AMMONIA PRODUCTION COSTS AND GAS PRICES

The first graph indicates the production cost for ammonia and urea from natural gas in Australia
from a greenfield site (Jan 2013 construction cost). The method used reduces capital and operating
costs to fixed values with only the gas feedstock as the variable. The method was developed by ICI
and described in "Gas Usage and Value - The Technology and Economics of Natural gas Use in the
Process Industries", D. Seddon, PennWell, 2006. The basis for the estimate is given in the following
table:
AMMONIA UREA
PRODUCTION kt/a 850 1500
CAPEX $MM 1050.95 1182.32
CONSTRUCTION PERIOD years 3 3
PLANT LIFE years 15 15
RETURN ON CAPITAL (10% DCF) %/a 16.34% 16.34%
NON GAS OPERATING COSTS $MM/a 252.12 284.97
GAS USAGE PJ/a 29.62 29.62

The capital cost is assumed to be 30% higher than in the US Gulf. The plot for a US Gulf operation
shown in the second graph.
For reference recent Far East ammonia prices (CFR NEA) are shown in Graph 3.
Inspection of the graphs clearly shows that at gas prices over $8/GJ ammonia production cost in
Australia would be in excess of $600/t which compares with typically traded at prices about $500/t.
For prices below $500/t the gas price to a new facility would have to be well below $5.5/GJ.
Long term US gas prices are now typically in the range $3 to $4/GJ (~ $/MMBTU). At this price
ammonia could be produced for about $350/t. Since typical large scale shipping of ammonia is in the
region of $50/t, ammonia delivered from a US facility would be in the region of $400/t.
To maintain a competitive position against US imports the gas price for a new Australian facility
would have to be in the region of $3/GJ or below.

D. SEDDON
29/05/2013
(www.duncan seddon.com)

Graph 1

Graph 2

Graph 3

0
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0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 9.50 10.00
U
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$
/
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FEEDSTOCK PRICE ($/GJ)
UNIT PRODUCTION COSTS OF AMMONIA AND UREA
FROM GAS FEEDSTOCK (AUSTRALIA)
AMMONIA UREA
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700
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 9.50 10.00
U
S
$
/
t

FEEDSTOCK PRICE ($/GJ)
UNIT PRODUCTION COSTS OF AMMONIA AND UREA
FROM GAS FEEDSTOCK (US GULF)
AMMONIA UREA
0
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400
500
600
700
800
900
1000
2
0
0
6

2
0
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7

2
0
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8

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9

2
0
1
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2
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1
1

2
0
1
2

u
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$
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FAR EAST PRICES
AMMONIA