small scale ammonia where it’s needed
TRANSCRIPT
Small scale ammonia where it’s needed
MAGAZINE | SEPTEMBER 2018
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Small scale ammonia where it’s needed
MAGAZINE | SEPTEMBER 2018
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ON THE COVER
CONTENTS
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03 Comment
05 World News
10 The Middle East in FocusPriyanka Khemka, Nexant, USA, looks at the key trends and challenges in the Middle East fertilizer market.
18 What’s on the Horizon?Ruth Sharpe, Argus Media, UK, takes a detailed look at the ammonia market, and discusses the impact that new capacity will have.
23 A Modular MethodCarrie Lalou, Linde Engineering, USA, explains how a modular approach to construction can be used to increase ammonia production with minimal capital.
27 Small Changes, Big Impact VK Arora, KPI, USA, looks at how to upgrade reforming capacity with minimum modifications.
37 Food for Thought Dr. Jörg Weidenfeller, ARVOS | SCHMIDTSCHE SCHACK, Germany, discusses important things to consider when revamping a process gas cooler system in an ammonia plant.
41 Key to the Future Wally Schaefer, Jorvic Vital and Melissa Callejo, Nalco Water, USA, explain the importance of heat exchanger monitoring data in enabling the ammonia plants of the future.
45 A Digital TwinStefano Signor and Miquel Àngel Alós, Inprocess, Spain, and José Ramón Ferrer, Espindesa, Spain, present a software tool that acts as a digital twin of a real nitric acid plant.
51 A Big ImpactRalph Weiland, Simon Weiland, and Mathew Bailey, Optimized Gas Treating, USA, explain how diethanolamine affects CO2 removal by hot pot.
57 In the Picture Paul Cannon, Microtrac, USA, explains how online dynamic image analysis can help optimise NPK production.
61 Ticking the BoxesJuan Hailer, INGETECSA, Spain, and Vasil Statev, BC Consult, Bulgaria, provide an overview of the design criteria for reactors and mixers for calcium feed phosphates.
67 A Change of ScreenTountzer Ramadan, RHEWUM, Germany, presents a case study on the installation of direct excited polishing screens at a fertilizer plant in Bulgaria.
71 The Future of FertilizersThomas Lansdorf, EIRICH, Germany, explains the challenges for agriculture and offers solutions for individually designed fertilizers.
75 Heavy Metal Removal John Lampariello, Solvay Technology Solutions, USA, explains the importance of heavy metals removal from the phosphate value chain.
80. 15 FactsThis month we give you 15 facts on the Middle East.
Localised, small scale ammonia production makes economic sense in regions where both demand and transportation costs are high. Modularisation is key to achieving a balance between cost and efficiency. The Linde Ammonia Concept™ (LAC), a simplified production technology, coupled with a high degree of modularisation, can help producers meet local need.For more information visit: www.leamericas.com/ammonia
1918
Ruth Sharpe, Argus Media, UK, takes a detailed look at the ammonia market, and discusses the impact that new capacity will have.
Changing international trade fl ows and speculation over the emergence of new export capacity have created volatile trading conditions in the ammonia market in 2018. The
global supply and demand outlook is fi nely balanced and sellers remain wary of pushing up prices too quickly, with the market exposed to new capacity that is close to reaching the export market.
Supply has been squeezed in the 2Q18, driven by strong demand from eastern markets, extended maintenance periods and high gas prices. This has left participants reluctant to commit to spot purchasing and buyers are instead keenly tracking the progress of new plants in the US, Indonesia, and Russia with the expectation that once they are producing at full capacity, there should be a signifi cant drop in pricing.
Three large scale ammonia plants are in the process of coming online this year. In the US, the 750 000 tpy Freeport ammonia unit has already made its fi rst export shipment, and will play a role both in reducing the US' reliance on imports, as well as bolstering US exports.
Additionally, the 660 000 tpy Panca Amara Utama (PAU) ammonia plant in Indonesia loaded its fi rst cargo in early July, indicating it is nearing targeted production rates and adding to the global supply balance after being delayed by
nearly eight months from its previous deadline. This will be joined at the end of 2018 or early 2019 by the 890 000 tpy Eurochem Kingisepp facility in Russia.
Although the addition of these facilities will undoubtedly keep the market under sustained pressure going forward, the timing of when the units can produce and maintain regular export shipments to the international market is keeping an element of uncertainty around spot trading this year.
