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Presidential Fertilizer Initiative Programme has commenced. Eleven blening plants are in now in full operation in different locations across the country. The fertilizer will be sold to farmers at a price of N5,500 per 50KG bag only by State Governments, registered distributors and dealers registered with FEPSAN. Intrested distributors/dealers to participate in the scheme can register with any of the blending plants and at FEPSAN office at No 1. NIDB Building, Muhammadu Buhari way, Kaduna. Whistle blower Nos: 08175777724, 08175077773

Energy-intensive nitrogen fertilizer manufacturing in some countries was traditionally reliant on naphtha and coal-fired power plants to fuel operations, but cost issues, stricter environmental legislation and advances in technology mean natural gas is now the feedstock of choice for producers.
When fertilizer production started as an industrial process, it was mainly concentrated in the developed world, where most of the crop nutrients are consumed. In recent decades, this dynamic has changed fundamentally and production has migrated to regions where raw materials – particularly natural gas due to its high hydrogen content – are more abundant and so cost less. As natural gas contracts are usually indexed to the cost of crude oil, the recent decline in global oil prices has been welcomed and resulted in some hikes in capacity.
Natural gas usage
Many developing countries in Africa, Asia and Latin America are increasingly looking to add value to their natural gas supplies, meaning nitrogen fertilizer production is an ideal fit as it takes advantage of ample local resources, reduces the need for imported crop nutrients, creates jobs and revenue streams, and boosts national socioeconomic development.
Natural gas accounts for 70 – 90% of the manufacturing cost of nitrogen fertilizer, meaning access to this reliable and cost-efficient energy source is vital if ammonia and urea producers are to maximise output and revenue. Curtailments or withdrawal of the feedstock force manufacturers to suspend operations or cut capacity. Over the past few years, gas supply issues – whether curtailments or payment delays – have hampered ammonia and urea producers to various extents in key export countries, including Trinidad and Tobago, Egypt, Ukraine and Indonesia. Producers have to juggle many factors in the supply chain to remain competitive, including the contract and spot prices of the vital feedstock and seaborne transportation costs that can vary greatly from quarter to quarter.
As the key building block for many fertilizers, ammonia is at the heart of the strong flow of investment for new plants in areas with an abundance of natural gas. This trend has been particularly evident in the US, where billions of dollars have been allocated to projects as part of the wider shale gas revolution.
Major players, such as CF Industries, Incitec Pivot Ltd (IPL), OCI, Yara and BASF, have spearheaded this expansion in capacity as they take advantage of competitively priced natural gas that averaged below US$3/million Btu during 2016. Easy access to significant natural gas supplies have certainly played a significant role in CF Industries’ success and in late 2016 the company became the owner of the world’s largest nitrogen complex when its Donaldsonville site, Louisiana, US, increased capacity to 4.3 million tpy from 3.2 million tpy. The majority of the ammonia is used for granular urea and urea ammonium nitrate (UAN) production, with surplus material sold on the merchant market.
In complete contrast, lack of natural gas forced the shuttering of Agrium’s largest facility – the 1.25 million tpy Nikiski plant in Alaska – in 2007, but the firm has been assessing a potential restart of the units if a reliable natural gas supply can be secured.
According to the International Fertilizer Industry Association (IFA), natural gas remains the main feedstock used in producing ammonia via the Haber-Bosch process and the key input for ammonia producers outside of China, where lignite and bituminous coal remain popular. “The use of other feedstocks, such as naphtha, fuel oil, hydrogen and electricity, continues to decline,” noted IFA President, Michel Prud’homme, during a keynote presentation delivered during the group’s 2016 annual conference in Moscow, Russia.
“Natural gas would see its contribution to global ammonia capacity rising from 69% in 2015 to 72%, 167 million t of ammonia capacity,” he announced to a large audience of fertilizer industry leaders. “Between 2015 and 2020, 97% of the world’s incremental ammonia capacity would be based on natural gas.
“Virtually all new projects in Latin America, Eastern Europe and Central Asia, West Asia, Africa and South Asia are based on natural gas, with very few exceptions in India, Indonesia, and potentially in Australia where projects would be based on coal, coalbed methane or oil refining products.
