Section: CRUNS Comment

As we near the end of the third quarter of 2022, the attention of the nitrogen industry is focused on the coming northern hemisphere winter, and the prospects for higher natural gas prices as temperatures fall and power and heating demands rise. Vladimir Putin has been stoking these worries to try and force a climbdown from European countries over the sanctions that followed his invasion of Ukraine, with the flow of gas through the Nordstream 1 pipeline across the Baltic Sea gradually dwindling over the summer and finally stopping altogether at the end of August due to “technical issues” – an explanation somewhat undermined by the subsequent statement from spokesman Dmitry Peskov that gas would flow again once sanctions were eased. This is a familiar enough tactic; Russia has used gas stoppages to pressure Ukraine and Europe several times over the past two decades.

On February 27th, in a speech to the Bundestag, Germany’s chancellor Olaf Scholz described the events then unfolding as a “zeitenwende” – a historical turning point. He was speaking of German foreign and security policy, but it seems likely that Russia’s February 24th invasion of Ukraine may end up marking a break with the past in many different ways. Last issue’s Editorial was written when Russia’s ‘special military operation’ was still only a few days old, and the situation was still very fluid. Two months on, and for all of the uncertainties remaining, some glimpses of the way that things are changing are becoming clearer.

Late February saw the diplomatic crisis between Russia and Ukraine abruptly devolve into all-out war, on a scale not seen in Europe since the collapse of Yugoslavia in the early 1990s – some would argue not since the end of the Second World War. At time of writing, the conflict is still barely two weeks old, but has already produced an unfolding humanitarian catastrophe, and a refugee crisis of massive proportions. But over the medium and longer term, together with the international sanctions that have swiftly followed, it also has the power to deliver an economic shock to commodities markets in particular and the world economy in general that may be as bad if not worse than the crash of 2008-9.

As a quick glance through the Index of last year’s articles and news items in this issue of the magazine will amply demonstrate, 2021 was a year full of project announcements for low carbon ammonia and methanol projects of all hues; blue, green, turquoise and many other shades besides. Market analysts CRU said in December that they calculated that there have been a total of 124 million t/a of low carbon ammonia projects announced, 80 million t/a of which came in 2021 alone, equivalent to 55% of current ammonia capacity. These range from tentative pilot plants that are fully costed and often with government grants already secured to blue sky visions of vast electrolysis hubs in the deserts of Arabia with timescales towards the end of the decade – it’s often the case that the longer the proposed timescale, the less likely a project is to happen.

Global nitrogen and methanol markets are currently in the grip of a crisis in feedstock prices. Mostly this is about Europe’s dependence on imported natural gas, but – particularly on the methanol side – it has also been exacerbated by high coal prices in China, where heavy rains have led to flooding in Shanxi province, the source of one third of China’s coal. These have followed similar floods in Henan in July, and come at a time when China is facing power rationing due to a lack of electricity supply. The world economy’s long-awaited bounce back from the covid pandemic has also led to a general global surge in energy demand, and consequently higher oil and gas prices.

While the past couple of years have seen considerable excitement and momentum concerning the use of blue/green ammonia as a fuel, an announcement in August by Maersk, the largest shipping company in the world, has served once again as a useful reminder that ammonia is not the only candidate molecule. Maersk said on August 24th that it is ordering eight methanol powered vessels from South Korea’s Hyundai Heavy Industries at a total cost of $1.4 billion. Each giant ship will have the capacity to carry 16,000 twenty-foot [container] equivalent units (TEUs).

At a time when green (or maybe blue) ammonia is being looked to as a way of reducing carbon emissions, substituting for hydrocarbons in a variety of potential uses, a conference held at the start of June was a reminder that nitrogen, its neighbour on the Periodic Table, is by no means off the hook on the environmental front. The Eighth Global Nitrogen Conference – held over from last year because of Covid-19, and this year held virtually, as most events are for the time being – was the latest in a series of tri-annual meetings convened by the International Nitrogen Initiative (INI), with support from the UN Economic Commission for Europe (UNECE) and the German Ministry of the Environment. The INI grew out of the 1979 UNECE Convention on Long-range Transboundary Air Pollution and 1999 Gothenburg Protocol, and is concerned specifically with ‘reactive nitrogen’ (i.e. nitrogen not tightly bound to itself in a triple bond, which makes up 78% of the air around us).

Judging by the pages of the project announcements in our news section, you’d be forgiven for thinking that the ammonia and methanol industries were all running off hydrogen generated from electrolysis, and that we had already entered an era of ‘clean’ chemical generation which did not require fossil fuels as a feedstock. Of course, while companies can naturally be forgiven for wanting to put the best public face on their green credentials, it does obscure the fact that for the moment 99% of syngas generation comes from natural gas, coal, and some coke or naphtha.

The ammonia industry seems to have quite a buzz about it at the moment. As can be glimpsed in our Nitrogen Industry News section this issue, the number of proposed green ammonia production sites continues to grow, as does interest in ammonia as a hydrogen or energy carrier, while the shipping sector continues to seriously consider ammonia as a green fuel candidate for the longer term. The latter prospect could see current ammonia demand double by 2050, although as our article on sustainable nitrogen production on page 22 notes, whether enough renewable power will exist by then to generate that must be seriously doubted.

It can’t have escaped anyone’s notice that the question of the carbon intensity of ammonia and downstream nitrogen compound production has been one of the main industry talking points for the past year. Everyone seems to be talking about ammonia of different colours – green ammonia, blue ammonia, and all shades of turquoise in between. If you are confused, it may not be surprising, as these words have come to cover a wide variety of different methods and technologies for producing ammonia, and their green credentials consequently come in a whole range of different shades.