New trade routes emergingRunning parallel to these new capacity additions, the ammonia market is in the midst of a period of rapid change and trade routes are evolving to meet rising demand in non-traditional markets. Plummeting US imports are being offset by an increase in buying from Morocco and China, and the increase in longer haul shipments is creating new associated costs and risks for buyers and sellers.
The change in trade dynamics has created a divergence in the supply and demand balance between the markets east and west of Suez. Demand is strong in China, South Korea and Taiwan (see Figure 1) and a lack of availability for spot ammonia in southeast Asia and the Middle East has pushed more tonnage from Yuzhny and Trinidad to eastern markets. The new PAU unit in Indonesia should reduce some pressure
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COMMENTJAMES LITTLE, MANAGING EDITOR
SEPTEMBER 2018 | WORLD FERTILIZER | 3
MANAGING EDITORJames [email protected]
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CONTACT US Newton’s Third Law of Motion states that every action has an equal and opposite reaction. In purely scientific terms this means that every action and reaction are a force and are equal in
terms of magnitude and opposite in direction. The two are inseparable – you slap me and we both experience pain. Fire a gun and it will recoil. Because of this fundamental logic it has become enmeshed in popular parlance and it is used frequently where one transfer is contingent on the other. We get a kick out of these concepts and there are lots of variations, Quid pro quo,
tit for tat, give and take, the law of unintended consequences, and even the butterfly effect. All based, often somewhat loosely, on Newton’s premise that action and reaction are paired.
Unintended cause and effect, or action and reaction, conspired precisely in this manner during June in Europe when in the midst of a Summer heat wave and with the football World Cup in full swing, it was reported that beer supplies were suddenly in short supply across the continent. Inevitably this led to panic buying that only served to exacerbate the problem. The cause of this supply disruption was a lack of CO
2 widely used to provide the bubbles in fizzy drinks, as well as in
fresh food packaging and even in meat processing plants to stun animals prior to slaughter. CO
2 is a by-product of ammonia production and with market prices for
this key fertilizer ingredient at a low, a glut of available supply plus the high cost of natural gas feedstocks, many European producers had embarked on extended maintenance programmes, and in a couple of cases forced shutdowns, in 2Q18, causing acute shortages of CO
2 at many breweries and industrial facilities.
This unforeseen consequence of ammonia plant shutdowns is clearly not a cause for real alarm and the problem has gradually been rectified as plants come back on stream, but all too often the results of actions taken unwittingly do unfortunately have significant consequential knock-on effects. For example, Turkey’s Southeastern Anatolia Project (GAP) will undoubtedly provide a significant boost in terms of energy and jobs within Turkey. However, the construction of 22 dams along the Tigris and Euphrates will have an adverse effect on downstream Iraq at a critical time in the country’s regeneration. Water levels are already dropping significantly in Iraq and with more than a third of the country’s 37 million population reliant on agriculture, the implications must provide cause for concern for the international community. But so too should the looming threat of trade wars between key economic power houses around the world, the imposition of new sanctions on Iran, and the ongoing Brexit negotiations between the UK and the European Union to name but a few of the issues currently filling news pages. For every action there is a definite reaction but it is often some time, and only with the benefit of hindsight, before we truly understand the implications of that reaction.
This month World Fertilizer will be out and about attending the Ammonia Symposium in Toronto, the Anna Conference in Calgary, the Turbo Machinery & Pump Symposia in Houston, The GPCA Fertilizer Convention in Muscat, and the Africa Fertilizer Agribusiness Conference in Cape Town - it is certainly going to be a busy month. We look forward to meeting many of our readers at these key industry events.
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WORLD NEWS
SEPTEMBER 2018 | WORLD FERTILIZER | 5
Haldor Topsoe has been awarded a contract by TechnipFMC for the license and engineering of two
2200 tpd ammonia plants.These plants will be based on Topsoe’s ammonia
technology, and are part of the Indian government’s revival plans for the domestic fertilizer sector. Three out of the four current fertilizer plant revival projects in India are based on Topsoe ammonia technology.
TechnipFMC awarded Topsoe the contract for the two plants for Hindustan Urvarak and Rasayan Ltd (HURL). The complexes in Sindri and Barauni will each consist of a 2200 tpd ammonia plant and a 3850 tpd urea plant. They will be realised by TechnipFMC, France, along with its consortium partner L&T Hydrogen Engineering, India.
Arun Kumar Gupta, Managing Director, HURL, said: “The HURL projects at Sindri and Barauni not only show the commitment and support of the Indian Government, NITI Aayog (National Institution for Transforming India), the Department of Fertilizer under the Indian Ministry
of Chemicals and Fertilizers, but also the three promoter companies, all well-known in the area of mega-project management.”
