Ammonia (NH3) is a gas produced from hydrocarbons (notably natural gas) and air using the Haber-Bosch process. This process reforms natural gas (methane) to produce the required hydrogen that is reacted with nitrogen extracted from air (by a cryogenic process) to form ammonia. Carbon dioxide, which is co-produced is often reacted with the ammonia to form urea.
Ammonia is a common industrial chemical but its most important use worldwide is in the manufacture of urea, the principal building block in nitrogen fertilizers. It is relevant to note that the world fertilizer market is very complex, riddled with producer and consumer subsidies and other market distortions. Most new export-oriented plants integrate ammonia and urea manufacture, using natural gas as a feedstock. It has applications in the manufacture of urea (as fertiliser and chemical intermediate), urea formaldehyde resins (used in composite wood), synthetic fibres and a broad range of chemicals.
Ammonia is produced in large petrochemical plants typically 400 000 to 800 000 tonnes of ammonia per year and costing $150m to $250m (though smaller plants in special relationships have been constructed, see later).
Ammonia is an industrial chemical but its most important use is as the building block of nitrogen fertilisers urea and ammonia chemicals. Ammonia (and urea) now represents 97 per cent of the source of nitrogen in fertilisers. Ammonia is produced in about 80 countries and 85 per cent is for nitrogen fertiliser production including about 6 per cent for direct use in agriculture.
Produced in capital-intensive operations, natural gas typically represents 55 per cent of the cash cost of production (ie. before interest and depreciation costs). As such it is one of the most feedstock- (or energy-) cost sensitive petrochemicals produced. A world-scale ammonia/urea plant (1,000 tonnes of ammonia per day or 1,700 tonnes of urea per day) uses 35 million cubic feet of natural gas per day (37.8 gigajoules per tonne of ammonia). In other words, the competitiveness of ammonia plants is as sensitive to construction and distribution costs as simply feedstock costs. Further, the world fertiliser market is complex and influenced by producer and consumer subsidies and other market distortions that often undermine the normal market price underpinned investment decisions in many regions.
Globally demand growth has been 2 to 3 per cent per year driven by developing countries offsetting European demand declining at 1 per cent year. Much of that new demand is being met by large-scale production capacity being added in low cost gas areas like in North America and the Middle East, particularly in Qatar and Saudi Arabia. Accordingly, Norsk Hydro that supplies one-quarter of the European market and one of the largest producers, has signaled that many non-integrated ammonia production centres in Europe were vulnerable to closure.
Production capacity has grown strongly – doubling from 62 million tonnes in 1974 to 130 million tonnes in 2000. In 1999, most of the production capacity was located in: North America (15 per cent of world capacity), China (22 per cent), the former USSR (FSU) - of which 80 per cent in Russia and the Ukraine - (17 per cent), West Europe (9 per cent), Central Europe (6 per cent), South Asia (12 per cent), the Near East (6 per cent), Indonesia and Japan (4 per cent), Mexico and the Caribbean (3.5 per cent). In 1974 the developing countries accounted for just 27 per cent of ammonia capacity but by 1999 their share had nearly doubled to 52 per cent.
The change in capacity related to a shift in market and the move to economies of scale. Up to the 1960s, the development of the nitrogen industry took place in the developed countries of West Europe, North America and Japan. However, in the 1970s and early 1980s, the construction of new plants shifted to the gas-rich countries of the Caribbean and Middle East and to some large consuming countries such as China, India, Indonesia and Pakistan. At the same time, many plant closures occurred in West Europe and Japan promoting the share of production in developing countries to represent one-half of world capacity.
Over one-third of the world's production is in China and India, though nitrogen fertiliser is produced in 80 countries. In 1998, the main producing regions of nitrogen fertilisers were: North America (18 per cent of world production), China (22 per cent), the former Soviet Union (FSU) (10 per cent), West Europe (11 per cent), Central Europe (5 per cent), South Asia (15 per cent), the Near East (5 per cent), Indonesia and Japan (4 per cent), Mexico and the Caribbean (2 per cent), the remaining countries accounting for 7 per cent. With many plant closures in West Europe and Japan, the developing countries share of nitrogen production nearly doubled in two decades to 1998 to 55 per cent.
