INTERVIEW | 'We can’t wait around for green hydrogen to scale — the world needs ammonia for food production now'




Our new blue NH3 plants are crucial for everyone but our plan doesn’t end there, says fertiliser giant OCI in exclusive interview with Hydrogen Insight


International fertilisers and chemicals giant OCI Global is building one of the world’s largest blue hydrogen-derived ammonia plants at its complex in Beaumont, Texas — at a vast cost of $1bn — without a single third-party offtake agreement in place.


As things stand at present, the Netherlands-based firm will offtake all the volumes for its own fertiliser production portfolio when Beaumont starts operations in 2025, despite courting Asian buyers and positioning itself to sell into European, Middle Eastern and US markets.


In fact, when construction started on new blue ammonia production capability at Beaumont in 2022, blue ammonia made from fossil gas-derived hydrogen with carbon capture and storage (CCS) was temporarily more expensive to produce than renewable ammonia, on account of sky-high gas prices.


This premium has now switched to a discount as gas prices have fallen, but OCI nevertheless estimates that gas prices will remain at three times the average over the past five years until at least 2025.


Not only that, but blue hydrogen and ammonia production attract a significant amount of opprobrium from environmental campaigners. Among the criticisms are that it incentivises yet more fossil-fuel production; that CCS infrastructure does not work, and that upstream methane emissions have an outsize impact on the climate (see panel below).


OCI’s answer to the question of why it is ploughing $1.1bn into a 1.1 million-tonnes-per-year new blue ammonia plant with uncertain gas prices and environmental opposition — not to mention underpinning Linde’s on-site $1.8bn blue hydrogen project, which will supply all the H2 for the ammonia plant — is a fairly simple one.


“Ammonia demand grows every year regardless,” Bashir Lebada, CEO of OCI’s methanol and fuels business (known as OCI Methanol and OCI HyFuels respectively), tells Hydrogen Insight. “We're constantly adding plants because demand is growing at a five, six per cent clip every year. And if we’re building [new] supply, we want to build it in the most low-carbon way we can, using the incentive programs that are in place for that. But now, the fact of the matter is that you cannot build green [hydrogen production] at scale.”


OCI has already had some painful experience of this. Until recently, when it sold its 50% stake in joint venture Fertiglobe to Abu Dhabi’s state-owned oil company Adnoc, the Netherlands-based company was co-developing a 100MW green hydrogen and ammonia plant in Egypt.


The project shipped its first green ammonia from the 15MW pilot phase in November, but the full 100MW capacity has been severely delayed, amid the project quietly dropping proton exchange membrane (PEM) electrolyser-maker Plug Power as the preferred supplier for scale-up.


Lebada would not comment on the progress of the Egypt project, which would have been one of the largest electrolysis projects in the world had it scaled-up on schedule by 2022, but he is adamant that blue ammonia will be critical to meet some of the world’s most fundamental needs.


“The world needs ammonia for chemical production, for nylon production, for food, for fertiliser,” he says. “But also then for all these new uses like marine fuels and power generation. Where’s the capacity going to come from?


“You cannot build a million tons of ammonia at scale today, which is what the market needs. We’re not going to just pause what we do as a business [to] grow and meet demand from markets just to wait for this technology to scale, which we think will take five or ten years, potentially.”


For Lebada, scale means building a 2GW green hydrogen plant using proton exchange membrane (PEM) “and not be worried about the technology”.


The biggest green hydrogen complex currently under construction, Air Products and co-developers’ 2.2GW Neom project in Saudi Arabia, is using Thyssenkrupp Nucera’s alkaline electrolysers, Lebada points out.


“We’re not there yet at all,” he continues. “So we’re just trying to do the best we can do, and blue is the best available.”




The company, which is also a major methanol producer, says it is committed to supporting at-scale green hydrogen production when that becomes feasible, but in the meantime its strategy is to build blue, and integrate the ability to switch to using renewable feedstocks in future — a practice Lebada refers to as “sleeving”.


Sleeving, for ammonia plants, means that although the Beaumont plant is billed as a blue ammonia scheme, it will as Lebada puts it, be able to blend “blue into green”.


In practical terms, this means that at first the plant will exclusively use blue hydrogen sourced from Linde’s on-site plant as a feedstock and capture the ammonia plant’s carbon dioxide for geological storage, resulting in blue ammonia.


But, if OCI is able to source green hydrogen, it can begin using this as a feedstock at the plant with its supply of chemically identical blue hydrogen, and sell some of the product as green (calculated as the weight produced with the renewable H2) and the rest as blue.


To this end, it has signed an offtake agreement for green hydrogen with New York-based New Fortress Energy (NFE) from its proposed 200MW ZeroPark1 in Texas — with which OCI says it can produce 80,000 tonnes of green ammonia per year at Beaumont from 2025, doubling to 160,000 tonnes in 2026.