Amy Hebert, Executive Vice President and Deputy CEO, Topsoe, added: “We are extremely pleased to be able to continue our long-standing support of the Indian Government’s efforts towards self-sufficiency in urea production and as a consequence: food security. Our world-leading ammonia technology and catalysts are the basis for three out of the four fertilizer plant revival projects in India right now.”
These two new plants are part of the Indian government’s revival plans for the fertilizer sector to ensure Indian self-sufficiency in urea fertilizers. In 2015, Topsoe was awarded the ammonia technology license, basic engineering, technology, and catalysts for an ammonia plant for the Ramagundam Fertilizer Project. This 2200 tpd ammonia plant is also a revival project scheduled to commence operation in 4Q18.
INDIA Topsoe awarded contract for two ammonia plants in India
Centrex Metals Ltd has announced that it has visited CDE Global’s construction facilities as part of its
client review for detailed design on the startup 70 tph wet processing plant for its Ardmore Phosphate Rock Project.
The startup plant will be a 70 tph circuit and will be used to produce premium grade phosphate rock concentrate to deliver large scale trial shipments in 2019 to potential customers requesting them, in order to secure long-term offtake contracts for the projects. The 70 tph modular startup wet processing plant will be designed as an oversized module capable of being upgraded to an eventual 140 tph circuit for the proposed full scale 800 000 tpy premium grade ultra-low cadmium phosphate rock concentrate operation in Ardmore.
According to the statement, Optima Consulting has completed feasibility level mine designs and associated studies for Ardmore and is preparing maiden Ore Reserve Statements for the project. GR Engineering Services (GRES) has reportedly completed engineering design for
the mine and processing operations, with WSP Global completing engineering design for associated offsite infrastructure. Cost estimations from the mining studies along with those from the engineering designs are now being compiled by GRES and are expected to be completed at the end of August once some outstanding quotations have been received from vendors.
In addition to this, Centrex claims that Integer Research has completed a phosphate rock market review and pricing feasibility study for Ardmore to feed into revenue forecasts for the overall feasibility study. Write up of the feasibility study report has begun, and the study’s results are now expected to be announced to market in September 2018 once complete.
Centrex will visit a customer’s single superphosphate plant in the local region next week to oversee the second of two 4000 t paid trials of run of mine ore from the project. Centrex claims that it observed the first trial a number of weeks ago at another customer’s plant, and received positive feedback.
AUSTRALIA Centrex provides update on Ardmore project
WORLD NEWSIN BRIEF
6 | WORLD FERTILIZER | SEPTEMBER 2018
NEWS HIGHLIGHTS
• Danakali releases Colluli Sulphate of Potash project update
• Nutrien ready to release idle potash capacity if BHP attempts entry
Visit our website for more news:
www.worldfertilizer.com
S inochem Group and Belarusian Potash Co. have signed a five-year
memorandum on the supply of a new type of potash fertilizers (halurgic granular white Muriate of Potash with the addition of zinc and sulfur).
According to the memorandum this product will be supplied to the Chinese market during a five-year period from 2019 to 2023 with the right to sign annual contracts based on the current market situation. According to the terms of the document, the total supply volume for the five years will be 700 000 t.
The signed document follows and develops the cooperation between the companies, contained in the existing memorandum on other types of Belarusian potash, signed on 10th May 2015.
The Deputy Director General of Sales and Marketing for JSC Belarusian Potash Co., A. Polyakov, commented: “The relations of Sinochem Group and BPC is a real strategic partnership, based on long-term experience of successful collaborative work. It is noteworthy, that the signing of the new memorandum
comes on an anniversary year. This year our potash giant, JSC ‘Belaruskali’, will celebrate its sixtieth anniversary, and BPC in its turn will celebrate its first small anniversary – the fifth. At all times during its existence BPC cooperated with Sinochem Group in the atmosphere of friendship, mutual respect, and understanding. We highly value the established business relations with our Chinese partners and believe that they will get stronger over the course of time.”
The Director General of JSC Belaruskali, I. Golovaty, commented: “The signing of the new memorandum is a further acknowledgement of the fact that our product is highly-demanded on the Chinese market. We are sure, that our new product with the addition of zinc and sulfur will quickly become popular and not only in the Asia region. Moreover, the new memorandum stimulates trade and economic exchange between China and Belarus, as well as enhanceing strategic cooperation of Belaruskali and BPC with Sinochem Group – one of the largest potash importers in the world.”
