Natural gas has been at the front of the news lately, mostly as a result of shortfalls causing power generation constraints in Europe. However, what is often forgotten in the noise of “gas crisis” headlines is that we need natural gas to feed our growing economies.
Did you know that natural gas is a key input to another, arguably more important commodity than power? Natural gas is used to make ammonia, a versatile product most people know little about.
Ammonia is a key feedstock for fertilizer. According to the US Energy Information Administration (EIA), world demand for nitrogenous fertilizers in 2009 was 133 million tonnes, with an estimated value of $45 billion. Ammonia is also used in the production of plastics and other organic chemicals.
Natural gas currently accounts for more than one-half of global ammonia production capacity, with the remainder split between oil and coal.
According to the International Fertilizer Industry Association (IFA), 90% of ammonia produced in 2008 was for agricultural use, with the remaining 10% used by industry. This dependence on natural gas could put fertilizer producers at risk when natural gas prices are high. In fact, certain European fertilizer producer have already faced production problems.
The US Energy Information Administration forecasts that world energy consumption for fertilizers will increase at an average rate of 2.3 percent per year from 2008 to 2035 . The US is the leading producer and exporter of ammonia, accounting for a little more than one-third of global production capacity in 2009 , while China, Russia and Algeria are also large producers.
Few people are talking about the critical interdependence of fertilizers and fossil fuels – in our view, the push for rapid decarbonisation has the very real potential to threaten supplies of food for millions of people around the globe.
Fertilizer is a remarkably important product in today’s world, and natural gas is one of the key resources needed to make it.
Andrew Schaper is a professional engineer and principal of Schaper Energy Consulting. His practice focuses on advisory in oil and gas, sustainable energy and carbon strategies.