The world’s biggest oil and gas firms are pouring billions of U.S. dollars into projects to produce low-carbon ammonia, a chemical critical for fertilizers 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 U.S. 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 building block of fertilizers, has been traditionally produced using fossil fuels, which makes the process emissions-intensive and not compatible with clean energy and climate goals.
However, with the use of carbon capture technology, the emissions from making ammonia would be removed and buried underground, making the process low- to zero-carbon.
This would make low-carbon ammonia an increasingly attractive offering for processes and industries looking to deliver emissions reductions, because when burnt for fuel, ammonia doesn’t produce carbon emissions.
Big Oil has already come up with plans for multi-billion projects to make low-carbon ammonia. The U.S. 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 building block of lower-emissions agriculture and shipping, for example. However, they also show that the nascent industry of producing ammonia with carbon capture needs either the deep pockets of Big Oil or government support and incentives – or both – to take off and become a clean energy solution of scale.
Big Oil’s Big Ammonia Deals
In recent weeks, major deals have been announced, involving some of the biggest international and national oil companies in the world.
ADNOC, the national oil company of Abu Dhabi, signed earlier this month an agreement with ExxonMobil to buy 35% in the U.S. supermajor’s Baytown, Texas, project, which is planned to produce low-carbon hydrogen and ammonia and be the world’s largest such facility.
The facility expects to convert U.S.-produced natural gas into virtually carbon-free hydrogen, with around 98% of carbon dioxide (CO2) removed, advancing U.S. competitiveness and supporting U.S. jobs, Exxon said.
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The project is planned to produce more than 1 million tons of low-carbon ammonia per year, too. A final investment decision (FID) is expected next year, with an anticipated startup in 2029.
“This is a world-scale project in a new global energy value chain,” said Darren Woods, ExxonMobil chairman and chief executive officer.
Last week, Exxon signed a deal with Mitsubishi Corporation under which the companies will study a possible equity participation of the Japanese conglomerate in the project and offtake of low-carbon ammonia. The 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 furthering our leadership position, alongside Mitsubishi Corporation, to advance low-carbon hydrogen and ammonia globally, helping the world achieve a lower emission future.”
US Government Support
While large corporations seek partnerships to invest billions of dollars into low-carbon ammonia and hydrogen, the U.S. Administration is supporting companies to 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 support would help finance a commercial-scale waste-to-ammonia production facility using carbon capture and sequestration (CCS) technology in West Terre Haute, Indiana.
The produced ammonia would be used by farmers in the Midwest, and the project “would play a critical role in securing domestic fertilizer supply for the region commonly known as the Corn Belt, contributing to both food security and climate goals,” the DOE said.
The project would repurpose an industrial gasifier to utilize petroleum coke while permanently storing carbon dioxide to produce 500,000 metric tons of anhydrous ammonia annually.
Still, the loan guarantee would be part of a total $2.4-billion investment that Wabash Valley Resources has yet to secure from private investors.
The company needs to raise around $800 million in equity and meet other project milestones before it starts receiving the loan, chief operating officer Daniel Williams told The Wall Street Journal. Around 75% of the equity funding is already in place, he added.
Apart from supporting low-carbon energy solutions, green ammonia projects such as the one in Indiana are crucial for a diversified domestic supply chain, especially in light of the war in Ukraine that Russia, one of the world’s top conventional ammonia producers, began in 2022, U.S. 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,” Jigar Shah, head of the Energy Department’s Loan Programs Office, told the Journal in an interview.
Apart from fertilizers, green ammonia could be used as a fuel in the shipping industry, which seeks to lower the sector’s emissions which account for about 2% of global energy-related CO2 emissions.
The International Energy Agency (IEA) reckons that ammonia could hold the largest share of final energy consumption in shipping, at 44%, in 2050. According to the agency’s Net Zero Roadmap, ammonia would have a larger share than either biofuels or hydrogen, each expected to have a 19% share of final energy consumption in the shipping industry.
By Tsvetana Paraskova for Oilprice.com
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