CHINA Sinochem and Belarusian Potash Co. sign five-year memorandum
CRU Events and The African Fertilizer and Agribusiness Partnership (AFAP)
are working with partners across Africa to offer brownfield projects seeking capital investment the chance to make a showcase presentation to an audience of global investors and financiers.
This opportunity to raise finance, named the ‘Investment Showcase’, will take place at the CRU Africa Fertilizer Agribusiness 2018 Conference. The conference, now in its 4th edition, will be held 24 – 26 September 2018 in Cape Town, South Africa. The event typically attracts more than 400 senior
fertilizer executives and agribusiness Stakeholders from across the global fertilizer and agribusiness supply chain.
Qualified and categorised projects will be selected that are seeking investment of over US$1 million in brownfield projects and are focused on fertilizer, agri-inputs supply chain, agriculture, agro-processing, and/or value addition sectors.
Projects will be selected on the strength of the proposal, with the intention to provide a diverse geographic range and representation from across the fertilizer and agribusiness supply chain.
AFRICA Events and AFAP provide investment opportunity for brownfield projects
Finite Element AnalysisHitard uses FEA and Fatigue life analysis when local stresses need to be calculated in complex structures or equipment with cyclic loading (pressure, tem-perature, vibration) cases.
For FEA we use:
• Pro/MECHANICA• Midas NFX
• MSC Software• PRG Softwares FEPipe / NozzlePro PCLGold / FEATools
• Shell and tube heat exchangers• Double pipe heat exchangers• Plate heat exchangers• Helixchangers• Waste Heat Boilers• Vessels & Drums• Columns & Towers• Steam Surface Condensers
• Thermal design• Pre-engineering / Bid phase• Setting plans & Shopping list• Mechanical design calculations• Fabrication drawings• Pipe Stress engineering• 3D modeling• Consulting services
What we dofor equipment such as
• Separators• Reactors
• Air coolers• Filters and Strainers• Tanks & Silos• Skids & Modules• Piping• Structural
Complete project services
• HTRI Xchanger Suite• Compress• PVElite / CodeCalc• OhmTech VVD• AutoPIPE Vessel / Microprotol• FEPipe / NozzlePRO• Finglow• CAESEAR II• AMETank• Hitard in-house softwares
• ASME VIII Div. 1 & 2• Eurocodes / EN 13445• AD-2000 Regelwerk• CODAP Div. 1 & 2• BS codes / PD 5500• AS-1210 S1 & S2• ASME B31.3• RToD / Stoomwezen • TEMA & API Standards• GOST R 52857
CAD tools for fabrication drawings and 3D modeling• AutoCAD• Inventor• SolidWorks• Pro/Engineer / PTC Creo• CADWorks• OneSpace Designer Drafting
the latest softwares for design calculations
the latest internatonal codes and standards
What we use
Hitard Engineering Serbia
Bulevar Oslobođenja 60A8th floor21000 Novi SadSerbiaPhone: Fax: E-mail: [email protected]: www.hitard.com
+381(0)21 452 917
Hitard Engineering Netherlands
Karel Doormanstraat 753012 GD RotterdamP.O. Box 17003000 BS Rotterdam, NetherlandsPhone: Fax: +31(0)10 4330 336E-mail: [email protected]: www.hitard.nl
+31(0)10 4330 331 +381(0)21 427 125
Finite Element AnalysisHitard uses FEA and Fatigue life analysis when local stresses need to be calculated in complex structures or equipment with cyclic loading (pressure, tem-perature, vibration) cases.
