0:03:41.680 liquifies a relatively easily, the energy input to liquified is 0:03:41.760 --> 0:03:44.480 quite low, which makes it less costly, and it's a 0:03:44.480 --> 0:03:47.240 molecule that we are transporting across the globe on ships. Already, 0:03:47.280 --> 0:03:50.320 there's about forty ships today that on a continuous basis 0:03:50.360 --> 0:03:53.080 transport ammonia across the globe. There's another one hundred or 0:03:53.080 --> 0:03:54.880 so one hundred to two hundred or so which do 0:03:54.960 --> 0:03:57.440 that on and one off basis from time to time. 0:03:57.520 --> 0:03:59.680 So it's already a traded industry and we have the 0:03:59.680 --> 0:04:03.160 infrastructures to transport ammonia around, which makes it comparatively a 0:04:03.200 --> 0:04:06.960 lot easier than hydrogen. What's also interesting is and something 0:04:06.960 --> 0:04:10.440 that maybe is hard to grasp, is the fact that 0:04:10.640 --> 0:04:14.480 per unit volume, so per cubic meter or per liter, 0:04:14.720 --> 0:04:18.560 ammonia actually contains more hydrogen than liquid hydrogen itself. That's 0:04:18.600 --> 0:04:21.880 because it's NH three, so it has another hydrogen molecule 0:04:21.920 --> 0:04:23.680 in there, and it's not just H two, which is 0:04:23.720 --> 0:04:26.960 the hydroen molecule itself. So within a unit volume, it 0:04:27.000 --> 0:04:28.840 just contains my hydrogen. So it's a more efficient way 0:04:28.839 --> 0:04:30.440 of transporting hydrogen as well. 0:04:30.560 --> 0:04:32.560 So we know how to ship it already, We're already 0:04:32.600 --> 0:04:35.600 doing it, which I think there is some conversation around 0:04:35.839 --> 0:04:38.320 what the future of shipping hydrogen looks like, and this 0:04:38.360 --> 0:04:41.280 could be a potential path. Let's talk a bit about Well, 0:04:41.320 --> 0:04:44.560 first of all, it's current emissions profile and then what 0:04:44.640 --> 0:04:47.880 the future of greening this industry could look like. So, 0:04:48.120 --> 0:04:50.200 at this current point in time, how is the vast 0:04:50.240 --> 0:04:53.559 majority of ammonia produced? I guess what's its feedstock, let's say, 0:04:53.800 --> 0:04:56.560 And then additionally, what are the associated emissions? 0:04:56.839 --> 0:04:58.840 Yeah, even today, you still need the hydrogen at the 0:04:58.920 --> 0:05:02.400 end to make the ammonia. The difference the future may 0:05:02.440 --> 0:05:04.440 be in a decarbonized wall is that we're getting the 0:05:04.480 --> 0:05:08.240 hydrogen from either natural gas or coal, and in eighty 0:05:08.240 --> 0:05:10.960 percent of cases it's natural gas across the world, and 0:05:11.000 --> 0:05:13.280 in twenty percent of times, so twenty percent of the 0:05:13.320 --> 0:05:15.640 feedstock that is being used as coal that's mostly used 0:05:15.640 --> 0:05:18.400 in China, and the extraction of the hydrogen is really 0:05:18.400 --> 0:05:20.599 where ninety percent of the emissions in the production of 0:05:20.600 --> 0:05:23.800 ammonial lie. And that's why hydrogen and decarbonizing hydrogen is 0:05:23.839 --> 0:05:26.440 such a key aspect to this. So, for example, if 0:05:26.440 --> 0:05:30.040 you're producing ammonia using natural gas, that emits about two 0:05:30.080 --> 0:05:34.600 tons of CO two equivalent per ton of ammonia, and 0:05:34.640 --> 0:05:36.360 then you still have to do something to the ammonia 0:05:36.440 --> 0:05:39.159 later to actually make it usable as fertilizers. So actually 0:05:39.160 --> 0:05:41.200 that doesn't even cover it. And the problem with ammonia 0:05:41.279 --> 0:05:44.160 is also that to two tons or so is just 0:05:44.240 --> 0:05:47.320 the production emissions. Sixty percent of the emissions associated with 0:05:47.600 --> 0:05:50.359 ammonia come from its use. So you combine it with 0:05:50.440 --> 0:05:54.039 a carbon molecule turned into a fertilizer like urea applied 0:05:54.080 --> 0:05:55.960 to the field, and at that point a lot of 0:05:55.960 --> 0:06:00.000 the emissions from the nitrogen get released again into the atmosphere. 