Global ammonia prices are down 13 percent at the end of the first half of 2015, and while they have not fallen as dramatically as oil and gas prices, the Trinidad and Tobago ammonia industry is faced with threats from several fronts.

Richard De La Bastide, president of Yara Trinidad, said the decline confirms that the price of ammonia is linked to the supply and pricing of natural gas, since gas is a major input into the production process.

He noted that most of the global ammonia production is geared toward conversion to downstream products (fertilisers such as urea, ammonium nitrate and ammonium phosphate), while only 10 percent is exported for international trade, and it is this 10 percent that determines the global price.

One of the major drivers of falling ammonia prices has been the lower price of natural gas — largely due to increased gas production through U.S. shale gas.

The impact on the ammonia industry has resulted in higher-capacity utilisation rates of marginal commodity producers.

According to De La Bastide, these global dynamics in the ammonia market are also motivating producers to build chemical plants in the U.S., thereby increasing supply. There are several projects at various stages of development in the Midwest and southern states such as Louisiana and Texas aimed at boosting ammonia, urea and UAN production.

Most of the new production of ammonia is geared toward onsite production of downstream products such as urea; however, there are a few standalone projects which will reduce demand for imported ammonia, and the U.S. has traditionally been one of Trinidad and Tobago’s major export markets for ammonia.

“Trinidad will follow a pattern similar to that of LNG,” De la Bastide said, “by moving to access alternative markets in Latin America, including Brazil and Mexico, as well as Europe.”

While ammonia supply is expected to increase in the U.S., demand is still expected to outstrip supply in regional markets in Latin America, Europe, North Africa and Asia.

Exporting to diversified markets, however, comes with new challenges, and De La Bastide says that distance to these markets will result in higher freight costs and lower netback prices.

“Trinidad and Tobago still has a competitive advantage in the ammonia market, since most plants in Trinidad are well-established and were built at a time when construction costs were less than the price of building a new plant in the U.S. today,” said De La Bastide.

Even the older plants on the Point Lisas Estate are being upgraded. Two of the major producers of ammonia in Trinidad, Yara and PCS Nitrogen, have executed efficiency upgrades in older plants in recent years to ensure that they get the most out of their feedstock.

An efficiency upgrade to an existing brownfield plant, he says, can often provide an attractive return on investment for the company as well as the country.

But the Yara Trinidad president lamented that natural gas curtailments have been hurting the local industry. The inconsistency of supply means that the plants cannot operate at maximum efficiency despite upgrade investments.

He indicated that inconsistent production has led to increased maintenance costs since more wear and tear is experienced when production levels vary.  

De la Bastide recalled that the industry had been competitive in the past mainly because of access to markets and relatively competitive natural gas prices.

The local price of natural gas and regular supply is a major factor for overall competitiveness, as are geographic concentration and the sheer economy of scale at the Point Lisas estate. As he acknowledges the challenges facing his company, De la Bastide said he is encouraged by the development of the Juniper project and recent cross-border talks with Venezuela regarding the Loran-Manatee field.