U.S. manufacturers of ammonia-based nitrogen fertilizer made with low cost natural gas feedstock are raking in profits and moving ahead with plans to expand domestic operations.
Going to the source, farmer-owned cooperative CHS Inc. is working on plans to build a fertilizer plant in Spiritwood, ND, alongside the Bakken Shale. The company is looking toward a completion date of 2016 for project that would cost about $1 billion with a capacity of 2,200 tons/day of ammonia (see Shale Daily, Sept. 14, 2012).
“Certainly, the presence of inexpensive natural gas in the region was a driving force behind our looking into this region,” CHS spokeswoman Lani Jordan told NGI’s Shale Daily. “We are studying the sourcing of natural gas,” Jordan said, noting the presence of a railway line and highway near the site.
Natural gas accounts for about two-thirds of the final fertilizer product’s production cost at current prices.
The fertilizer plant would be the company’s first, and the production would replace imported fertilizer. “A plant like this is about production closer to home,” Jordan said. In 2011, the U.S. imported a record 54%, or 10.8 million tons, of its nitrogen fertilizer, according to the U.S. Department of Agriculture. Farmers would also benefit from lower fertilizer prices. Anhydrous ammonia prices are near $900/ton.
North Dakota has been encouraging the development of fertilizer plants as a way of decreasing the flaring of stranded natural gas. At its peak, more than one-third of production was flared (see Shale Daily, July 24, 2012; Aug. 17, 2012). Jeff Zent, communications director of the North Dakota governor’s office, told NGI’s Shale Daily the CHS plant is “part of the overall effort” to reduce flaring (see related story). “If you’re using more natural gas, it stands to reason that there’s less to be burned off.”
Others are profiting from expanding natural gas production. Deerfield, IL-based CF Industries Inc. enjoyed gross margins of 58% on its nitrogen products in 3Q2012, in part due to low natural gas prices (see Shale Daily, Nov. 8, 2012).
In November CF announced plans to expand two fertilizer plants in Donaldsonville, LA, and Port Neal, IA, at a cost of $3.8 billion. When both expansions are complete in 2016, the plants would have a combined capacity of 2.1 million tons/year of ammonia. About 30 MMBtu of natural gas is required to produce one ton of anhydrous ammonia, according to the Fertilizer Institute.
“The expansion of CF Industries’ capacity, at these locations in particular, allows the company to take further advantage of the global cost advantage of North American natural gas. Donaldsonville is served by five natural gas pipelines at essentially Henry Hub economics, and Port Neal is well positioned to access existing gas supply from the Rockies, Midcontinent U.S. and Canada, and the increasing supply expected to come from the Williston Basin,” the company said.
And Ohio Valley Resources LLC said last month it has selected Spencer County, IN, as the home for its new billion-dollar nitrogen fertilizer plant. The high-tech facility would produce about 2,420 tons/day of ammonia and 3,000 tons/day of urea ammonium nitrate solution to be used as fertilizer. The site was chosen in part because there is access to two interstate natural gas pipelines. The location also offers rail and highway access, as well as the potential for river access.
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