Nitrogen+Syngas 386 Nov-Dec 2023
30 November 2023
Certification of blue ammonia
ENVIRONMENT
Certification of blue ammonia
While producing ammonia with hydrogen from electrolysis remains expensive, large scale lower carbon ammonia has focused on carbon capture and storage from existing plants, so-called ‘blue’ ammonia. But exactly how green is blue?
In August 2022, Saudi state fertilizer producer Sabic Agri-Nutrients delivered the first accredited cargo of blue ammonia; 37,800 tonnes produced at Jubail. The accreditation was provided by German testing, inspection and certification agency TÜV. Sabic has delivered several blue accredited cargoes over the succeeding year, to clients in South Korea, India, China and Taiwan. A cargo of certified blue ammonia from Ma’aden also arrived in Varna, Bulgaria in June 2023 for Bulgarian fertilizer producer Agropolychim, marking the first commercial-scale delivery to Europe, and Ma’aden has also supplied to Taiwan. But as these deliveries become more frequent and more widespread, there is a looming question of who will certify these cargoes and upon what basis.
Those financing blue ammonia projects will wish to be assured of offtake by customers, and those customers in turn will want some measure of certainty of what they are buying. Fertilizers Europe has put it like this: “The development of a coherent and science-based certification process will be key to developing this market.”
Carbon intensity
To certify ammonia and hydrogen as ‘blue’, a significant part of the CO2 associated with the manufacturing process needs to be captured and permanently sequestered or used in downstream applications. But the devil is in the details, particularly the word “significant”. Different ammonia technologies are amenable to carbon capture, utilisation and/or storage (CCUS) to different degrees. For example, most ammonia capacity today is based on steam methane reforming (SMR). Carbon dioxide generated during the partial oxidation of natural gas in the process can be fairly readily captured as it already forms part of the process stream. In this way around 50-70% of CO2 generated in the process can be captured for utilisation or storage. However, carbon dioxide generated from the gas burned to heat the reformer ends up instead in flue gas, and represents the other 30-50% of CO2 generation. There is a very low partial pressure of CO2 in the flue gas, making its recovery more expensive. Conversely, autothermal reforming (ATR) uses an oxygen blown reformer which entrains around 90-95% of the CO2 in the process stream. While it is a more capital intensive process than SMR, ATR therefore offers advantages in terms of carbon dioxide recovery.
There are also other potential carbon savings in production, for example using renewable electricity to run plant power demands and power pumps etc which can all have a bearing on the carbon intensity of the final ammonia.
End uses
Life cycle carbon costs can also be a factor. For carbon capture and use, this depends upon what the end product is. If the CO2 is being used to make urea, methanol or olefins, for example, these products may end up releasing the CO2 again when they are used, especially if low carbon methanol continues to make inroads into the market for shipping fuels.
At the moment, most carbon dioxide that is captured and pumped back into the ground goes into oil producing wells to maintain well pressure and hence output, so-called Enhanced Oil Recovery (EOR). While at the moment these projects are able to claim that they are ‘blue’ production, there is considerable debate as to exactly how ‘low carbon’ it is to be generating additional oil output. EOR is attractive as an end use for captured carbon because the additional oil has a monetary value, and hence so does the CO2 that is being supplied, offsetting to at least some extent the cost of CCUS.
Proponents would argue that as long as oil is being produced and consumed, where and how it is produced is largely irrelevant, as it is a fungible commodity, and the carbon impact of oil production and consumption is being tackled separately via taxes on consumption and on emissions from refineries etc. Production of oil generates about 100 kg CO2 e per barrel according to the International Energy Agency, and burning it another 400 kg CO2 e/bbl. Enhanced oil recovery can sequester between 300-600 kg CO2 e/barrel, in theory potentially generating carbon neutral or even carbon negative oil, though of course it is important to avoid double counting – one shouldn’t get credits for both low carbon ammonia and low carbon oil using the same sequestered CO2 .
However, were, for example, the EU decide that CO2 being used for EOR no longer qualifies for ‘blue’ ammonia certification, or that it qualifies at a reduced rate, it would shut off a large market for the product. The US already takes this into account with its Inflation Reduction Act (IRA), in section 45Q, where CO2 used for EOR receives a carbon credit of $35/t, compared to $50/t for CO2 which is permanently sequestered. It remains to be seen how far such a two tier system might spread. Even so, there are four ammonia plants in the US currently receiving $35/t tax credits for producing ammonia using CCUS.
Carbon credits
Blue ammonia certificates will also need to interface with existing emissions reduction regulatory frameworks. Various nations and grouping of nations already operate such schemes. For example, the European Union operates its ETS emissions trading scheme, a cap and trade scheme based on trading emissions permits above a floor level. The aim is to put a cost on CO2 and CO2 equivalent gases above a certain limit and encourage the use of abatement technologies such as carbon capture and storage. However, from 2026 it will be augmented by the EU’s Carbon Border Adjustment Mechanism (CBAM), which aims to prevent ‘carbon leakage’ – the shutdown of domestic industries which have made expensive investments to reduce carbon output, and their replacement with imported ammonia or urea from overseas which may have been made in a more carbon intensive manner. In effect it will place a carbon tax on any imports, meaning that in order to produce, European producers are going to have to be tackling their CO2 emissions in some way, and in order to compete and supply the European market, overseas producers will need to be able to produce certification to prove how low carbon their own production is.
