AMMONIA UREA MARKET OVERVIEW
The ammonia urea market is a global powerhouse, closely linked to agriculture and various industrial applications.
Market Size and Growth:
Value: Estimated at USD 83.5 billion in 2023, projected to reach USD 120.2 billion by 2030 with a CAGR of 5.6%.
Drivers: Growing population, rising food demand, and increasing fertilizer use in developing economies fuel market expansion.
Challenges: Geopolitical tensions, natural gas price fluctuations, and environmental regulations add volatility
KEY PLAYERS
Top Producers: Yara International (Norway), CF Industries (US), EuroChem (Switzerland), OCI N.V. (Netherlands), and Sinochem Group (China). With Russia being the second largest producer of ammonia after China. And according to the World Bank, Russia accounted for 16 percent of urea (a source of nitrogen) exports and 12 percent of phosphate exports. Russia and Belarus combined provided 40 percent of global potash exports.
Regions: China, India, North America, and Europe dominate demand and production. emerging markets like Brazil and Southeast Asia see rapid growth.
DEMAND AND APPLICATIONS
Urea: Primarily used as a nitrogen fertilizer, also serves in resin production, plastics, and pharmaceuticals.
Ammonia: Fertilizer production again holds the top spot, followed by refrigerants, explosives, and textile processing.
MARKET TRENDS
Sustainability: Focus on green ammonia production using renewable energy sources like biogas and electrolysis.
Precision agriculture: Adoption of advanced technologies for efficient fertilizer application and resource optimization.
Regionalization: Growing local production capacities and trade diversification to reduce dependence on individual markets.
AMMONIA AND UREA: A POWERFUL DUO FOR AGRICULTURE AND BEYOND
Ammonia (NH3) and urea (CO(NH2)2) are two of the most important chemicals in the world, with a deep connection to agriculture and various industrial applications. They often go hand-in-hand, with ammonia serving as a key precursor to urea production.
Ammonia
Production: Primarily synthesized from natural gas and nitrogen through the Haber-Bosch process.
Properties: Colorless gas with a pungent odor, highly soluble in water, and flammable.
Applications:
- Fertilizer: The primary use, accounting for about 80% of global ammonia production. Supplies nitrogen, crucial for plant growth.
- Refrigerant: Used in industrial and commercial refrigeration systems.
- Chemicals: Produces various chemicals like nitric acid, explosives, and textiles.
- Wastewater treatment: Neutralizes acidic wastewater.
Urea
Production: Synthesized from ammonia and caron dioxide in the rea synthesis process.
Properties: White, odorless, and water-soluble solid. Stable at room temperature but decomposes at higher temperatures.
Applications:
- Fertilizer: The main use, accounting for about 50% of global urea production. Provides readily available nitrogen to plants.
- Feed additive: Used as a nitrogen source for ruminant animals.
- Plastics: Produces melamine resin, used in laminates, adhesives, and coatings.
- De-icing agent: Melts ice and snow on roads and sidewalks.
OMEC PROJECT
OMEC plans to design, procure, install, commission, and operate a plant to produce up to 330,000 tons per annum (tpa) of urea and 19,800 tpa of ammonia. The plant will be located near AlRisha gas field at the delivery point of the natural gas supply.
The manufacturing process involves converting natural gas to ammonia first. Around 90% of the ammonia produced will be processed to produce urea as a final product.
The second phase will concentrate on the remaining ammonia which can be sold to ammonia buyers as an input for further processing or converted to nitric acid for use in the process of manufacturing phosphate-based fertilizers or sold to the local market to cover local demand.
ECONOMIC AND SOCIAL IMPACT
OMEC’s Project aims to enhance the value chain of fertilizer production in Jordan by pioneering the production of ammonia and urea fertilizer products in Jordan. Such an ambitious Project will enhance the value added in the Jordanian fertilizer industry by capturing more of the downstream value added.
OMEC aims to achieve the following objectives from this Project:
• Capturing more of the downstream value of the limited supply of natural gas produced in Jordan.
• Supplying quality fertilizer products to Jordanian farmers to enhance the yield of farmland and
contribute to food security.
• Exporting a part of the production and substituting imports of similar products which will contribute positively towards the balance of payment in Jordan.
• Creating jobs for qualified Jordanian workers directly and indirectly (in downstream industries and associated services) outside of the major cities.
We believe that this pioneering Project will have a profound effect on the chemicals and fertilizers industry sector in Jordan and we look forward to demonstrating this effect.
KEY SUCCESS FACTORS
For the planned project to be successful, the following key success factors must be met:
- Gas supply security and continuity – The gas supply is secure with reserve studies showing sufficient reserves and a drilling program undertaken by NPC to secure additional production.
- Taxation treatment – Tax exemption of 5 years from commercial operations if the plant is registered onshore. If registered in the free zone, the tax rate will be a flat 5% tax.
- Food security and import substitution – The products of the Project are needed in the region to meet the growing demand for fertilizers and to meet the needs for increasing food production. Locally and in neighboring countries, the presence of the Project in physical proximity to the markets for output will result in savings in time and shipping costs.
- Downstream integration – The presence of phosphate rock in the area near the plant allows for further downstream value addition. This can contribute to the financial viability of the Project.
- A growing market – The need for fertilizer is linked to feed security and the ability of farmland to produce the crops required to meet the growing human needs. This is an investment into a growing sector with growing demand.
RISK MANAGEMENT
Gas Supply Risk: We were informed that the gas reserves at Risha field are sufficient for the requirements of the Project. NPC is undertaking a drilling program that is anticipated to increase the proven reserve and the output of natural gas from the field. The reserve studies and the production profile of AlRisha field promise sufficient supplies of gas for the term of the supply contract.
Market Risk: The market risk of chemical fertilizer – especially urea – is limited by the pace of demand growth expected. Demand for fertilizers is expected to grow by a significant 6.5% CAGR through 2030. Therefore, we do not anticipate any prolonged decrease in the growth of demand for ammonia/urea during the life of the Project. Furthermore, at their current levels of demand, the local buyers of ammonia can easily absorb around all the planned ammonia capacity of the Project as raw material.
Technology Risk: The technology selected for the Project will be proven with a well-established track record of commercial operations in multiple locations around the region and the world. One of the key Project partners is SPEC, a well-established and experienced UAE-based EPC contractor with extensive expertise in hydrocarbons. SPEC has already engaged a reputable technology provider who may play an active role in the Project ensuring the highest quality and capability of the entire value chain. The Project team includes specialists in ammonia / urea and fertilizer production with extensive experience which will be brought to bear on the selection and implementation of technology as well.
Interest Rate, Currency, and FX Risk: The interest rate assumed for the debt part of the financing of the Project is 8% p.a., which is high compared to the risk profile of the Project. This was done as a part of the effort to be conservative in modeling the Project. The interest rates are expected to decrease from their current levels as inflation in the US appears to have been brought under control. We anticipate achieving more favorable terms of financing at the time of debt raising. The borrowing will be in US$ for the project financing which will match the currency of the gas purchase and the urea and ammonia sales. No significant FX risk is expected.
