Project finance, Project news, Regulatory

Data: North America blue ammonia project status

Since ammonia as an energy commodity is still a new idea with a yet-to-be-created market, there’s a general sense of uncertainty looming over the industry.

May 8, 2024

As of April 2024, there are 42 blue ammonia projects in North America, including announced, greenfield, suspended, and projects that have reached a final investment decision (FID), according to data gathered by ReSource.

The vast majority of them, 34, are located in the United States. Over 60% of them are in the Gulf Coast region. Thanks to their attractive energy infrastructure and ports, from where producers could easily export the product to eager markets like Europe, Japan and South Korea, Texas and Louisiana are emerging as the undisputed North American hubs for blue ammonia.

Canada has eight blue ammonia projects, mostly concentrated in Alberta.

As a region with a strong oil and gas industry and already a natural ammonia hub sitting on major ammonia trade routes, North America, and the US in particular, is well positioned to dominate a future global blue ammonia market, according to a source familiar with the industry.

Overall, 20 North American projects are at a greenfield status, understood as comprising any project that has developed past a feasibility study stage, while an additional 19 have been announced, one has been suspended, and two have achieved the FID milestone.

OCI Global started building its blue ammonia project in Beaumont, Texas, in December 2022. The plant will receive the necessary low-carbon hydrogen supply from Linde, and, once it starts operations in 2025, it is expected to produce 1.1 million tonnes of blue ammonia per year, which, according to OCI, would make it the largest blue ammonia plant in the world.

One year later, in November 2023, Air Products received final investment approval for its $7bn clean energy complex in Louisiana, which will produce both blue hydrogen and blue ammonia.

Both companies have a robust network of existing relationships and infrastructure to rely on to offset the risks, which facilitates securing investments and offtake agreements, according to the source.

Another major blue ammonia project, Nutrien’s Geismar Clean Ammonia facility, which had a planned $2bn of capex, was officially suspended in August 2023 because of market uncertainty and high capital costs.

The project’s suspension could be a sign that some fertilizer producers are hesitant to invest in blue ammonia production if major energy players like ExxonMobil are also entering the space with their vast resources, according to another source familiar with the market. At the moment, around 70% of ammonia produced globally is used as a fertilizer, with the remainder used for industrial applications such as plastics, according to the International Energy Agency.

Since ammonia as an energy commodity is still a new idea with a yet-to-be-created market, there’s a general sense of uncertainty looming over the industry. Project developers are waiting for off-takers to move forward, while the off-takers are waiting for the project developers to take the first steps, especially as government subsidies like the 45V tax credit are still being worked out, according to the first source.

Of the nine main companies involved in blue ammonia projects in North America, however, the majority have been operating in the fertilizer industry for years.

With five ongoing projects, CF Industries is the most active one. As CEO Tony Will said in a recent investor call, the company expects the largest source of clean ammonia demand to come from Japan, and it has arrangements in place to develop one of its blue ammonia projects with both JERA Co. and Mitsui.

(ReSource initially recorded CF Industries’ arrangements with JERA Co. and Mitsui as two separate projects, but condensed them into one after executives said they would seek to align them under a single project during the investor call.)

The prediction is in line with Japan’s active role in the development of many North American clean fuels projects – around 4% of all clean fuels projects in North America have one or more Japanese firms involved as co-developers, equity investors, or off-takers. Accordingly, JERA and Mitsubishi come right after CF Industries for blue ammonia activity, being involved in four projects each.

Two things will play an important role in the future: what the carbon intensity reduction threshold is for a project to claim to produce blue ammonia, and how the nascent industry will adapt to the disarray in gas prices caused by Russia’s war in Ukraine.

The coming months will clarify which of the flurry of projects announced in the past couple of years are actually moving forward.

Unlock this article

The content you are trying to view is exclusive to our subscribers.

To unlock this article:

You might also like...

Innovation, Project news

Equatic releases whitepaper on carbon dioxide removal

A fledgling company with a relationship with Boeing is marketing a process for seawater electrolysis to capture and store CO2 while producing hydrogen.

Carbon removal company Equatic has developed a process that relies on seawater electrolysis to capture and store CO2 while producing clean hydrogen, according to a news release.

A white paper written with consultation from EcoEngineers outlines Equatic’s approach to quantifying and verifying the carbon removal process.

Equatic operates two pilots in Los Angeles and Singapore. The company sells carbon removal credits and recently announced a pre-purchase option agreement with Boeing.

Under that agreement, Equatic will remove 62,000 metric tons of carbon dioxide and will deliver 2,100 metric tons of carbon-negative hydrogen to Boeing.

August 15, 2023

Innovation, Project news, Raising capital

Verde Clean Fuels to develop lower carbon gas refinery in West Texas

The project would consume natural gas in the pipeline-constrained Permian Basin as feedstock, potentially mitigating the flaring of up to 34 million cubic feet of natural gas per day.

Verde Clean Fuels, Inc. and Cottonmouth Ventures LLC, a subsidiary of Diamondback Energy, have executed a Joint Development Agreement for the proposed development, construction, and operation of a facility to produce commodity-grade gasoline utilizing associated natural gas feedstock supplied from Diamondback’s operations in the Permian Basin.

