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Vulnerabilities of The International Energy Supply For The Ammonia Industry
Vulnerabilities of The International Energy Supply For The Ammonia Industry
Herbert W. Cooper
Dynalytics Corp.
T
he Ammonia Industry is large. On a
world-wide basis, approximately 550 production technology is steam/methane
plants in 80 countries produce reforming, to produce the required hydrogen,
~170,000,000 tons per year of ammonia, accounting for approximately 85 percent of the
having a value of U.S. $40,000,000,000. Many world’s ammonia production. Coal-, coke- and
of its modern plants are large, with capacities residual oil-based ammonia production is also
exceeding 1500 tons of ammonia per day. Its operational. In fact, 60 percent of China’s
companies produce a limited number of ammonia production is coal-based. Although
products all of which are commodities with there are continual evolutions, the technologies
standardized properties; competition is based on are generally considered to be mature. While
price and service. Approximately 85 percent of recognizing the technical and economic
the ammonia is used to produce fertilizers. challenges, there still remains a theoretical
potential for using substantially less feedstock
Although some ammonia is produced as a for ammonia production.
byproduct from manufacturing other chemicals,
97 percent is produced by reacting hydrogen Paper studies of nuclear-based production have
and nitrogen. Feedstocks and energy supplies also been carried out. This route, while
are virtually always natural gas, light technically viable, is many decades from
hydrocarbons, heavy residual oils, coke or coal. commercial operation.
Natural gas, where available, is most often used
as the source of the hydrogen and as the fuel for Energy Issues
economic and environmental reasons. This
usage accounts for approximately 4 to 6 percent Ammonia production is an international
of the natural gas consumption in North business with respect to sales and to sources of
America and Western Europe, and 40 percent in feedstocks and fuels. The producing companies
India. Natural gas typically represents 70 to 90 are exposed to many of the same factors all
Natural Gas: Many countries with large and/or While there is general agreement that
growing economies are net importers of natural hydrocarbon production will eventually peak, or
gas. These include member states of The has already peaked, there is much controversy
European Union which imports approximately about the timing of the peak and the subsequent
53 percent of its gas needs. Of the imports, 40 rate of decline. Certainly, crude oil production
percent comes from Russia, 30 percent from from Prudhoe Bay in the United States has
Algeria and 25 percent from Norway. The fallen by approximately 5.4 percent per year
United States is also a net importer of natural since 1988,10 from the North Sea by
gas, only producing 85 percent of its demand. approximately 5.9 percent per year since 1999,11
Gas extracted from gas shale and coal beds, from the Oseberg complex on the Norwegian
termed “unconventional gas” is becoming an Continental Shelf by 6 percent per year since
increasingly large factor; it now represents 16 1996,12 from Oman’s giant Yibal oilfield by
percent of U.S. production. The shortfall was approximately 60 percent since 1997,13 and
compensated for by importing gas, primarily from the Samotlor and Romashkino fields in
from Canada. Russia by 83 percent and 90 percent,
respectively, since the late 1970s14 and from the
Liquefied natural gas: Liquefying natural gas UK’s Continental shelf by 6 percent from 2005
is only a way to way to help lower the cost of to 2006.15 Gas production from wells that were
transporting it; it does not increase the amount active within the continental United States in
of available gas. Liquefied natural gas (LNG) 1999 has fallen by more than 50 percent.16
production, now approximately 180 million tons There are many more examples of declining
per year, is the fastest growing segment of the production.
energy sector throughout the world, averaging
14 percent per year. The world’s major LNG Although there is only a 36 percent success rate
producing countries are Qatar, Indonesia, in making commercially viable discoveries,
Malaysia, Algeria and Australia, and significant upcoming increases in the world’s oil and gas
new liquefaction facilities are under supply from new discoveries will nevertheless
construction in several countries including partially offset these declines. In addition to
Equatorial Guinea, Iran, Norway, Russia and increased supply from new sources,
Yemen. The major destinations for the product technological advances in extraction practices
are the European Union, North American and and reservoir control have increased production
Asian markets. Japan and Korea have been and recovery of a reservoir’s oil-in-place.
completely dependent on LNG imports for Importantly, technology improvements are not
many years. Unlike natural gas delivered by considered in the well known Hubert’s
pipelines, LNG delivered by ships can be predictive methodology. 17 A recent analysis18
readily diverted to another destination for of actual production data shows very poor
operational or financial reasons, subject to agreement between reality and predictions based
meeting navigational constraints, obtaining an on Hubert’s technique. Predictions consistently
q An extremely serious interruption: a 20 Utility and fuel supply companies have certainly
percent reduction in all types of energy, plus developed contingency plans for managing
many sporadic rolling two-hour blackouts, various levels of supply and delivery
lasting for a twelve-month period. Fuel interruptions. Discuss their contingency plans
prices will increase to seven times their with them to ascertain their views of how, to
then-current values. what extent, and under what conditions your
company will be impacted by their problems. It
Strategic Management Issues is important to understand the conditions under
Conclusion
Annual
Per Capita Annual Per
Electric Capita
Country Population Generation Gross Domestic
KWH/ Product
Yr/Person $/Yr/Person
Canada 32,800,000 15,879 34,446
China 1,306,300,000 1,475 1,707
India 1,095,400,000 537 812
Indonesia 245,500,000 427 1,145
Japan 127,400,000 7,112 36,102
Mexico 107,400,000 2,091 7,157
Nigeria 128,800,000 140 940
Pakistan 162,400,000 459 542
Russia 142,200,000 6,200 5,371
United States 298,400,000 12,455 39,538
Venezuela 25,400,000 3,409 5,005
Consumption Production
Country Reserves Million Barrels Million Barrels
Million Barrels per Year per Year
Algeria 12,300 103 775
Canada 178,800 846 1,150
China 18,300 2,518 1,389
European Union 7,527 5,379 1,063
India 5,600 960 309
Indonesia 4,300 420 403
Iran 125,800 561 1,555
Japan 59 1,911 46
Mexico 12,900 757 1,367
Nigeria 36,200 108 895
Pakistan 300 128 22
Russia 60,000 1,042 3,531
Saudi Arabia 259,800 766 3,905
U.S.A. 21,900 7,592 2,738
Venezuela 79,700 211 1,022
Table 4
Crude Oil Shipping Chokepoints31