For FEA we use:
• Pro/MECHANICA• Midas NFX
• MSC Software• PRG Softwares FEPipe / NozzlePro PCLGold / FEATools
• Shell and tube heat exchangers• Double pipe heat exchangers• Plate heat exchangers• Helixchangers• Waste Heat Boilers• Vessels & Drums• Columns & Towers• Steam Surface Condensers
• Thermal design• Pre-engineering / Bid phase• Setting plans & Shopping list• Mechanical design calculations• Fabrication drawings• Pipe Stress engineering• 3D modeling• Consulting services
What we dofor equipment such as
• Separators• Reactors
• Air coolers• Filters and Strainers• Tanks & Silos• Skids & Modules• Piping• Structural
Complete project services
• HTRI Xchanger Suite• Compress• PVElite / CodeCalc• OhmTech VVD• AutoPIPE Vessel / Microprotol• FEPipe / NozzlePRO• Finglow• CAESEAR II• AMETank• Hitard in-house softwares
• ASME VIII Div. 1 & 2• Eurocodes / EN 13445• AD-2000 Regelwerk• CODAP Div. 1 & 2• BS codes / PD 5500• AS-1210 S1 & S2• ASME B31.3• RToD / Stoomwezen • TEMA & API Standards• GOST R 52857
CAD tools for fabrication drawings and 3D modeling• AutoCAD• Inventor• SolidWorks• Pro/Engineer / PTC Creo• CADWorks• OneSpace Designer Drafting
the latest softwares for design calculations
the latest internatonal codes and standards
What we use
Hitard Engineering Serbia
Bulevar Oslobođenja 60A8th floor21000 Novi SadSerbiaPhone: Fax: E-mail: [email protected]: www.hitard.com
+381(0)21 452 917
Hitard Engineering Netherlands
Karel Doormanstraat 753012 GD RotterdamP.O. Box 17003000 BS Rotterdam, NetherlandsPhone: Fax: +31(0)10 4330 336E-mail: [email protected]: www.hitard.nl
+31(0)10 4330 331 +381(0)21 427 125
WORLD NEWS
8 | WORLD FERTILIZER | SEPTEMBER 2018
DIARY DATES
63rd Annual Safety in Ammonia Plants and Related Facilities
Symposium16 – 20 September 2018
Toronto, Canadahttps://www.aiche.org/conferences/
annual-safety-ammonia-plants-and-related-facilities-symposium/2018
2018 ANNA Conference16 – 21 September 2018
Calgary, Canadahttp://www.an-na.org/2018-
conference/
Turbomachinery & Pump Symposia
18 – 20 September 2018Houston, USA
https://bulkex.co.uk
GPCA Fertilizer Convention18 – 20 September 2018
Muscat, Omanhttp://gpcafertilizers.com/
Africa Fertilizer Agribusiness Conference
24 – 26 September 2018Cape Town, South Africahttps://events.crugroup.com/
eastafrica/home
BULKEX 201817 – 18 October 2018
Nottingham, UKhttps://bulkex.co.uk
Emmerson Plc has released a statement claiming that it has received confirmation from
the Moroccan mining authorities that it has been granted 15 additional research permits adjoining its 100% owned Khemisset Potash Project in Northern Morocco.
Highlights include the following:
• 11 additional research permits granted adjoining Khemisset to the north-east.
• A further four research permits granted adjoining Khemisset to the south-west.
• The new permits cover an area of 239 km2. The project now has a total area of 815 km2.
• Desktop geological work indicates that potash mineralisation is likely to continue for some distance to the north-east, including the area covered by a number of the new permits.
• A JORC-compliant exploration target is expected to be released in coming weeks demonstrating exploration potential for the area covered by the new permits in the north-east.
• Emmerson claims that it will begin planning an extensional drill programme
to test this area, which is likely to be carried out as part of the second drill programme at Khemisset.
The CEO of Emmerson, Hayden Locke, said: “The Khemisset Potash Project already has a large inferred mineral resource of 311.4 million t @ 10.2% K2O, which covers only a small portion of the broader Khemisset Potash Basin. Our desktop review of historical geological data indicates that the potash mineralisation is likely to continue for a number of kilometres to the northeast. We are currently completing an exploration target for this new zone, which will give some context as to the potential for additional resources for the project.
“We believe our existing JORC-compliant resource is sufficiently large to support a mine life of over 20 years. Additional mineralisation in this region will only strengthen the overall fundamentals of the project and its multi-decade, multi-generational potential.
“In the meantime, the scoping study for Khemisset is well underway and we’re confident of delivering it by the end of 1Q19. We continue to be excited by Khemisset’s potential to be a low capital cost, high margin, potash project delivering outstanding returns regardless of the potash price.”
MOROCCO Emmerson granted additional research permits
Under its “Shaping 2030” strategy”, K+S is expanding into the Sub-Saharan
Africa, which offers great potential due to its underdeveloped agriculture.
The use of fertilizers is comparatively low at only 8 kg/ha. and crop yields are correspondingly low. By comparison, an average of 135 kg/ha. are used worldwide and in Europe, 150 kg are used. In addition, agriculture is characterised by small-scale farming structures without pronounced agricultural know-how.
K+S is currently investing in agricultural infrastructure in Uganda, such as fertilizer blending plants, grain handling processing, and storage facilities near the Ugandan capital, Kampala.
