Africa fertilizer update

AFRICA

Africa fertilizer update

Prior to the covid pandemic, sub-Saharan Africa had been the fastest growing market for new fertilizer demand. However, the combination of pandemic related disruption, followed by the dislocations caused by the war in Ukraine, have pushed up prices and led to falling demand across the continent.

A farm at Vioolsdrift, South Africa.

PHOTO: SOUTH AFRICAN TOURISM

An estimated 140 million people across Africa face food insecurity, according to UN figures. The continent’s chronic food insecurity has been amplified in recent years by drought, especially in the Horn of Africa, itself exacerbated by climate change. The current crisis in the continent however has mainly come about as a result of high food prices. Weather-sensitive domestic food production results in heavy reliance on imports, with some 85% coming from outside the region, although this tends to overstate the import dependence of smaller countries. In fact four countries; Nigeria, Angola, the Democratic Republic of the Congo (DRC), and Somalia, account for most of the region’s net agricultural import position. The rest of the countries in the region are actually marginally net agricultural exporters. Even so this is a worrying situation for a region with so much arable land.

Fertilizer prices have played a part. Fertilizer prices have tripled since early 2020 and remain volatile, putting a stable supply of fertilizer out of reach of many small farmers. Fertilizer exports from Belarus and Russia – important fertilizer suppliers for Africa – have been disrupted by the war, while some other exporting countries have restricted supply through export taxes, bans and licensing requirements, in part to protect their own farmers. Food shipments via the Black Sea Grain Initiative have helped to ease some supply challenges, but Russia’s withdrawal from the agreement in July means that this important lifeline has now closed.

Fertilizer demand

The region has vast amounts of arable land and extensive agricultural production (albeit with low yields) but soil fertility is low – the major increase in food production that the region needs to feed its projected population increase over the next 20 years will need to come from increased fertilizer use. Fertilizer application rates have been on a steady increase in the region, averaging around 4.5% year on year during the 2010s, and around 7% in 2017-2020, although they remain low by global standards. Sub-Saharan Africa has an average fertilizer nutrient application rate of 22 kg/ha, compared to a world average of 146 kg/ha (and closer to 400 kg/ha in some countries, such as China and Chile). This has nevertheless more than doubled since 2006, but still falls way short of the 50 kg/ha target set by the Abuja Declaration in 2006. Figure 1 shows total nitrogen fertilizer consumption for the region in 2020, with Ethiopia, Nigeria and South Africa the main consumers.

One reason for low fertilizer application rates is the hand to mouth existence of many farmers in the region, who cannot afford to buy fertilizers until they have sold their crops. Around 70% of farmers in the region are smallholders. The International Finance Corporation has launched a $6 billion Global Food Security Platform to improve credit access to address liquidity constraints in the private fertilizer supply chain, and there have been ongoing efforts to improve fertilizer markets in Africa. In Kenya, for example, a World Bank program providing fertilizer e-voucher subsidies helps eligible smallholder farmers purchase fertilizer from private retailers at a subsidized rate, increasing productivity by more than 50%, enhancing crop diversification, and building private sector capacity. Nevertheless, much more needs to be done to improve Africa’s food productivity.

Fig 1: Nitrogen consumption in sub-Saharan Africa, 2020

Infrastructure

Poor roads and ports are another problem. Ports are often not able to handle larger vessels, so capacity to handle fertilizer shipments is limited, while poor transport networks and often long queues to cross borders increase the time taken to ship fertilizers inland and bump up costs from the international baseline. Again there are development programs to try and improve this, but it remains a structural impediment to greater use of fertilizer in Africa.

Supply

With domestic demand limited, many producers have been forced to look at export markets. Africa produces approximately 30 million t/a of fertilizer of all types, roughly twice as much as it consumes. But in spite of this, nearly 90% of fertilizer consumed in Sub-Saharan Africa is imported, mostly from outside the continent. This reflects inefficiencies in shipping and port costs, distribution chains, information availability and other trade frictions.

There are currently 19 fertilizer manufacturing plants in sub-Saharan Africa outside of South Africa, out of which five are nitrogen plants, concentrated in Nigeria, as well as an ammonium sulphate plant in Madagascar and an ammonium nitrate plant in Zimbabwe. There are also nine locations producing phosphate rock, SSP, DAP and other phosphate-based fertilizer compounds in Kenya, Tanzania, Zimbabwe, Burkina Faso, Mali, Senegal and Togo. Outside of this, there are four lime supplements and micronutrients plants.

Natural gas

Development of nitrogen fertilizer capacity has hitherto been largely dependent upon exploitation of natural gas reserves. African natural gas production is concentrated in the north of the continent, especially Egypt and Algeria, while Sub-Saharan Africa produces only one third of the continent’s gas output, around 60% of that represented by Nigeria. Other significant regional producers are Angola and Mozambique, with smaller volumes coming from the Democratic Republic of Congo, Tanzania, Côte d’Ivoire and Equatorial Guinea. However, Sub-Saharan Africa continues to see new gas discoveries and development and has been a major focus for exploration and production by international majors. Much of this centres around the potential for LNG development. The global LNG market continues to expand rapidly, especially since Europe has not been able to import natural gas by pipeline from Russia, and LNG developments continue to proceed apace.

