The world’s largest oil and gas companies are investing billions of dollars into low-carbon ammonia projects. This chemical, essential for fertilizers, is also gaining attention as a potential clean fuel, particularly for the shipping industry.
Green Ammonia Developments
In recent months, several major green ammonia projects have emerged in the United States. The U.S. Department of Energy (DOE) is backing these initiatives with loan guarantees to support the production of green ammonia, aimed at helping Midwest farmers.
Ammonia, a critical component of fertilizers, has traditionally been made using fossil fuels. This process is emissions-intensive and conflicts with clean energy and climate goals. However, with advancements in carbon capture technology, emissions from ammonia production can be removed and stored underground, making the process low- to zero-carbon.
This shift makes low-carbon ammonia a promising option for industries seeking to cut emissions. When burned as fuel, ammonia does not release carbon emissions.
Major Investments from Oil Giants
Oil companies are making substantial investments in low-carbon ammonia projects. The U.S. government is also backing these efforts as part of its clean energy strategy under the Biden Administration.
Recently, significant deals have been announced involving leading oil companies. Abu Dhabi’s national oil company, ADNOC, has agreed to purchase a 35% stake in ExxonMobil’s Baytown, Texas project. This project aims to produce low-carbon hydrogen and ammonia and is expected to be the largest of its kind globally.
The Baytown facility will convert U.S.-produced natural gas into nearly carbon-free hydrogen, capturing around 98% of carbon dioxide (CO2). It aims to produce over 1 million tons of low-carbon ammonia annually, with a final investment decision anticipated next year and a startup planned for 2029.
“This is a world-scale project in a new global energy value chain,” said Darren Woods, ExxonMobil’s chairman and CEO.
ExxonMobil has also signed a deal with Mitsubishi Corporation to explore potential equity involvement and ammonia offtake for Japan, where the ammonia could be used for power generation and industrial processes.
Dan Ammann, President of ExxonMobil Low Carbon Solutions, highlighted the collaboration with Mitsubishi as a step forward in advancing global low-carbon hydrogen and ammonia efforts.
Government Support for Green Ammonia
While oil companies seek partnerships to fund low-carbon ammonia and hydrogen projects, the U.S. government is providing support through loan guarantees. The DOE’s Loan Programs Office (LPO) recently announced a conditional loan guarantee of up to $1.559 billion for Wabash Valley Resources, LLC. This funding will help finance a waste-to-ammonia production facility using carbon capture and sequestration (CCS) technology in West Terre Haute, Indiana.
The facility will produce ammonia for Midwest farmers, contributing to regional food security and climate goals. It will repurpose an industrial gasifier to utilize petroleum coke and store CO2 permanently, generating 500,000 metric tons of anhydrous ammonia annually.
Wabash Valley Resources needs to secure around $800 million in additional equity and meet other project milestones before receiving the loan. Approximately 75% of the equity funding is already in place.
Strategic Importance
Green ammonia projects, such as the one in Indiana, are crucial for diversifying the domestic supply chain, especially given recent global disruptions like the war in Ukraine, which has affected ammonia production from Russia.
Jigar Shah, head of the DOE’s Loan Programs Office, emphasized the need for a diverse supply chain to avoid reliance on foreign sources for this important chemical.
In addition to fertilizers, green ammonia has potential as a fuel for the shipping industry, which is working to reduce emissions that contribute to global CO2 levels. The International Energy Agency (IEA) projects that ammonia could account for up to 44% of final energy consumption in shipping by 2050, surpassing both biofuels and hydrogen in this sector.