In a second step, K+S, together with local
partners, will set up a digital trading platform. In the process, a Ugandan partner obtains fertilizer through K+S and provides it to small-scale farmers in the required quantities. After the harvest, the small-scale farmer can then sell the finished products (coffee, corn, etc.) through the platform at transparent prices to local wholesalers.
K+S plans to extend this business model later to other countries in the Sub-Saharan region. “Our goal is to become the leading agricultural solutions provider in East Africa in a few years,” added Dr. Lohr. “Working closely with our local partners, we are becoming an integrated point of contact for farmers to provide them with optimal support in both the production and subsequent sale of their products.”
AFRICA K+S expands activities in East Africa
WWW.KIMRE.COM
(305) 233-4249
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The Middle East is a robust gas consuming region, with fuel use almost doubling between 2005 and 2016. Despite recent upward price adjustments in several countries
in the region, energy prices are still below international levels, especially in Gulf Cooperation Council countries, although they vary substantially across the Middle East. Historically, low domestic prices have incentivised greater gas consumption and, to that end, the Middle East is increasingly dependent on natural gas to fuel new power and desalination plants to provide competitive feedstock for petrochemical projects, and to produce metals. Regional consumption is driven not only by fast growing economies, but also the wants and needs of a comparatively youthful population. According to UN data, the Middle East’s population has a median age of about 27 years, compared to an average of over 42 years in the economically-advanced G7 countries. Looking ahead, Nexant expects that projected regional gas consumption will remain supported by the availability of gas at subsidised prices, despite some recent
progress in phasing out subsidies in various countries, albeit from very low base prices. This sets the scene for significant gas consumption growth in the long-term.
Gas already occupies a prominent position in the regional energy mix ( just under 50% in 2017), but scope exists for additional penetration. The same trends that have governed regional gas consumption growth over the last decade remain in force: ample resource availability in several (but not all) countries; population growth; strong economic factors; urbanisation; a boom in the industrial sector led by the rapidly expanding petrochemical business using gas as a feedstock; and policies that have kept end-user prices at relatively low levels. However, optimism must be tempered with the knowledge that not all Middle East countries will be willing and/or able to sustain subsidies for domestic energy prices in the long-term. The growing competitiveness of renewable energy sources in the power sector moreover poses increasing competition for natural gas, which may erode gas’ share of this all-important segment.
n According to Nexant’s modelling, the power and industrial sectors account for a large part of forecast consumption growth by 2040. The power sector (including water desalination, where gas-fired plants combine power generation with freshwater production) almost doubles its gas use
Priyanka Khemka, Nexant, USA, looks at the key trends and challenges in the Middle East fertilizer market.
12 | WORLD FERTILIZER | SEPTEMBER 2018
over the forecast period and accounts for almost half the region’s gas consumption in 2040.
n Industrial gas use grows by almost 105 billion m3, where switching away from oil is also a driving force.
n Middle East gas producers are conflicted between increasing gas prices to incentivise gas producers and reduce the resulting financial price subsidy burden and retaining the political support of industrial consumers whose business models are predicated on access to low-cost gas supplies. The Middle East’s increased focus on natural gas is ultimately driven by the economics of oil as an export commodity and also to some extent the use of cleaner fuel supplies.
Historic and projected supplyA common assumption today is that the Middle East has an abundance of readily available natural gas supplies. However, the reality is quite different. To date, the Middle East, which has 40 – 45% of the world’s proven gas reserves, has struggled to produce sufficient gas to meet its needs. This is attributable to several factors:
n The region’s proven conventional gas reserves are unevenly distributed. While some countries in the region (e.g. Qatar, Iran, and Saudi Arabia) have significant deposits, others (e.g. Jordan) are gas-poor. Even countries with modest reserves endowments face supply problems (e.g. Bahrain and Oman). As oil-poor countries, they historically focused on gas as a means to develop their economies, and are already contending with production declines.
n Gas reserves do not translate to available gas supply, with Iran and Iraq being the most obvious examples.