LNG production in southern Africa is dominated by the longest established producer, Nigeria, which exported 19.6 bcm of gas as LNG in 2022. Angola was the next largest producer, with an LNG liquefaction capacity of 5.2 million t/a at a facility which has been operating since 2013, owned by BP, Chevron, Eni, Sonangol EP, and TotalEnergies. Since 2007 Equatorial Guinea has also operated a 3.7 million t/a LNG plant at Bioko Island, and in Cameroon, Golar LNG started operations via a 2.4 million t/a capacity floating LNG (FLNG) platform in 2018, although production only runs at 1.4 million t/a as new gas fields are tapped.

Floating LNG plants have proved an answer to some of the infrastructure problems that bedevil the region, as they can be constructed elsewhere and sailed into position. The Republic of Congo is playing host to the new $5 billion Tango LNG project. Eni is developing the offshore Marine XII project using two floating LNG plants which will process gas from the Nenè and Litchendjili fields. The first FLNG vessel is expected to begin production in December this year and the second in 2025, taking production to 3 million t/a. In Gabon, independent oil company Perenco made a final investment decision in February 2023 to bring on stream a 700,000 t/a floating LNG unit at the Cap Lopez Oil Terminal by 2026.

But there is also plenty of onshore development as well. In late December 2019 Nigeria made a final investment decision to go ahead with a major expansion of its Bonny LNG plant via a new 7th train which will increase capacity by 4.2 million t/a, as well as debottlenecking of existing capacity to add a further 3.4 million t/a. Overall, Nigeria’s LNG capacity will increase by 35% to just over 30 million t/a by 2024.

In Angola, Eni and its partners have made a final investment decision to develop the Quiluma and Maboqueiro gas fields, which will include a connection to Angola’s existing LNG plant, allowing production of an additional 4 bcm of LNG by 2026.

TotalEnergies’ Mozambique LNG project will commence exports by 2027, with other LNG schemes following, including ExxonMobil’s Rovuma LNG which is to consist of two 7.6 million t/a liquefaction trains on the Afungi Peninsula.

In Equatorial Guinea, Marathon Oil is developing the 3.7 million t/a Punta Europa LNG plant on Bioko Island, while BP is pursuing developments in Mauritania and Senegal. The Greater Tortue Ahmeyim (GTA) export facility will become the deepest African LNG project, with gas coming from two deep offshore natural gas fields, Tortue offshore Mauritania, and Ahmeyim offshore Senegal. Originally scheduled to begin production in 2022, the project has been delayed to 2024 by the covid pandemic. It now aims to produce 2.3 million t/a of LNG from the start of 2024.

In Tanzania, the $30 billion Lindi LNG project, backed by TotalEnergies and Norway’s Equinor, will develop gas from deepwater resources through a 10 million t/a plant. And South Africa could see its first LNG project. South African helium and natural gas producer Renergen has launched the first phase of the Virginia Gas Project in the Free State province. The facility is expected to have a capacity of 50 t/d of LNG, increasing to about 680 t/d in the second phase.

Overall, LNG export infrastructure capacity in the region is expected to rise to about 110 million t/a by 2030, and to more than 175 million t/a by 2040.

Other feedstocks

There is still some nitrogen capacity in South Africa based on coal gasification, using Sasol technology. Sasol operates a 300,000 t/a plant at Sasolburg and two trains at Secunda with another 250,000 t/a. The Secunda facility is based on coal gasification, while Sasolburg uses the off-gases from the large scale Fischer-Tropsch plant, which used to run on coal but since 2004 has been converted to run on natural gas. From this AEL manufactures 420,000 t/a of ammonium nitrate for explosives use using ammonia sourced from Sasol, as does mining company Omnia, which has nitric acid, AN and CAN facilities at Sasolburg. Sasol has plans to switch Secunda to imported natural gas, possibly from the Rovuma project in Mozambique, in the medium term.

Zambia likewise developed coal-based capacity, including 100,000 t/a of ammonia production at Kafue, operated by Nitrogen Chemicals of Zambia (NCZ), as well as downstream nitric acid, ammonium nitrate and ammonium sulphate production. Most of this capacity has been closed down, but the AN plant was re-started in 2013 using ammonia imported from South Africa.

On the renewables side, Zimbabwe operated an electrolysis-based ammonia plant at Kwekwe using electricity from the Kariba Dam, but this closed in 2015 due to the high electricity costs involved. Sable Chemicals continues to run nitric acid and ammonium nitrate production at the site using ammonia imported from South Africa and produced 50,000 t/a last year.

Renewables

There is considerable interest in the region, as there is elsewhere, in switching to renewable feedstocks. Sasol has conducted a feasibility study on building a 600 MW green hydrogen hub at Boegoebaai using a combination of wind and solar energy, with an option to expand into downstream renewable ammonia and methanol production. Likewise Omnia is conducting a feasibility study on using solar power to generate 100,000 t/a of ammonia for its feed, while in Zimbabwe, Sable Chemicals has discussed switching to renewable ammonia production, with a feasibility study on building 400 MW of solar powered hydrogen production.

