August 2023 Carbon Capture Update: Nutrien Pauses Blue Ammonia Plant in Louisiana

In recent years, ammonia producers have proposed dozens of new CCUS projects, with many concentrated along the U.S. Gulf Coast. Some of these operators aim to earn a premium for “blue ammonia” products, which have a lower carbon intensity than traditional ammonia produced without CCUS. However, one prominent project was placed on hold in August due to rising CapEx estimates and uncertainty around the business case for blue ammonia. This CCUS Update highlights similar projects in development and how they may be risked by the same factors.

August 2023 – Major CCUS Updates:

• Fidelis New Energy announced plans to build a blue hydrogen complex with a hydrogen production capacity of 500 t/d in West Virginia. The project’s first phase currently has an in-service date of 2028, and with each of the four proposed phases expected to cost $2 billion and sequester 2.5 Mt/y of CO₂, this is the largest project of its type proposed for the eastern U.S.
• Along with other partners, Climeworks has received a $12.5 million DOE grant to fund preliminary studies for the Prairie Compass DAC hub in North Dakota. The project will target a 1 Mt/y capacity with storage at Minnkota Power’s already permitted Class VI wells, originally connected with the Project Tundra coal power CCS project. Much larger DOE grants were awarded to Climeworks’ DAC project in Louisiana and Occidental’s second DAC location in Texas. CarbonCapture’s DAC project in Wyoming and several other early-stage projects also received grants, albeit smaller ones.

Spotlight: Risk Factors Differ Across Ammonia Plant CCUS Projects

This month, ammonia and fertilizer producer Nutrien announced that it would be pausing development of a large blue ammonia plant in Louisiana. Management stated that estimated CapEx for the project had risen by 15–20% to a total around $2.4 billion. In addition to the higher costs, management expressed uncertainty over whether a premium market for blue ammonia would materialize. Notably, much of the discussion around blue ammonia is not exclusively focused on supplying fertilizer demand, which is, conventionally, the primary market for ammonia. Instead, companies like Nutrien have expressly cited the potential for blue ammonia to be used as a low-carbon fuel or as a hydrogen carrier. While there has been some interest for importing low-carbon ammonia into Europe and East Asia for those purposes, policy and market incentives for this new type of demand remain speculative. With global prices of standard ammonia currently plunging far below recent highs, a guaranteed premium for blue ammonia has only become more important.  

To justify such a premium, blue ammonia projects have aimed to capture up to 95% of emissions from production. Achieving this will, in most cases, require investment in new facilities with state-of-the-art autothermal reforming (ATR) production units, as would be the case for Nutrien’s new facility. No large-scale ATR facility with carbon capture has yet entered production, though, notably, OCI and Linde have begun construction on a complex in Beaumont, TX of similar size and character to the Nutrien project. The OCI/Linde project is expected to cost $2.8 billion. On the high end, CapEx for Clean Hydrogen Works’ massive Ascension Clean Energy project has been estimated at $7.5 billion. Facilities like this one will be exposed to similar risks as Nutrien described, and their developers may be wary to make FID until emerging demand has solidified.

However, CCUS at ammonia plants is not uniform, and some projects may face smaller risks due to differences in technology. There are two main sources of process emissions from ammonia production, with about 66% of CO₂ produced in a syngas stream from which CO₂ must be scrubbed prior to ammonia synthesis. With relatively little additional investment, CCUS can divert CO₂ from this process toward utilization or permanent storage. In fact, as seen in the chart above, some operational projects are already known to be capturing and utilizing syngas CO₂ for urea fertilizer production or enhanced oil recovery (EOR). Certain planned projects will also apply this simpler form of CCUS at a much smaller cost than the multi-billion dollar blue ammonia projects with higher capture rates. For instance, one U.S. project plans to capture an incremental 450,000 t/y of CO₂ with an investment of just $60 million. However, because this only reduces production carbon intensity by about half, ammonia produced at this plant may be limited in its ability to garner premiums from blue ammonia markets in the future. Still, BTU Analytics models that revenue from subsidies, like the 45Q tax credit, could be sufficient to make this lower-cost application of CCUS economic, even without a premium market for end-products.

The data used to create this analysis can be accessed by FactSet Workstation subscribers here.

BTU Analytics is a FactSet Company. This article was originally published on the BTU Analytics website.

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