“The beauty of blue is, just like we're going to do in Texas, is it allows you to sleeve,” says Lebada. “So I can build a million tonnes of ammonia plant and contract with New Fortress Energy to get hydrogen that allows me to produce a couple hundred thousand tonnes of ammonia and still produce 800,000 tonnes of blue ammonia at that plant.”


It should be noted that OCI is not taking technology or capex risk on Linde and NFE’s blue and green hydrogen plants (and in Linde's case, it is also taking these risks on CCS infrastructure, including its geological sequestration). However, it could be taking a volume risk if either of those plants fail.


In fact, OCI’s deal with NFE is “enabling” the ZeroPark1 project, according to Lebada, which in turn entails the Dutch company “taking a lot of the risk with our offtake”.


Existing production


But what about existing ammonia production? OCI produces seven million tonnes of ammonia today — almost all of it grey — however Lebada is reluctant to give a timeframe for the decarbonisation of the entirety of its production, pointing out that the company’s plants, many of which are smaller, are dispersed over many different geographies.


The company also has three million tonnes of annual methanol production capability. Methanol, made by binding together hydrogen, oxygen and carbon, forms a building block for a vast array of chemical products. More stable at ambient temperatures and non-toxic, it is also likely to be a low-carbon (or carbon-neutral) fuel for marine and road transport.


“For all of our plants, especially the methanol ones, our plan is to slowly chip away at the current fossil feedstock by adding over-the-fence green feedstocks — whether that be renewable natural gas or green hydrogen from electrolysis — and then slowly take down our fossil feedstock instead of kind of replacing it,” says Lebada.


In general, the decarbonisation of OCI’s methanol production plants will be much harder than that of its ammonia assets, due to the need to find a supply of biogenic carbon, Lebada tells Hydrogen Insight.


“It just makes the technology a little bit harder when you’re dependent on gasification technologies [which can make biogenic carbon from biomass]... which are slowly starting to scale,” he says.


“We’re starting to see the first couple commercial-scale gasifiers come on line this year. Renewable natural gas is growing exponentially and we’re also seeing sources of biogenic carbon [where] paper and biomass power plants do carbon capture projects. So, we’re catching up.”


Counterintuitively, Lebada argues that new markets for ammonia and methanol, especially those using them as fuel, will facilitate rather than hinder the decarbonisation of its chemicals portfolio.


“It’s so difficult to decarbonise the chemical downstream production,” he says. “We see it with our green methanol. We see it with our green ammonia. The premium required to afford those products other than the fuel market is just not there for the chemical industry. They’re not willing to pay that premium because there’s just so many chinks in the chain to get down to the consumer product.”


Either way, projects are dependent on subsidies


The reluctance of typical ammonia buyers to pay more for green products is borne out by comments made by an executive at one of OCI’s rivals Yara last year, who pointed out that farmers cannot and will not ask their customers to pay more for food.


This fact is further illustrated by the fact that OCI is building its massive Texas blue ammonia without any offtake contracts — meaning that for now, the company will be buying up all of its own supply from Beaumont for its fertiliser plants.


It’s doing this partly because it can rely on a supply of blue hydrogen subsidised by the US government’s Inflation Reduction Act (IRA) — specifically the 45Q tax credit which awards $85 per tonne of CO2 geologically stored or $60 per tonne used for industry or enhanced oil recovery — and also because the EU’s carbon border adjustment mechanism (CBAM), set to begin in earnest in 2026, will shift some competitive advantage towards importers of “building block” chemicals such as ammonia.


Lebada will not say whether these subsidies will be enough to bridge the gap between its blue ammonia production and the market price for grey, a gap estimated by consultancy CRU Group in July 2023 at around $119/tonne.


Analysis from CRU Group found that Beaumont would be eligible for IRA subsidies of up to $145/tonne, more than enough to fill the gap, although OCI CEO Ahmed El-Hoshy has said in the past that the plant needs to offload blue ammonia at premium prices in order to justify the $1bn capex.


For this reason, the company also has its eye on the fuel markets, predicting that the EU’s FuelEU Maritime, which mandates shipping emissions reductions of 2% from 2025 ratcheting up to 80% by 2050, as well as EU Emissions Trading Systems reform, will ramp up European demand for use in shipping.


And OCI is especially keen to attract high-paying buyers in Asia-Pacific, where some power producers want to co-fire ammonia with coal in their existing power stations — a controversial choice — in order to keep their plants on line while achieving some emissions reduction.


But here as well, the availability of public money is imperative to getting these buyers on board, admits Lebada.


“Government subsidies in this region are still under development and will likely impact the ability to purchase green products,” he says.



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