The CF Industries fertilizer plant in Medicine Hat is shown with a wind turbine, located on the neighbouring Box Springs Wind Farm, in the foreground. The global ammonia producer is exploring low-carbon processes and potential expansions, according to a business plan announced last fall.--NEWS PHOTO COLLIN GALLANT
cgallant@medicinehatnews.com@CollinGallant
Adding a carbon capture process to fertilizer production would only require modest capital spending and add relatively little to production costs, the head of CF Industries told investment firms Thursday morning.
Tony Will, president of the global nitrogen and ammonia producer which has a major plant in Medicine Hat, made the statement during a conference call to discuss the firm’s first-quarter results.
It laid out record cash flow from spiking world commodity prices and a plan to build a new joint partnership “blue ammonia” plant on the U.S. Gulf Coast, announced Tuesday, along with a dividend hike and share buyback program.
“Based on how the business is performing, we can do all of the above,” said Will, whose company sees strong pricing to last beyond the conflict and shipping and sanction constraints in Ukraine and Russia.
“The agriculture industry, including CF Industries, is poised for strong results over the next years as we work to replenish global grain stocks,” he said.
That will allow the company to move forward on a plan to position CF as a global supplier of low-carbon ammonia, said Will.
The nature of steam methane reforming to strip hydrogen out of methane already captures about two-thirds of the CO2 produced in the process.
“The most expensive part is capturing the CO2, and that’s already baked into how a fertilizer plant works,” he told the conference.
The company is spending US$200 million this year to install equipment to compress and dehydrate the CO2 at its plant in Donaldsonville, La.
Operationally, it could also add between $5 and $10 per tonnes in additional utilities expense – about 1 per cent of current record market prices for ammonia – and other costs for transportation and final sequestration costs.
A new “world-scale” plant with additional carbon capture process could be built by 2028 in partnership with Japanese firm Mitsui, with production exported to Asia.
Added expenses could be absorbed by tax credits in the United States.
“That leaves a lot of money in the ‘Q45’ (tax credit),” Will said, adding that costs for other industrial production sectors would be higher.
“We’re not encumbered by that considering we already capture a lot of our CO2.”
Not addressed Thursday was a similar tax credit in the recent Canadian federal budget that would see qualified CCUS projects receive a 50 per cent credit.
In Alberta, large emitters are also charged a $50 per tonne fee on CO2 released under TIER regulations, which could be avoided, considering it is based on emissions, not feedstock or gross production.
In 2020 the company stated it would evaluate potential capital projects at all facilities, including Medicine Ha, to become leaders in making and delivery low-carbon ammonia sector and hydrogen supply.
Officials only discussed announced projects on Thursday, but said “we consistently look at other organic and inorganic projects,” including brownfield plant upgrades.
CF and other area petrochemical companies have lent initial interest to a plan by the City of Medicine Hat to study the feasibility of a carbon capture hub in southeast Alberta. That report is due this spring.
The newly announced plant could cost about US$2 billion in total to the 50-50 partners over a five-year design and construction project.
CF’s share would amount to US$200 million in capital spending per year, said Will, comparing it to free cash flow of US$2.8 billion over the last 12 months.
“We expect to generate significant free cash flow in the coming years. This will allow us to invest in our clean energy growth initiatives while also returning substantial cash to shareholders,” said Will.