The US IRA has been a major driver of new project activity, with the carbon credits available from blue ammonia production driving a number of new projects which collectively represent around 80% of announced new blue ammonia capacity. However, while much of the impetus for development of blue ammonia has come from a regulatory push from governments, there are also the signs of a pull from customers who are looking to improve their own environmental credentials. Consumers of ammonia and other downstream products who are trying to move towards net zero will need to look at ammonia as a primary way of reducing their lifecycle CO2 emissions. The Japanese government has been a major factor in this, as it plans to co-fire low carbon ammonia in coal-fired power stations in order to reduce their carbon intensity and extend their working life. But many companies who are working towards net zero carbon reductions wish to be able to demonstrate to their customers that they are producing low carbon products and
Who will certify?
There is also the question of who will certify the ammonia, and perhaps even a question of who certifies the certifiers. Multiple certification schemes for low carbon hydrogen and/or ammonia are already offered by the Green Hydrogen Organisation, the Smart Energy Council, TUV SÜD, CertifHy, Bureau Veritas etc, with schemes also under development by industry bodies such as Fertilizers Europe and The Fertilizer Institute. The Australian Government is working on a Guarantee of Origin scheme which would certify the carbon reduction on lower carbon hydrogen production for ammonia which it hopes to have up and running next year.
The schemes differ. Bureau Veritas says that carbon intensity of the ammonia produced must be below 0.5 kg CO2 e per kg ammonia, for example, while the EU is pushing for a definition of ‘renewable’ hydrogen/ammonia of a 70% reduction in carbon intensity, with less than 70% being defined as ‘low carbon’ hydrogen. At present around 10 plants worldwide are producing blue ammonia of one hue or another, but the average carbon reduction is around 50%, as they are based on steam reforming plants, as discussed earlier.
Ideally there would be a single widely recognised unified reporting standard worldwide, but at the moment the situation is analogous to the current carbon credit reporting system, with a methodology which varies between jurisdictions. At its most extreme it even raises the possibility of a kind of two or more tier blue ammonia certification system, where some jurisdictions like the US and EU are stricter on the criteria for qualification than other parts of the world.
Over the past couple of years, the Ammonia Energy Association has been trying to draw together the various stakeholders to achieve a globally harmonised certification scheme for low carbon ammonia. In 2021 it published a discussion paper on the subject and solicited comments from interested parties for its own proposed certification scheme. This aims to support the adoption of a globally harmonised framework for the accounting, reporting, and verification of the carbon intensity of ammonia (tCO2 e/tNH3) as the basis for certification of emission reductions associated with the implementation of low-carbon ammonia initiatives, via:
registration of ammonia projects under the certification scheme, against approved project design, accounting, monitoring, reporting and verification methodologies; and the issuance of low-carbon ammonia certificates for verified emission reductions arising from the implementation of low carbon ammonia projects registered under the scheme.
It aims to quantify an absolute carbon intensity for ammonia produced at a specific site, as well as other metrics, such as origin, inputs, co-products, technology pathway, and date of manufacture.
As far as life cycle costs go, the AEA has concentrated on well-to-factory gate emissions (Scopes 1, 2, and upstream Scope 3) as a basis for certification, with the option of additional well-to-tank or well-to-wheel/wake certification on top. Well to gate is regarded as a minimum standard which could be more widely applicable across multiple customer types (producers, traders, retailers, end users) in different and possibly conflicting sectors or jurisdictions. The EU however seems to be moving towards a life cycle cost analysis.
Pricing
Will blue ammonia develop a price premium over conventional ‘grey’ ammonia? At the moment, none of the buyers or sellers of the certified blue shipments mentioned at the start of the article have said whether or not they were bought at a premium to normal ammonia prices. Platts, which, in common with several other market consultancies tracks assessed prices for grey, blue and green ammonia plants, says that the current premium for blue ammonia over conventional production in the US Gulf Coast was estimated at around $24/tonne in September 2023. But establishing the production cost of blue ammonia is not quite as straightforward as for green ammonia produced using electrolysis, depending on how the CCUS is financed and installed. Often there is a collaboration with the oil or gas producer who runs the reservoir where the CO2 is being sequestered, and as previously mentioned, where CO2 is being sold for enhanced oil recovery it may actually be a credit for production. CRU estimates that carbon capture and storage will increase grey ammonia costs by between $20/t NH3 and $44/t NH3 .
It is possible, if the market becomes more sophisticated, that in the longer term it may be possible to trade blends of grey/green/blue ammonia based on their overall carbon reduction, but this will need much greater harmonisation of certification than is presently the case. There are also other factors to consider, such as ammonia ‘cracking’, allowing users to import ammonia to generate hydrogen.
However, at the moment, the prime factor in determining investment decisions for blue or green ammonia seems to be not pricing but rather a requirement for commitment from buyers for long-term offtake agreements.