The JDA provides a pathway forward for the parties to reach final definitive documents and Final Investment Decision for the proposed project, according to a news release. The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close, such as FID.

The expectation for the project is to produce approximately 3,000 barrels per day of fully-refined gasoline utilizing Verde’s patented STG+® process. By consuming natural gas in the pipeline-constrained Permian Basin as feedstock, the proposed project could demonstrate the ability to mitigate the flaring of up to 34 million cubic feet of natural gas per day, while also producing a high-value, salable product.

“The Verde Clean Fuels team is incredibly excited to finalize this JDA with Diamondback Energy with the goal to produce gasoline from natural gas in the Permian Basin,” said Ernie Miller, CEO of Verde. “This arrangement brings compounding economic and environmental benefits to West Texas. We believe that the ability to de-bottleneck midstream constraints along with the potential to reduce flaring of natural gas, while creating less carbon intensive gasoline, is of paramount interest to natural gas producers.”

“This agreement, with the first planned project in Martin County, fits perfectly with Diamondback’s strategy to decarbonize the oil field while ensuring a return for our investors,” said Kaes Van’t Hof, President of Diamondback. “Additionally, the scalability of the project is incredibly exciting, with similar natural gas-to-gasoline facilities possible across Diamondback’s locations in West Texas. We are proud to partner with Verde to bring this technology to the market.”

The proposed facility, which is to be located in Martin County, Texas in the heart of the Permian Basin, could serve as a template for additional natural gas-to-gasoline projects throughout the Permian Basin and other pipeline-constrained basins in the U.S., as well as address flared or stranded natural gas opportunities internationally.

February 13, 2024

Project finance, Regulatory

IRS 45V tax credit rules draft stricter than EU

A leaked draft report of pending 45V guidance from the US Treasury Department has advocates of the emerging green hydrogen industry warning of too-stringent measures.

US Treasury guidance for clean hydrogen producers to claim the top $3/kg rate of the hydrogen production tax credit could be overly onerous on the fledgling industry, according to responses to reporting on a draft in Politico and Bloomberg.

Reportedly, new rules include requirements that hydrogen be produced from newly created renewables (additionality), as well as geographic correlation and hourly time-matching requirements to qualify for the top rate.

“The proposal suggests that there will be an hourly matching requirement from 2027, making the rules stricter than those in the EU: a surprise to many, and potentially problematic in the eyes of some,” Ben Heininger, a manager at Baringa, said in a statement on LinkedIn. “This will lead to a material increase in costs, given the challenges in procuring firm 24/7 green power – a boon for storage developers no doubt.”

The increase in cost will drive the levelized cost of hydrogen higher and producers will likely have greater concerns over competitiveness for exports, Heininger said.

“If true, the Biden Administration’s proposed strategy for implementing these provisions will fail to get this new industry off the ground,” Jason Grumet, chief executive officer of the Washington-based American Clean Power Association, said in a statement yesterday. “It is surprising and disappointing that the administration would propose such a rigid approach that is at odds with decades of learning about new technology deployment.”

The 45V tax credit was originally unveiled as part of the Inflation Reduction Act and is split into four rates based on emissions intensity.

Hydrogen project developers and investors worry that stringent 45V rules will put the nascent industry on its back foot, significantly enough to kill projects by increasing the cost of green hydrogen production as the number of hours an electrolyzer can be operational is reduced and the sources of energy from which they can purchase power is limited.

December 5, 2023

Innovation, Project news, Raising capital

Exclusive: Coal bed methane producer seeking capital partners

A western US company producing RNG by injecting biomass into coal seams is preparing a Series B and has a line of site to financing and contracting EPC for a series of projects in western coal fields.

Cowboy Clean Fuels, a Wyoming-based RNG producer, is preparing to launch a Series B to reach commercialization, CEO Ryan Waddington told ReSource.

CCF injects biomass feedstock like molasses into the coal seams of spent coal mines about 1,000 ft. below surface, relying on the endogenous microorganisms living in those seams to produce methane, Waddington said. Capex on projects is low, up to $6m each.

The company raised $10m in a Series A and will seek to raise that same amount for a Series B. The company has been assisted by Syren Capital Advisors.

Projects are set up as separate entities under the parent, Waddington said. Six projects, each ranging from 70 to 300 wells, are in the company’s pipeline now in the Powder River Basin of Wyoming and Montana.

“We can replicate this 1,000 times,” Waddington said of the immense number of available wells in the region, which can be acquired cheaply. Additional growth could come in the San Juan region of New Mexico, where coal capacity is being retired quickly.

The fuels could be sold as renewable diesel into markets with incentives, like California’s LCFS, Waddington said. The renewable fuel is significantly (10X) more expensive than natural gas produced as a by-product of oil production. But, CCF is not looking to participate in the LCFS program or the EPA-run RFS program.

“The voluntary market for RNG has really taken off,” he said. A contract for renewable diesel offtake is pending with a Wyoming-based oil and gas company looking to lower its CI score.