World ammonia capacity grew from 119 million tonnes in 1980 to a peak of 141 million tonnes in 1989. Virtually all the growth in capacity occurred in the FSU and Asia. From 1990 to 1995 capacity remained relatively flat, with increases in Asia being off-set by closures in Europe and the FSU. From 2000 to 2005 some 45 per cent of the anticipated increase in ammonia capacity will be in Asia, 25 per cent in North and South America and 15 per cent in the Middle East, these regions accounting for 85 per cent of the world total increase.
The growth in Asia is symbolized by the significant amount of new capacity with ten new sites and a number of capacity expansions announced in China. India as another major consumer is building several new plants including a 330 000 tonne per year unit at Vizas operated by Jindals.
The price of ammonia is influenced by the "unpredictable markets" of Russia and the Ukraine, which accounts for about one-half of world trade in ammonia and urea and the devaluation of the currency enabled smaller production units to remain in production. In January 2000 world overcapacity promoted ammonia prices reaching historical lows while urea prices were 60 per cent lower than in 1995. In a six year period to 1998, a high was $265 per tonne , barges, f.o.b. Gulf Coast and a low of $115 per tonne same basis. Currently in mid 2000 it is around $145 per tonne.
Ammonia is produced by the Haber Bosch process that involves steam reforming of natural gas to produce hydrogen, followed by reaction with nitrogen. The technology is mature, with the market dominated by five licensers-Haldor Topsoe, M.W. Kellogg, Uhde, ICI, and Brown & Root. Kellogg has developed a precious metal-based catalyst but otherwise the technology is mature and not envisaged to change. Haldor Topsøe has a 50 per cent world market share as supplier of the technology.
In the Haber Bosch process the hydrocarbon is primarily converted into hydrogen and carbon oxides while the required nitrogen is added as a component of the process air. The steam reforming section comprises a prereformer (normally installed when the feed is naphtha or when the feed contains higher hydrocarbons), a side fired tubular reformer and a secondary reformer where the process air is added. After the steam reforming section, the synthesis gas undergoes high and low temperature shift conversion where the carbon monoxide is converted into carbon dioxide. The carbon dioxide is removed and often used along with the produced ammonia to produce urea. Before the synthesis gas enters the ammonia synthesis, the final traces of carbon oxides are removed in the methanation section where methane is formed. The conversion into ammonia occurs in synthesis loop using radial flow synthesis converter(s).
While most of the plants operate at scales in excess of 300 000 tonnes per year new improvements in technology enables small scale manufacture for products aimed at nearby markets. This is enabled by the sharing of hydrogen from the syngas generator and the co-production of oxygen for the nitrogen required for the ammonia plant. In 1999, Petronas Fertiliser has become the world's first grassroots plant to coproduce methanol with ammonia at Kedah, Malaysia with the flexibility to vary methanol production between from zero to 200 tonnes per day (0 to 73 000 tonnes per year) and ammonia from 1125 to 1350 tonnes per day (400 000 to 500 000 tonnes per year).
 In the USA, the profile of ammonia use is as direct application fertiliser, 20 percent; other fertilizer materials (including urea, ammonium nitrate, ammonium phosphate, ammonium sulfate and nitric acid), 60 percent; chemical intermediates (acrylonitrile and caprolactam), 19 percent; miscellaneous (including metals, pulp and paper, and refrigeration), 1 percent.
 Other Asian countries set for ammonia expansion include Indonesia and Malaysia; and in a joint venture in Myanmar, Mitsui has built a 560 000 tonne ammonia-urea plant. Indonesia
Indonesia's PT Kaltim Parna Industri (KPI) expects to start up its $240m 500 000 tonne per year ammonia plant in Bontang, East Kalimantan, early 2002, Some 60 per cent of the plant's output will be exported, with the bulk earmarked to feed downstream units of Mitsubishi Corp and Asahi Chemical Industry. The unit will use natural gas supplies from Pertamina under a 20-year supply deal signed last year. It will benefit from Bontang's advanced oil and gas infrastructure and the company aims to be one of the world's most competitive suppliers of ammonia.
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