0:06:00.160 --> 0:06:04.400 So actually ammonia itself was probably responsible for somewhere between 0:06:04.440 --> 0:06:08.039 two and four percent of all global greenhouse gas emissions. 0:06:08.480 --> 0:06:12.200 So for those who are listening and feel like they 0:06:12.320 --> 0:06:15.720 are awash with different colors on the color we are 0:06:15.760 --> 0:06:18.480 for hydrogen which we B and EF have actually moved 0:06:18.520 --> 0:06:21.000 away from using these colors because they're somewhat confusing. And 0:06:21.000 --> 0:06:23.560 I'm going to admit I actually just asked my producer 0:06:23.600 --> 0:06:27.520 what the color was for hydrogen that's produced from natural gas, 0:06:27.560 --> 0:06:30.160 and it's gray hydrogen. But what we're here to talk 0:06:30.200 --> 0:06:33.599 about today is actually how green hydrogen that that is 0:06:33.680 --> 0:06:38.320 produced from renewable energy sources could actually dramatically change the 0:06:38.640 --> 0:06:43.359 upstream emissions associated with hydrogen production and therefore ammonia. So 0:06:43.440 --> 0:06:46.560 let's talk a little bit about green hydrogen and the 0:06:46.600 --> 0:06:50.120 emissions benefit and then you know, of course we'll acknowledge 0:06:50.120 --> 0:06:52.400 some of the challenges because we know what the opportunities 0:06:52.440 --> 0:06:54.560 are here. So, yeah, Addie, what are your views on 0:06:54.839 --> 0:06:57.520 I guess the future potential for green hydrogen as it 0:06:57.560 --> 0:06:58.480 relates to ammonia. 0:06:58.720 --> 0:07:01.799 Sure, maybe making a step back. There's really two ways 0:07:01.800 --> 0:07:05.799 of decarbonizing ammonia production. One is just adding carbon capture 0:07:05.839 --> 0:07:08.479 and storage to the natural gas facility and then capturing 0:07:08.480 --> 0:07:11.280 the emissions associated with it. We call that blue hydrogen. 0:07:11.360 --> 0:07:13.800 The problem with blue hydrogen, or I guess the issue 0:07:13.800 --> 0:07:16.120 long term, is that, yes, you save about seventy eighty 0:07:16.120 --> 0:07:18.280 percent of the emissions with blue hydrogen already today or 0:07:18.320 --> 0:07:20.640 blue ammonia, but you never get to zero with blue 0:07:21.000 --> 0:07:23.840 blue ammonia or blue hydrogen. That's really the issue. It's 0:07:23.840 --> 0:07:25.520 the easiest way to do it today, and maybe in 0:07:25.600 --> 0:07:28.600 terms of the additional cost it has, it's much smaller 0:07:28.600 --> 0:07:30.880 than what we will have for green, but it doesn't 0:07:31.200 --> 0:07:32.960 lead you to an at zero future, and that's really 0:07:33.000 --> 0:07:37.120 where green comes in. Green ammonia produced using hydrogen that 0:07:37.280 --> 0:07:41.080 is again in itself produced using renewable electricity and a 0:07:41.120 --> 0:07:44.800 machine called an electrolyzer that splits water into hydrogen and oxygen, 0:07:44.800 --> 0:07:46.920 and then we take the hydrogen from that as an input, 0:07:47.200 --> 0:07:49.640 can be as close to net zero as you can get. 0:07:49.720 --> 0:07:51.960 The emission's reduction is up to ninety percent or so, 0:07:52.560 --> 0:07:55.280 as if you're using renewable electricity, that's as good as 0:07:55.280 --> 0:07:57.000 you can get with ammonia, and then you have a 0:07:57.000 --> 0:07:59.840 little bit that you might need to offset. So long term, 0:08:00.120 --> 0:08:02.240 we would say that if you really want to decarbonize 0:08:02.240 --> 0:08:05.000 at least the production side of ammonia, you would need 0:08:05.040 --> 0:08:07.240 to switch to green and the incentives to do so 0:08:07.280 --> 0:08:08.160 will need to be there. 