CCF’s projects are much larger than a typical RNG project, Waddington said; the first project will produce at some 700 cfpy and include 185 tons of CCS. CCF is looking for EPC providers now.

The executive team of CCF has a minority position of the company, Waddington said. The founders and the management team together have a majority position.

The company’s first 139-well project in Wyoming is awaiting final approval from the federal Bureau of Land Management.

CCF is primarily VC-backed to date. The company received approximately $7.8m through the Energy Matching Funds program of the Wyoming Energy Authority early this year.

April 2, 2024

exclusive

Project finance, Project news, Raising capital

Mitsubishi laying groundwork for additional equity raise

Mitsubishi Power Americas and its JV partners are preparing to raise additional equity for the ACES Delta project in Utah, as well as for other hydrogen developments in the Americas.

Mitsubishi Power Americas is conferring with its financial partners to raise equity from existing investors in the Advanced Clean Energy Storage (ACES) Delta green hydrogen project in Utah, Senior Vice President, Investment and Business Development Ricky Sakai said in an interview.

Haddington Ventures formed Haddington ESP I and raised $650m in June 2022 from institutional investors to fund projects developed by ACES Delta, which is a joint venture between Mitsubishi Power Americas and Haddington portfolio company Magnum Development.

The investors — AIMCo, GIC, Manulife Financial Corporation, and Ontario Teachers’ Pension Plan Board — have additional rights to increase their collective investment to $1.5bn, according to a press release announcing the deal.

The first phase of the project in Utah will be to produce 100 tons of hydrogen per day. Once that is complete, existing investors can scale up their investment, Sakai said.

Mitsubishi is involved in several regional hydrogen hubs applying for funding from the US Department of Energy.

Hydrogen capable

Depending on how that $7bn is ultimately allocated, Mitsubishi is interested in replicating the Utah project in other regions, a source familiar with the company said.

MPA and Magnum recently closed on a $504.4m loan guarantee from the DOE for ACES Delta, electrolyzers for which will be supplied by Norway-based HydrogenPro.

ACES Delta will support the Intermountain Power Agency’s IPP Renewed Project — upgrading to an 840 MW hydrogen-capable gas turbine combined cycle power plant using Mitsubishi’s M501JAC gas turbines. The plant will initially run on a blend of 30% green hydrogen and 70% natural gas starting in 2025 and incrementally expand to 100% green hydrogen by 2045.

Mitsubishi is also supplying the hydrogen-capable gas turbines to Entergy’s Orange County Advanced Power Station; to an Alberta coal plant owned by Capital Power; and to J-Power’s Jackson Generation Project in Illinois, which reached commercial operations last year.‍

Investing in startups

Mitsubishi is doubling down on a strategy of investing in startup producers and technology in renewable fuels, Sakai said.

Recent investments in the space include: C-Zero, a drop-in decarbonization tech startup in California; Cemvita Factory, a Houston-based synthetic biology firm focused on the decarbonization of heavy industries; Infinium, an electrofuels company innovator in California forming decarbonization solutions for industries in Japan; and Starfire Energy, a modular green ammonia solution provider in Denver.

Series A and Series B valuations for US companies are much higher now than they were a few years ago, Sakai said. Still, the US is the leading climate tech startup ecosystem in the world and provides rich opportunity for capital deployment, Sakai said. Biofuels, SAF and waste-to-energy are leading sectors for MHI investment moving forward.

“We have several hundred of these in the pipeline that we are looking at right now,” he said. “In the next few years, we will increase the number of these portfolio companies.”

March 30, 2023

exclusive

Project news, Raising capital

Waste-to-hydrogen developer hires advisor for equity raise

A California developer of waste-to-hydrogen projects has mandated a boutique advisor to raise equity for early-stage project development and is planning a larger funding round in early 2024.

Clean Energy Enterprises, the holding company of awaste-to-hydrogen project developer based in Long beach, California, hasmandated a financial advisor to raise equity for early-stage development, CEO Jean-LouisKindler said in an interview.

Costigan Capital Partners, of Vancouver, Canada, has beenretained to raise an early round of $5m, Kindler said. That liquidity, split evenlybetween a demonstration project in California and operations, will last aboutone year.

Clean Energy is the holding company of WaysH2, which is thecompany developing the projects.

Next year Clean Energy will conduct a raise of equity anddebt between $30m and $50m, Kindler said.

Clean Energy, which is owned by five founding partners and earlyfriends-and-family backers, is also narrowing options for the first WaysH2 commercialproject in the US, Kindler said. The company has a client that will use hydrogenfor municipal transportation in the southwest.

The group has a relationship with Spanish EPC firm TechnicasReunidas and plans to pursue another demonstration project in either Spain or Portugal.

The technology play is waste-to-hydrogen at landfillprojects to serve end users in local mobility and waste processing energyrequirements.

He pointed to California’s SB 1383 regulations, which mandatesa reduction of organic waste disposal by 75% by 2025.

“It will be used locally,” Kindler said of the hydrogen. Thecompany is also in discussions with foreign ammonia producers. “We want to beclose to our clients.”

May 17, 2023