Hive Energy in South Africa has plans for up to 780,000 t/a of renewable solar based ammonia production at Nelson Mandela Bay with a 1.3 GW solar array. The project is a joint development with Linde, with a price tag of $4.6 billion and a start-up date initially targeted for 2026, though almost certain to slip.

Elsewhere, MET Development has proposed a 200,000 t/a renewable ammonia plant at the Oserian Industrial Park, next to Lake Naivasha in Kenya, with a downstream urea plant based on Stamicarbon technology. The electricity grid in Kenya has a high renewables penetration, with about 90% of the energy derived from solar PV, wind, hydro and geothermal. Kenya has an “overcapacity” of electricity, with about 500 MW of installed capacity currently considered surplus to requirements.

Nigeria

Nigeria has had a long history of domestic nitrogen production, beginning in 1987 with the National Fertilizer Company of Nigeria (Nafcon) plant, which operated 500,000 t/a of gas-based ammonia-urea production at Onne, near Port Harcourt in the east of Nigeria. The company suffered from financial and operating problems throughout the 1990s however, and Nafcon was sold on in 2005 to Egypt’s OCI group, becoming Notore Chemical Industries. Notore refurbished the plant and reopened it in 2010. A subsequent debottlenecking project increased capacity to 430,000 t/a of ammonia and 750,000 t/a of urea in 2013.

Several projects to build new nitrogen capacity followed, but delays in gas allocations and difficult financing slowed development. The first new project to be commissioned was the Indorama Eleme Fertilizer and Chemicals Ltd facility at Port Harcourt, River State, developed by Indonesian chemical giant Indorama Corp. Toyo Engineering and Daweoo Nigeria built the plant using KBR ammonia technology for the 2,300 t/d ammonia plant and a Toyo license for the 4,000 t/d urea plant. The facility was commissioned in 2016, and a second, identical ammonia-urea train was completed in 2021, bringing capacity to 2.6 million t/a.

Outside of Indorama, the major development has been the $2 billion Dangote complex in the Lekki Free Trade Zone east of the capital, Lagos, next to a refinery and petrochemical plant run by the same company. The Dangote project has been a huge one, consisting of two 2,200 t/d Topsoe-designed ammonia plants feeding two 3,850 t/d Saipem urea plants, for a total of 2.5 million t/a of urea capacity. Completion of a gas supply pipeline pushed back the original start-up date, and covid added more delays, but the plant was finally fully commissioned in March 2022.

The Dangote complex takes Nigeria’s urea capacity to 5.8 million t/a. This is considerably ahead of domestic consumption, although that has been rising as more fertilizer becomes available. Nigeria consumed 550,000 t/a of urea in 2016, but after the Indorama plant started up this rose to 750,000 t/a in 2017 and 1.7 million t/a in 2021. Nevertheless, both Indorama and Dangote rely upon export sales.

Other projects

A few years ago there were a number of other nitrogen schemes proposed for the region, but outside of Nigeria no plants have actually been commissioned. Indian fertilizer producers have been interested in developing urea projects based on African gas for export to India, but difficulties in developing the projects and the rise of domestic capacity in India based on imported LNG have largely killed these schemes off. An Indian project for a 1.2 million t/a urea plant in Ghana was cancelled in 2014, as was a similar one in Gabon. Plans have also been floated for ammonia-urea plants in Cameroon, Tanzania, Mozambique and Angola, but so far none have made it past the design stage.

In Ethiopia, a 300,000 t/a coal-based urea plant that was to have formed part of a fertilizer complex being developed with Chinese assistance at Yayu remains only part complete. Meanwhile in 2021 phosphate giant OCP announced its involvement in a $3.7 billion gas-based ammonia-urea unit for Dire Dawa in Ethiopia with a capacity of 3,200 t/d, as well as downstream NPK production. However, the project has not progressed beyond the feasibility study stage. At present there are no active nitrogen projects under construction in sub-Saharan Africa.

A temporary setback?

Promising improvements that had been taken in the development of fertilizer demand and production in sub-Saharan Africa have taken a step backwards with the covid pandemic and the dislocations to fertilizer and food markets caused by the war in Ukraine. Nevertheless, the gas developments that would be the basis for new nitrogen production in the region continue to progress apace. The success of Dangote and Indorama in Nigeria show that the development of domestic fertilizer production does lead to an increase in domestic fertilizer demand – urea consumption in Nigeria has more than tripled in just a few years. OCP continues to be forward thinking in this regard, developing partnerships and joint venture companies with local firms across the region. The region’s potential for sustainable fertilizer production via renewables is also apparent and, indeed, local solar or wind power can overcome infrastructural deficiencies in gas or power distribution networks. It can only be hoped that the current crisis is just a temporary setback, and that Africa continues to develop as both a destination for fertilizer investment and demand.