“By 2020, coal and petroleum coke would represent 26% of the feedstock for ammonia capacity (58 million t). China contributes 95% of this coal-based ammonia capacity; out of the nine new large ammonia units to be completed over the next five years, eight will be based on coal. Ammonia capacity based on other feedstocks would total 6 million t in 2020 and represent a 3% share of world ammonia capacity.” As the world’s leading source of merchant ammonia, Trinidad and Tobago is home to 11 ammonia plants – including units featuring the involvement of Yara, PCS and Koch – that produced nearly 4.4 million t in 2015, of which around 3.7 million t was exported, according to the IFA. Of the material destined for delivery overseas, just under 2.8 million t was transported to the US, meaning the imminent hike in domestic capacity has created a major headache for manufacturers on the island and left them searching for alternative destinations for cargoes that would have previously headed north.
The seismic shift in the international distribution network has seen major players, such as PCS, increasingly target spot and contract customers in North Africa (OCP Morocco) and northwest Europe (BASF), while Koch recently expanded its fleet of 40 000 t capacity ammonia tankers to improve its freight rates and has established fresh sales channels in Asia Pacific.
The industrial group secured long-term supply deals with Korean buyers LOTTE Fine Chemicals (LFC) and Namhae Chemical Corp. in late 2016 that will see each partner receive 200 000 t of ammonia during 2017. In turn, rival producers with export-oriented plants in the region, such as Yara and PETRONAS, have seen their market share diminish and they too have been left to explore other outlets for merchant ammonia over the coming months and years.
Challenges and curtailments
However, it is not just the substantial new nitrogen fertilizer capacity in the US that is worrying ammonia producers in Trinidad and Tobago. Plant operators have for years suffered from frequent natural gas curtailments – usually of 10 – 15% but occasionally spiking to more than 30% – caused by work on offshore platforms or pipelines. The impact has been two-fold; not only has the unreliability of feedstock reduced operators’ capacity and sometimes triggered unscheduled shutdowns, it has deterred major investment. One major operator revealed during 2016 it would prefer to upgrade existing units rather than invest more substantial sums in additional facilities given there have been no guarantees from the government as to when the situation will improve.
Once overwhelmingly considered the global benchmark for ammonia prices due to the relative high production costs of Ukrainian suppliers that favoured more cost-efficient manufacturers elsewhere in the world, the Yuzhny FOB (free on board) has lost its lustre over the past couple of years.
While the challenging geopolitical situation has resulted in some Ukrainian exporters halting production altogether, the performance of state-owned Odessa Port Plant (OPZ) has been crippled by natural gas shortages related to payment terms and gas debts. Due for privatisation during 2017, the company has been embroiled in a long-running dispute with Group DF that claims it is owed almost US$200 million or more for natural gas supplied to the plant in 2014 – 2015. At one point in 2015, OPZ even signed a gas-tolling agreement with Antra to enable its plants to keep running in a move that saw feedstock exchanged for ammonia and urea.
Gas supply problems have not just impacted fertilizer manufacturers in the Caribbean and Black Sea in the past few years, counterparts in North Africa have also experienced major disruption from feedstock shortages.
The two main nitrogen fertilizer producing countries in the region are Egypt and Algeria. In the former, which has a production capacity of over 4.5 million tpy of urea, production rates have been irregular for a while.
The problem is especially pronounced during the summer months when gas is diverted for domestic requirements. Since October 2016, the gas supply situation in the country has dramatically improved due to imports of liquefied natural gas (LNG).
However, Egypt’s supply situation may still be affected in the summer months in future years, especially if LNG imports are not sufficient. Egyptian urea manufacturers are understood to pay an average US$4.5 – 5/million Btu.
Algerian production rates have been more or less stable although the country does suffer from frequent shutdowns and logistical challenges.
The Middle East
With ample supply of natural gas (a prerequisite for most new fertilizer facilities), several new plants have sprung up in the Middle East as the region enjoys some of the world’s lowest cost feedstock. Until early 2016, Saudi producers, such as SABIC, SAFCO and Ma’aden, were paying less than US$0.75/million Btu, although that rate was hiked to US$1.25/million Btu as part of a Kingdom-wide upward adjustment in energy prices.
Between them, the companies produce and export millions of tonnes of nitrogen and phosphates fertilizers annually, with producers in nearby countries, such as QAFCO of Qatar, Razi Petrochemical Co. and Pardis Petrochemical Co. of Iran also benefitting from competitive natural gas costs due to large reserves that have provided them with a strong platform on which to build market share. Fully reliant on natural gas, the jewel in the crown of the region’s fertilizer projects is due to come online in Saudi Arabia in 2017 when the first phosphate rolls off the production line of the US$8 billion Wa’ad Al Shamal complex. The vertically-integrated complex is a joint venture between Mosaic, SABIC and Ma’aden and it will be one of the world’s largest integrated phosphate sites with a total production capacity of approximately 16 million tpy, as well as one of the lowest cost producers of finished phosphates globally.