0:08:08.480 --> 0:08:14.440 Now you're mentioning CCS, which is not currently incredibly cheap technology, 0:08:14.480 --> 0:08:19.400 and then mentioning also that green hydrogen, and therefore this 0:08:19.440 --> 0:08:22.160 other production process, which would be significantly cleaner, is even 0:08:22.200 --> 0:08:26.240 more expensive. Do you see a situation where the ammonia 0:08:26.280 --> 0:08:31.080 production is cost competitive at some point with current methods 0:08:31.120 --> 0:08:31.600 of production? 0:08:32.200 --> 0:08:34.959 I mean, starting again with CCS. If you add carbon 0:08:35.000 --> 0:08:38.600 capture and storage to your existing ammonia facility today, with 0:08:38.720 --> 0:08:41.640 a carbon price of about one hundred dollars potanol slightly 0:08:41.679 --> 0:08:44.720 higher than that, it would be profitable to produce blue 0:08:44.720 --> 0:08:48.160 ammonia blue hydrogen with that carbon price alone. And there 0:08:48.160 --> 0:08:49.960 are markets where we have that, like in the EU. 0:08:50.040 --> 0:08:53.319 The EUETS hovers around that price, and if you look 0:08:53.360 --> 0:08:56.000 at our forecast for the EUETS carbon price out to 0:08:56.040 --> 0:08:58.320 twenty thirty, we will be well in above the one 0:08:58.400 --> 0:09:01.160 hundred euros per ton and would will make blue ammonia 0:09:01.320 --> 0:09:03.960 cost competitive by itself. On top of that, there's tax 0:09:04.000 --> 0:09:06.600 credits in the US which allow blue ammonia to be 0:09:06.600 --> 0:09:09.839 competitive today already. Now, if you look at green ammonia, 0:09:10.280 --> 0:09:14.400 the cost differential today could be about somewhere between two 0:09:14.440 --> 0:09:17.360 and four times gray ammonia. So, if you want to 0:09:17.360 --> 0:09:20.960 think of this in absolute numbers, gray ammonia or fossil ammonia, 0:09:21.000 --> 0:09:23.400 over the last ten years has traded at a price 0:09:23.440 --> 0:09:25.800 of about four hundred eighty dollars per ton or so, 0:09:26.040 --> 0:09:28.200 and it's produced at a price about two to three 0:09:28.280 --> 0:09:31.439 hundred dollars per ton or so. Green ammonia will cost 0:09:31.480 --> 0:09:34.400 you anywhere between eight hundred to one thousand, two hundred 0:09:34.440 --> 0:09:36.880 dollars per ton, and that's largely because of the cost 0:09:36.880 --> 0:09:40.679 of hydrogen contained within it, because green hydrogen today costs 0:09:40.720 --> 0:09:43.160 at least four or five times as much as the 0:09:43.360 --> 0:09:46.440 fossil kind. So what really needs to happen is for 0:09:46.520 --> 0:09:48.640 that cost gap to close down the line, and we 0:09:48.679 --> 0:09:51.280 see that in hydrogen already. We see by twenty thirty 0:09:51.320 --> 0:09:53.960 green hydrogen will be cheaper than blue hydrogen with so 0:09:54.040 --> 0:09:56.840 hydrogen produced carbon captrin storage, and then down the line 0:09:56.840 --> 0:09:59.000 in the late twenty thirties, early twenty forties or so 0:09:59.160 --> 0:10:03.600 that green hydrogen will even outcompete gray hydrogen in most markets. 0:10:03.600 --> 0:10:04.560 That we are looking at. 0:10:04.760 --> 0:10:06.640 So in parts of the world where there is you know, 0:10:06.720 --> 0:10:10.480 functioning carbon market, there is some real potential there now 0:10:10.520 --> 0:10:14.240 just pivoting. Actually, you mentioned the price of ammonia, and 0:10:14.280 --> 0:10:17.840 this is a fascinating part of the ammonia story, which 0:10:17.920 --> 0:10:21.440 essentially is how the prices are formed and how trading works. 