Iran’s isolation from the global community until 2016 precluded the country from assuming the status of a large gas exporter, whereas Iraq’s potential is constrained by political strife.
n Some of the region’s gas supply is associated with crude oil. Reserves may not be available to supply domestic markets or export markets because production is dictated by crude oil production quotas (if applicable) and/or the need to re-inject gas to maintain current levels of crude oil production.
n Even countries with rich non-associated gas reserves are concerned about production sustainability. Qatar, which is the only Arab country not dealing with security of supply issues and is currently the world’s largest exporter of LNG, imposed a moratorium on further North Field resource development in 2005, citing concerns about the effects of large scale production on the reservoirs. This moratorium was only lifted in the summer of 2017.
n A decision taken in early June 2017 by Saudi Arabia, the UAE, Egypt and Bahrain to impose sanctions on Qatar due to its perceived support for Islamic terrorism has not (as of June 2017) affected LNG flows from the emirate, or even Qatari pipeline exports to Oman and the UAE. Consequently, Nexant does not foresee a material long-term effect on regional gas movements. Of the region’s approximately 600 billion m3 of annual
production in 2016, less than a quarter was exported to other global regions. Aside from LNG export projects in Oman, Qatar, the UAE and Yemen, the vast majority is consumed within the region. Indeed, inter-regional gas imports have assumed increasing importance in the Middle East over the last several years. In addition to Iranian pipeline imports from the former Soviet Union, the Middle East has assumed the status of an LNG import province, with receiving terminals operating in Israel, Jordan, Kuwait, and the UAE. The Middle East’s seemingly incongruous rise as an LNG import province is testimony not only to gas’ growing importance to the region, but also internal supply availability issues in certain countries. For example, Israeli and Jordanian LNG receipts were a response to unreliable (and ultimately suspended) Egyptian deliveries via the Arab Gas Pipeline, whereas a mismatch between the ramp-up of demand and new non-associated gas production ventures in Kuwait and the UAE account for the 2010 startup of Arab Gulf LNG imports. Regional LNG deliveries totalled a provisional 8 billion m3 in 2016.
It is hoped that the ramp-up of new non-associated gas supply projects in Kuwait, Israel, and the UAE will eventually eliminate the need for LNG imports in these countries, but if production capacity additions fail to match demand increases, LNG imports will remain crucial to the region’s supply mix. Moreover, there is scope for new LNG importers to emerge such as Bahrain, which needs LNG to compensate for declining output from mature indigenous sources. In Nexant’s view, the Middle East will remain a modest but tangible import market for LNG going forward.
Figure 2. Middle East gas consumption (2005 – 2016). Source: Nexant's world gas model.
Figure 1. Middle East ammonia production capacity by country (2017, estimated).
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14 | WORLD FERTILIZER | SEPTEMBER 2018
Given the country’s mounting LNG import track record over the past several years, it’s unsurprising that the topic of shale gas in the Middle East has attracted considerable interest from companies operating in countries with limited conventional resources, as well as for countries with plentiful conventional resources that are costly to develop. Together, Jordan, Oman, and the UAE are estimated by Advanced Resources International (for the Energy Information Administration) to host over 7.3 trillion m3 of wet technically recoverable shale gas resources, whereas third-party estimates for Saudi Arabia are in the neighborhood of almost 17 trillion m3 or more.
However, the costs of shale gas production must be weighed against the supply alternatives. If pipeline or LNG imports can be procured more cheaply, and promote intra-regional trade and good-will into the bargain, this is a compelling option indeed. On the other hand, a concentrated focus on higher domestic gas output may prove more attractive in the long run. Several Middle East countries have domestic gas pricing regimes that are very attractive to consumers (owing to the presence of subsidies), which is an obstacle for gas-focused production programs. However, in the medium to long-term, gradual removal of price subsidies may provide incentives for increased gas production. This would also facilitate the imports of market-priced LNG and pipeline gas supplies.
For Middle East countries with both plentiful conventional gas reserves and high shale gas resource potential, however, the latter might not occupy a prominent role in the future gas supply mix. Producers with easily-accessible and cost-competitive conventional deposits may prefer to exploit these reserves instead of embarking on costly shale gas exploration endeavours that may or may not be successful.
Nitrogen fertilizer outlookThe Middle East is one of the largest producers of nitrogen fertilizers in the world, with an estimated ammonia production of close to 17 million t and urea production of 22 million t in 2016. The low cost of natural gas in the region and hence the low cost of production makes the construction of export-orientated, integrated urea plants very attractive. Iran, Qatar and Saudi Arabia are the largest ammonia and urea producing regions within the Middle East, as shown in Figure 1. In 2016, the region exported an
estimated 16 million t – 17 million t of urea; the second largest regional export volume in the world. Within the Middle East, Saudi Arabia is the largest exporter of urea followed by Iran and Qatar.
