BASF, Yara eyeing Gulf Coast for ammonia plant

Chemical giants BASF and Yara are talking about building “a world-scale ammonia plant” on the Gulf Coast, although few other details are available.

BASF, the world’s largest chemical company, uses ammonia in its United States manufacturing facilities. Oslo-based Yara, which has a global fertilizer network, is looking to strengthen its U.S. presence.

BASF spokesman John Schmidt said the joint project, if it happens, would be the first between BASF and Yara.

The BASF-Yara plant, if built in Louisiana, would join a handful of major ammonia projects announced in the last year. The projects include CF Industries $2.1 billion expansion in Donaldsonville; Russian fertilizer company EuroChem’s proposed $1.5 billion plant that will be built in either Carville or St. John the Baptist Parish; Dyno Nobel America and parent company Incitec Pivot Ltd.’s $850 million anhydrous ammonia production facility in Waggaman; and Mosaic’s proposed $700 million expansion of the Faustina site in St. James Parish.

Rusty Braziel, president of RBN Energy, expects BASF and Yara will choose between Louisiana and Texas, with neither state having much of an advantage over the other.

“For competitive reasons and to protect confidential company information, we can’t comment on current or potential prospects,” said Stephen Moret, Louisiana’s economic development secretary.

“In both states, there are a lot of industrials that have already announced expansions …. Also, both states have the lion’s share of the LNG exports that have already been announced,” Braziel said.

But both those things mean that the demand and the price for natural gas, the feedstock for the ammonia plant, will be higher in Louisiana and Texas than in other parts of the country.

Natural gas prices have historically been 3 cents to 5 cents cheaper at the Houston Ship Channel than at Louisiana’s Henry Hub. But the Ship Channel has some air quality issues, unlike most of Louisiana, that could increase the new plant’s cost, he said.

Federal regulations require companies planning new plants in areas with air quality issues, such as Houston, to buy emission reduction credits to offset the additional emissions from the plants.

The problem is that those credits are in short supply. In June, RBN Energy reported that the cost for the credits had risen from $4,500 per ton in 2011 to $300,000 per ton. The scarcity of those credits and the rising prices threaten to limit or delay new petrochemical plant construction, as well as hampering plant development and expansions.

Braziel said no one knows how many of the projects that have been announced will actually be built.

“Our feeling is that a lot of these plants that have been announced probably won’t make it off the drawing board,” he said.