0:10:21.520 --> 0:10:23.839 Can you talk a little bit about how our price 0:10:23.880 --> 0:10:27.280 is dictated for when those who are actually purchasing ammonia 0:10:27.320 --> 0:10:27.840 down the line. 0:10:28.000 --> 0:10:31.200 Yeah, that's a great question. We produce about one hundred 0:10:31.200 --> 0:10:34.280 and eighty million metric tons of ammonia globally today. Just 0:10:34.400 --> 0:10:37.840 about ten percent of that ammonia is traded as is 0:10:37.880 --> 0:10:40.120 so actually in the pure form of ammonia, and maybe 0:10:40.120 --> 0:10:43.800 another fifteen percent or so are traded as a fertilizer product, 0:10:43.800 --> 0:10:46.680 particularly urea. So about a quota to a third the 0:10:46.760 --> 0:10:49.760 market is really traded in ammonia. But the key point 0:10:49.880 --> 0:10:53.600 is that traded market sets the benchmark prices that all 0:10:53.679 --> 0:10:56.920 the ammonias apply in the world use this as a 0:10:56.920 --> 0:11:00.880 formula to set their own pricing methodology. There's one in particular, 0:11:01.040 --> 0:11:04.000 which is the Tampa ammonia price, which is simply just 0:11:04.040 --> 0:11:07.320 based on a contract between an ammonia producer called Yarra 0:11:07.559 --> 0:11:10.319 and a phosphate fertilized a producer called Mosaic in the US, 0:11:10.559 --> 0:11:13.760 and they import about a million metric tons of ammonia 0:11:13.800 --> 0:11:16.960 every year to Tampa, and the price that they pay 0:11:17.000 --> 0:11:20.000 for these cargoes is used as a global benchmark for 0:11:20.120 --> 0:11:23.240 what ammonia prices really are, because why they use Tampa 0:11:23.320 --> 0:11:25.600 is because it's the most transparent price benchmark, they have 0:11:25.640 --> 0:11:28.280 the longest history, and that it then goes into a 0:11:28.320 --> 0:11:31.480 lot of pricing formulas across the globe. They might add 0:11:31.520 --> 0:11:34.679 an additional charge for transport and storage, some local discounts 0:11:34.720 --> 0:11:37.040 and so on, but that's the benchmark price and in 0:11:37.040 --> 0:11:40.160 that sense that that one contract really determines a lot. 0:11:40.280 --> 0:11:42.320 There's other benchmarks as well that are used, like the 0:11:42.400 --> 0:11:45.280 landed price of ammonia in Western Europe for example. All 0:11:45.320 --> 0:11:47.640 of those matter, but the key thing is that maybe 0:11:47.679 --> 0:11:50.000 ten to twenty percent of the market and the price 0:11:50.040 --> 0:11:52.760 that that traded market receives sets the price for a 0:11:52.760 --> 0:11:55.000 lot of the global supply and demand of ammonia. 0:11:55.120 --> 0:11:57.120 So this is a future is rather than a spot 0:11:57.200 --> 0:11:57.840 price market. 0:11:57.960 --> 0:12:00.520 This is completely spot so there is actually no futures 0:12:00.559 --> 0:12:04.480 market for ammonia. So ammonia is largely traded based on 0:12:04.520 --> 0:12:07.680 spot prices. There are term contracts, so ammonia is typically 0:12:07.720 --> 0:12:10.720 traded on one to three year term contracts where the 0:12:10.760 --> 0:12:13.360 pricing is then set based on a monthly ammonia price 0:12:13.400 --> 0:12:15.960 that varies every month. But the contract itself is up 0:12:16.000 --> 0:12:17.920 to three years long. But there's no futures that it 0:12:18.000 --> 0:12:22.520 can use, which makes actually hedging and protecting against risk 0:12:22.640 --> 0:12:24.280 really challenging in the ammonia market. 0:12:24.440 --> 0:12:26.720 Well, and talk to me a little bit about the volatility. 0:12:27.040 --> 0:12:30.880 Yeah, ammonia is actually extremely volatile. The ammonia prices are cyclical, 0:12:30.920 --> 0:12:33.040 so they go up and down with certain changes in 0:12:33.080 --> 0:12:36.560 supply and demand and availability of natural gas. Again, I 0:12:36.640 --> 0:12:39.040 mentioned four hundred and eighty dollars per ton was a 0:12:39.080 --> 0:12:42.760 ten year average, including the spikes that happened due to 0:12:42.760 --> 0:12:45.920 the Ukraine War. But actually ammonia prices have gone all 0:12:45.920 --> 0:12:48.120 the way down from one hundred and fifty dollars a 0:12:48.160 --> 0:12:50.000 ton to all the way to I think over one 0:12:50.040 --> 0:12:53.600 thousand dollars per ton, particularly last year when the Ukraine 0:12:53.679 --> 0:12:56.560 War happened and that cost a spike in natural gas prices, 0:12:56.720 --> 0:12:59.080 So you can see how volatile the price of ammonia 0:12:59.240 --> 0:13:01.960 is I just checked today and today in Europe the 0:13:02.000 --> 0:13:05.000 price of ammonia is already again at four hundred dollars paton, 0:13:05.160 --> 0:13:07.800 while his last year was about a thousand dollars paton. 