Historic consumptionThe region’s fertilizer demand is relatively small, with an estimated consumption of approximately 5 million t in 2016. The Middle East is largely an arid region, and the development of its agricultural sector has been hindered by many factors such as small farm sizes, weak infrastructure, soil deterioration, and water scarcity. Due to low precipitation levels in much of the region, however, fertilizer use is critical to enhance agricultural production. Turkey and Iran account for more than 50% of urea consumption in the Middle East. Nexant believes that the Middle East’s total urea demand will grow close to 3% per year up to 2025, faster than the 1% growth per year experienced in the 2000 – 2017 period. The region’s growing population and consequent food demand will drive regional growth for urea in the direct application segment, which accounts for approximately 80% of the total urea consumption in the Middle East. Iran’s consumption, which accounts for one-third of total urea consumption in the Middle East, is expected to grow close to 3.5% in the next decade, driven by rising export demand for various agricultural products.
Current and projected production/exportsAmmonia capacity developments in the Middle East have somewhat slowed down in recent years, from an average annual growth rate of 7% between 2000 and 2012, to a 3% per year growth between 2012 and 2017 period. There have been no significant capacity additions in the Middle East in the past four to five years. This is attributable to various factors. For example, Qatar has not been able to expand capacity because of the moratorium on North Field development, which was just lifted in May 2017, whereas Oman is struggling with feed gas supply constraints that have even affected natural gas export volumes. The outlook for regional capacity growth is also affected by the prevailing global oversupply situation: capacity developments in other parts of the world such as coal-based plants in China and shale gas-based capacity developments in the US have resulted in a global oversupply situation. The incentive to invest in new Middle East production facilities in the near-term is therefore not great.
On a delivered cost basis, US Gulf Coast (USGC) producers are on par with Saudi Arabian suppliers of ammonia/urea into the USGC, thanks largely to the increased availability of competitively-priced shale gas. With the US less dependent on Middle Eastern imports, the onus is now on Middle Eastern producers to identify opportunities in other export markets – most likely in Asia, which Nexant considers to be the world’s biggest demand growth market for fertilizers.
Middle Eastern exporters also face competition from North African producers in supplying the mature European market, since North African sellers enjoy a freight cost advantage due to their proximity to European
Figure 3. Pipeline and LNG flows to/from the Middle East. Source: Nexant's world gas model.
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Highlights
outlets. However, some North African producers – chiefly Egypt – have experienced feed gas constraints of their own in recent years, necessitating supplemental LNG imports and the temporary cessation of LNG exports. This situation is not expected to persist, as Egypt brings the massive non-associated offshore Zohr field online. In addition, there have also been several new gas discoveries reported in the country in recent years, especially in the Nile Delta region. Together with the optionality of augmenting domestic production with natural gas imports from neighbouring Israel and even Cyprus, Egypt may considerably expand its fertilizer production and export base in the longer-term, thereby posing additional competition for Middle East producers.
Iran poses additional competition for existing Arab fertilizer exporters in the Middle East, although its success would ultimately boost the region’s profile as a source for volumes. The 2016 lifting of sanctions in Iran and various projected new capacity developments are strengthening Iran’s net export position, which translates to stronger competition for current Saudi producers. In Saudi Arabia, Ma’aden is the only company that has started production at a new ammonia plant, with capacity of 1.1 million tpy, in the recent years (in 2016) primarily to feed the Wa’ad Al Shamal phosphates complex. By contrast, some 2 million t – 3 million t of new capacity is expected to come onstream in Iran in the 2017 – 2020 period. However, project activity may be delayed if Iran is unable to secure financing from foreign lenders. President Trump is in the process of reviewing US policy towards Iran, and the uncertainty this engenders is plainly not conducive to the financing of new ventures. Nevertheless, Iran is viewed as an attractive location by many external investors, such as Indian and Bangladeshi companies, who have indicated their interest in establishing export oriented production ventures there.
Even though the Middle East capacity is expected to grow slowly in the near-term, it remains a major producer and exporter of ammonia/urea in the global market. The drop in global oil prices has reduced the returns on investments for manufacturers, but this has not eroded the Middle East’s position as one of the largest urea export regions in the world. The pace of capacity development is expected to pick up post 2022 in Qatar and Saudi Arabia, as manufacturers begin to take advantage of the production from new gas fields. In addition to the lifting of the moratorium on Qatari North Field gas production, Saudi Arabia is in the process of expanding its natural gas production under the National Transformation Program (NTP 2020) that was approved by Riyadh in 2016. In Nexant’s view, the Middle East will retain its position as the largest exporter of urea in the world, as regional capacity developments outpace consumption growth.
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