Much of this output will end up in the fields and industrial units of India, a country eager to become more self-sufficient in fertilizers, but hampered in some areas by a lack of modern energy infrastructure, although the situation is improving, albeit slowly.
South Asia
In south Asia, the gas supply situation improved in 2016, which has led to more domestic urea production in countries such as India and Pakistan. India has revived defunct urea plants and increased domestic production by as much as 1 – 2 million tpy in 2015, and reduced its imports.
“Access to feedstock remains the key issue for the nitrogen industry in India,” the IFA noted in its May 2016 presentation. “Naphtha is still used by three ammonia-urea complexes, despite the government’s policy to shift all ammonia plants to natural gas feed. India’s urea production is projected to increase in the near term [from 24 million t], supported by new capacity, new energy norms, lower natural gas prices pegged at US$3.8 – 4.0/million Btu, and allowance for production beyond re-assessed capacity. The government has also allowed the continuation of production from the three naphtha-based urea units until natural gas supply is secured.”
In neighbouring Pakistan, there is talk for the first time of exports of urea. While this may not materialise, it is a clear indication of ample availability of urea, largely on the back of higher domestic production after the elimination of “chronic curtailments of natural gas supplies”.
In April 2016, energy chiefs cut natural gas costs to the fertilizer industry by almost 40% to around US$1.20/million Btu. “Improved access to more affordable natural gas supply in 2016 is seen as positive for enhancing the operating performance of urea producers,” the IFA noted. “If natural gas supply were adequately supplied, Pakistan’s urea demand of 5.7 million t could be entirely fulfilled with domestic production. Urea imports into Bangladesh also declined in 2016 as domestic production increased, although like in India the outlook could be a lot brighter.
“There is no significant expansion of natural gas supply in the near term, despite extensive rights in the Bay of Bengal and new gas extraction from Chevron Bangladesh in the Jalalabad gas field,” the IFA highlighted.
“The fertilizer industry in Bangladesh continues to suffer for a lack of gas supply; as of mid-May 2016, four of seven plants were reported idle, shutting out 1.7 million t of urea capacity on an annualised basis.
Fertilizer production activities in Southeast Asia are mainly centred on Malaysia and Indonesia, although natural gas costs were heard higher than many other parts of the world in 2016 at above US$4.00/million Btu, producers are considered competitive due to their proximity to key import markets.
Despite the feedstock price handicap, the likes of PETRONAS Chemicals have set aside billions for capital expenditure on natural gas related infrastructure. The Malaysian firm’s showcase fertilizer project SAMUR (Sabah Ammonia Urea) commenced activity in late 2016 in a move that established the group as the largest granular urea manufacturer in the region.
Similar substantial investment in new plants in Indonesia means that country will become the world’s fourth largest urea manufacturing country within the next four years, with several news plants on track to commence production by 2020. In late October 2016, Mitsubishi Gas Chemical (MGC) announced it had agreed to participate in a 700 000 tpy ammonia production project in Indonesia, through an investment vehicle. The US$830 million project in Banggai Regency, Sulawesi Island, is being implemented by PT Panca Amara Utama (PAU) and is due to start commercial operations in end-2017. The project will use natural gas from the Senoro-Toili gas fields (Donggi-Senoro) in Central Sulawesi.
China is the world’s largest ammonia and urea producer and the industry is continuing to undergo significant changes through large-scale restructuring that is bringing new capacity online, albeit based on alternative energy sources, particularly coal. According to IFA data, nine new ammonia and urea plants located in the coal-rich regions of the north and northwest will be commissioned in the next couple of years, adding about 5 million t of new capacity. In 2015, up to 90 small ammonia plants were shut down for good, of which the vast majority was focused on coal-based feedstock rather than natural gas.
In his Executive Summary during the speech in the Russian capital in 2016, the IFA’s Michel Prud’homme reiterated how energy prices continued to influence the prices of crop inputs and production costs during 2015: “Divergence in feedstock has polarized nitrogen capacity developments in China (which has been increasing its share of coal feedstock) compared with the rest of the world, which favours natural gas.”
“During the next five years, 97% of the planned ammonia capacity increase will be based on natural gas; however, despite massive capacity rationalization in China the share of coal in that country continues to expand and is to reach 82% of ammonia potential production by 2020, compared with 78% in 2015.”
https://www.worldfertilizer.com/special-reports/13062017/a-natural-boost/

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2nd Floor Bank of Industry Building 
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Mobile: +234 (803) 3174409...................sssss