0:13:08.120 --> 0:13:11.160 Now it dropped tremendously because natural gas prices relaxed. 0:13:11.559 --> 0:13:14.079 Where in the world is it really popular to import it? 0:13:14.120 --> 0:13:17.120 And I guess just which countries and are the biggest buyers. 0:13:17.240 --> 0:13:21.560 Yeah, the biggest buyers of pure ammonia are European countries. 0:13:21.600 --> 0:13:24.840 In particular, India buys a lot of ammonia, and actually 0:13:24.840 --> 0:13:27.559 the US is also a net importer of ammonia today, 0:13:27.600 --> 0:13:30.040 even though they do produce a lot themselves. But then 0:13:30.080 --> 0:13:32.240 there's a lot of buyers who buy ammonia not as 0:13:32.240 --> 0:13:35.600 ammonia but as urea, so a carbon based molecule produced 0:13:35.679 --> 0:13:39.440 using ammonia, And India and Brazil really top that ranking. 0:13:39.520 --> 0:13:42.400 They're one of the largest fertilizer importers in the world 0:13:42.480 --> 0:13:45.760 and really dependent on it. Sometimes countries also directly import 0:13:45.840 --> 0:13:48.240 natural gas to produce their own ammonia, so that's not 0:13:48.280 --> 0:13:50.680 accountid for within these figures, but that happens as well. 0:13:50.920 --> 0:13:53.439 Well. Then let's talk about who the producers are then, 0:13:53.559 --> 0:13:55.400 so it's clearly coming from somewhere. 0:13:55.559 --> 0:13:58.680 Everyone in the world has some level of production of 0:13:58.679 --> 0:14:01.440 ammonia because they see it as energy security issue. So 0:14:01.520 --> 0:14:04.160 every country has at least a small amount of ammonia 0:14:04.160 --> 0:14:07.559 production facilities domestically, even if that means they are importing 0:14:07.559 --> 0:14:10.160 the natural gas itself. However, I think four or five 0:14:10.200 --> 0:14:14.960 countries really dominate global supply of ammonia. That's first China. 0:14:15.040 --> 0:14:17.320 China accounts for about a third of all global subpi 0:14:17.400 --> 0:14:20.000 of ammonia, but China mostly uses that domestically. It's a 0:14:20.080 --> 0:14:23.359 huge market. All the ammonia that they produce they use domestically. 0:14:23.440 --> 0:14:26.160 They also have some sort of export restrictions on fertilized 0:14:26.160 --> 0:14:29.200 products like urea, so not much urea or ammonia actually 0:14:29.280 --> 0:14:32.280 leaves China. Ever, then that's about third, About nine to 0:14:32.280 --> 0:14:36.200 ten percent typically outside of today's situation comes from Russia. 0:14:36.560 --> 0:14:39.520 Russia is a major exporter. Over fifty percent of the 0:14:39.520 --> 0:14:44.040 production that Russia produces in house is exported to other markets, 0:14:44.200 --> 0:14:47.520 and both in the form of ammonia and as urea, 0:14:47.680 --> 0:14:49.600 and that's a big one. What happened now is a 0:14:49.640 --> 0:14:53.000 result of the Ukraine War, is that Russian ammonia exports 0:14:53.040 --> 0:14:57.920 completely ceased. Why because Russia exports ammonia through a pipeline 0:14:57.920 --> 0:15:00.720 and where ammonia pipeline that goes from Russia to Ukraine 0:15:00.760 --> 0:15:03.200 to import in Ukraine from where it is then exported 0:15:03.240 --> 0:15:06.640 overseas via ships, So that pipeline ceased operating as a 0:15:06.640 --> 0:15:09.440 result of the Ukraine War. Well, Russia is still exporting 0:15:09.560 --> 0:15:13.200 urea directly from Russia, but ammonia exports from Russia have 0:15:13.200 --> 0:15:15.560 completely seized. The other two markets where a lot of 0:15:15.640 --> 0:15:18.040 ammonia is produced are you the US in India, So 0:15:18.160 --> 0:15:20.200 the US, even though it has a lot of natural gas, 0:15:20.360 --> 0:15:22.960 is producing a lot of ammonia itself, but still needs 0:15:22.960 --> 0:15:25.520 to import a lot of ammonia to satisfy its own demand. 