LSB Industries estimates its Houston Ship Channel blue ammonia project will add approximately $150m of EBITDA annually, CEO Mark Behrman said today.
The facility, which would produce approximately 1.1 million metric tons of ammonia and capture and sequester 1.6 million metric tons of CO2 annually, is currently in the pre-FEED phase and planned for construction on the Vopak Exolum Houston Ship Shuttle Ammonia Terminal.
Behrman gave a back-of-the envelope estimate assuming the cost of the facility would come in at $800m, resulting in the added $150m of annual EBITDA .
“If you could tell me what the cost is, we’re only in pre-FEED now, but if we used an $800m cost, and I’m not suggesting that that’s the cost, I think we really need to go through our engineering, and we look at the types of returns that we would want, I would guess that for a very stable and steady stream of income, it’s probably somewhere in the neighborhood of $150 million annually,” Behrman said.
Oklahoma-based LSB will use a project finance model to fund the project, the company previously said, giving estimates of between $500m – $750 for the cost.
LSB expects initial offtakers based out of Japan and Korea, but Behrman said today that, more recently, “we have had conversations with potential European offtakers and are encouraged as we now believe Europe to be a viable target market as well.”
The company is developing the facility in partnership with INPEX, Japan’s largest E&P company, and plans to build and operate an ammonia synthesis loop using low-carbon hydrogen produced by Air Liquide, who will also handle the carbon capture and sequestration as well as the nitrogen supply.
El Dorado
Meanwhile, LSB expects to add up to $20m of EBITDA per year from the installation of a carbon capture unit at its ammonia facility in El Dorado, Arkansas.
LSB has partnered with Lapis Energy on the project, which will capture and sequester 450,000 metric tons of CO2 per year from El Dorado’s ammonia production. Lapis will receive 45Q tax credits of $85 per ton of CO2 sequestered and pay a fee to LSB for each ton.
In turn, LSB will produce 375,000 tons of low-carbon ammonia that can be sold at a premium, executives said on an investor call today.
“All combined, this should equate to an estimated 15 to $20 million in annual incremental EBITDA for LSB,” CEO Mark Behrman said.
“The main gating factor is the approval of our Class VI permit application from the EPA that will enable Lapis to begin construction and then capturing and permanently sequestering,” he said. Indications from the EPA are that they are on track to issue the permit during 2025, he added.
At the same time, LSB elected to delay the expansion of production capacity at the El Dorado facility citing commodity market conditions, planned turnarounds and other initiatives the company has underway.
The El Dorado expansion project has been selected to receive funding under the USDA Fertilzer Production Expansion Program, a financing element under which LSB expects to have five years to complete the project once approved for the grant.
LSB previously paused a green ammonia project planned for Pryor, Oklahoma, citing lower gas prices, higher power prices, and uncertainties around tax credit incentives under 45V that created conditions favoring blue ammonia projects.