0:15:25.600 --> 0:15:28.760 Similarly with India, India produces a lot of ammonia domestically, 0:15:28.800 --> 0:15:31.920 but all of that ammonia is typically through imported natural gas. 0:15:31.960 --> 0:15:34.080 So in a sense they're not self reliant on fertilizers 0:15:34.120 --> 0:15:36.040 at all. They just have a lot of production capacity 0:15:36.040 --> 0:15:37.960 for it, it still need the feedstock to come in 0:15:38.120 --> 0:15:41.040 or the import ammonia are other places, so on net basis, 0:15:41.080 --> 0:15:43.040 they still import more ammonia than they produce. 0:15:43.200 --> 0:15:46.560 The Inflation Reduction Act in the US has certainly got 0:15:46.640 --> 0:15:49.840 hydrogen in its sites in terms of making the US 0:15:49.880 --> 0:15:53.720 possibly quite big producer of hydrogen, in particular green hydrogen. 0:15:53.880 --> 0:15:56.920 Have we started to see any of those projects come 0:15:56.960 --> 0:16:00.120 online and come to light? And if not, because I 0:16:00.120 --> 0:16:01.920 think I might know what the answer is. These are 0:16:02.000 --> 0:16:05.760 large infrastructure projects. When do we expect to start seeing 0:16:05.760 --> 0:16:06.280 some change. 0:16:06.400 --> 0:16:09.160 Yeah. What's interesting about the Inflation Reduction Act, especially in 0:16:09.200 --> 0:16:11.280 terms of ammonia, is the fact that in the law 0:16:11.320 --> 0:16:13.960 there's nothing that says that a hydrid producer in the 0:16:14.080 --> 0:16:16.760 US could not use the tax credit and then export 0:16:16.800 --> 0:16:19.720 that subsidized hydrogen as ammonia, for example, to other markets, 0:16:19.760 --> 0:16:21.520 which really means that US could become one of the 0:16:21.560 --> 0:16:24.240 cheapest suppliers of clean ammonia of any kind. To the goal, 0:16:24.440 --> 0:16:27.040 why we haven't really seen any impact of the Inflation 0:16:27.080 --> 0:16:30.000 Reduction Act tax credit just yet, I would say, is one, 0:16:30.080 --> 0:16:32.800 you're right, it's large infrastructure projects that will take another 0:16:32.800 --> 0:16:35.480 three four years to actually become operational. And second, no 0:16:35.520 --> 0:16:37.600 one has actually received any tax for it, at least 0:16:37.600 --> 0:16:40.000 on the hydrogen part yet, and that's because they're waiting 0:16:40.040 --> 0:16:42.760 on crucial guidance from the US Treasury and how you 0:16:42.800 --> 0:16:45.760 can actually produce hydrogen and call that clean or green 0:16:45.840 --> 0:16:48.480 hydrogen and meet the emissions thresholds that the Inflation Reduction 0:16:48.520 --> 0:16:50.280 Act has set out for its tax credit. And there's 0:16:50.320 --> 0:16:52.520 a heated debate. There's full page ads in the New 0:16:52.560 --> 0:16:55.119 York Times and the Washington Post about how these criteria 0:16:55.280 --> 0:16:57.520 should be set out, and that still needs to be determined. 0:16:57.520 --> 0:16:59.400 And we're working actually on a publication to set out 0:16:59.400 --> 0:17:00.640 our own view on this. 0:17:00.960 --> 0:17:02.600 So we'll keep our eyes on what's going to happen 0:17:02.600 --> 0:17:04.840 in the US with the IRA. There are other parts 0:17:04.880 --> 0:17:06.800 of the world that are actively engaged in this market, 0:17:06.880 --> 0:17:09.480 and certainly incumbents don't want to lose market share. Can 0:17:09.520 --> 0:17:12.280 you talk a little bit about countries that are actively 0:17:12.320 --> 0:17:14.840 involved in this space and more importantly, the companies that 0:17:14.880 --> 0:17:18.680 are actually producing ammonia right now and really what they're 0:17:18.720 --> 0:17:19.199 doing with it. 0:17:19.440 --> 0:17:21.840 Yeah, that's a really good point. I mean, every market 0:17:21.920 --> 0:17:26.920 with good renewable electricity sources like good sola and wind resources, 0:17:27.000 --> 0:17:29.840 as well as abundant natural gas, has been looking at 0:17:29.880 --> 0:17:33.480 one point at producing green or blue ammonia and trying 0:17:33.520 --> 0:17:37.400 to export that, particularly in the Middle East. Australia, Latin America, 0:17:37.480 --> 0:17:39.000 all of those markets have looked at it, and the 0:17:39.040 --> 0:17:41.240 Middle East is probably one of the places where most 0:17:41.280 --> 0:17:44.280 of the projects are concentrated. In One project in particular 0:17:44.400 --> 0:17:47.399 that is worth highlighting here is in Saudi Arabia. It's 0:17:47.480 --> 0:17:51.280 the Neo project. It's a two point two gigaboute electoralizer 0:17:51.440 --> 0:17:54.639 project that has actually taken final investment decision, so it 0:17:54.720 --> 0:17:57.640 is becoming reality very soon. It'll be operational by twenty 0:17:57.680 --> 0:17:59.720 twenty six and it looks to export over a million 0:17:59.760 --> 0:18:02.760 metric tons of ammonia. That's actually huge for the traded 0:18:02.800 --> 0:18:05.399 market that is only about twenty millimetric tons today, so 0:18:05.440 --> 0:18:08.879 that's going to happen. The challenge with NIOM is really 0:18:09.040 --> 0:18:11.760 part of its business model. So in Saudi Arabia, producing 0:18:11.800 --> 0:18:13.919 green ammonia makes a lot of sense because they have 0:18:14.000 --> 0:18:16.960 both good solar radiation but also good wind speeds, which 0:18:16.960 --> 0:18:19.359 means you can combine it to and produce really cheap 0:18:19.440 --> 0:18:21.760 green ammonia in the region. And the project is financed, 0:18:21.760 --> 0:18:23.439 so it's going ahead as well, and it has an 0:18:23.480 --> 0:18:26.119 off taker in air Products, which has been willing to 0:18:26.160 --> 0:18:27.639 sign a thirty year off take. So in a lot 0:18:27.680 --> 0:18:30.200 of ways, the financial zion place, the renewables are in place, 0:18:30.200 --> 0:18:32.760 and the ammonia will be cheap. The questionnaer on Neium 0:18:32.840 --> 0:18:35.320 is really what they will do with the ammonia, because 0:18:35.320 --> 0:18:38.119 air Product is buying the ammonia, but they're not the 0:18:38.160 --> 0:18:41.600 final user of the ammonia. Air Product's role within this 0:18:41.800 --> 0:18:44.399 is to take the ammonia, put it on ships and 0:18:44.440 --> 0:18:47.000 then export it to other markets and then find willing 0:18:47.040 --> 0:18:49.600 buyers in these other markets for that ammonia. So they're 0:18:49.640 --> 0:18:51.840 really a trader of the ammonia. And the stated business 0:18:51.880 --> 0:18:54.359 model right now is to take the ammonia, move it 0:18:54.560 --> 0:18:57.280 via ship to Europe to an import terminal that air 0:18:57.320 --> 0:18:59.680 Products is building, actually three of them, and then crack 0:18:59.720 --> 0:19:02.600 it back to hydrogen, so not actually use the ammonia 0:19:02.680 --> 0:19:05.880 as is, but crack the ammonia under high temperature back 0:19:05.920 --> 0:19:08.439 to hydrogen, which in a sense makes it more useful 0:19:08.440 --> 0:19:11.359 because there's more use cases for hydrogen and ammonia. But 0:19:11.680 --> 0:19:14.320 that's where for us the economics really fall apart. We 0:19:14.400 --> 0:19:16.520 think it could make a lot of sense for country 0:19:16.520 --> 0:19:19.720 like Audi Area to produce ammonia in bulk ship it 0:19:19.800 --> 0:19:21.880 and then for that ammonia to be used as ammonia, 0:19:21.880 --> 0:19:24.840 and that will be broadly competitive with domestic production in 0:19:25.040 --> 0:19:27.800 let's say Germany or so. Once you think about cracking 0:19:27.800 --> 0:19:31.959 the ammonia bag, that's such an energy intense process that 0:19:32.000 --> 0:19:35.280