In this context, Argus’ latest analysis, which can be found in the recently released Argus Green Ammonia Strategy Report, can be summarized as follows:

• There is significant potential for a very large market for green hydrogen (and possible carriers such as ammonia) owing to the current drive towards decarbonization. But this is expected to only impact the market noticeably beyond 2030.
• In the near-to-medium term (next 10 years) supply is likely to exceed demand should all the announced projects be implemented on schedule. We expect only selected projects will be realized, as illustrated in the graphic below, which compares Argus’ forecast scenarios for green ammonia demand by 2030-35 with the current green ammonia project pipeline.
• In the near term, use of hydrogen / green ammonia as an energy carrier can only become viable through government incentives or sponsored schemes. These schemes are essential to establish the infrastructure and supply chain. There are already a number of such schemes / policies being developed or suggested in jurisdictions such as the EU and Japan. Regional / domestic producers and exporters have announced projects looking to take advantage of such schemes.
• In countries, regions, sectors or MNCs where such schemes exist or are planned, potential green hydrogen / ammonia produces will compete on cost to supply the targeted volume.
• Green hydrogen / ammonia product that targets markets outside these specific schemes will not be cost-competitive with conventional energy carriers without significant breakthroughs
• In the longer term, the market for green hydrogen or other potential carbon-free energy carriers is expected to increase significantly through expansion and internationalization of government sponsored or mandated schemes — for example the pricing of CO2 emissions — limits or outright bans on the usage of certain fuels in certain sectors, and technological breakthroughs that will enable green hydrogen / ammonia to compete without subsidy.

In addition to the wave of project announcements for green ammonia, firmer investor interest and a closer examination of the economics of hydrogen production are spurring interest in intermediate solutions such as blue hydrogen and ammonia. This appears to be the case especially in gas-rich regions such as North America, Russia and the Middle East, where blue hydrogen is increasingly being seen as a lifeline to keep adding value to cheap and abundant gas reserves.

Recently we have seen the first trial shipments of blue ammonia from the Middle East to Japan for use in a power station to generate lower-carbon electricity. The surge in interest in blue hydrogen/ammonia also poses an interesting challenge, given the renewed scrutiny of methane emissions in the natural gas supply chain, and the lifecycle carbon intensity of this solution. The absence of clear regulatory guidance and certification poses the risk of dubious environmental claims in the short term, and this is an issue that will have to be tackled by regulators as soon as possible.

we believe that not all options are likely to be treated equally in light of possible stringent regulations and certifications linked to the lifecycle emissions of blue ammonia. We highlight the main issues below:

• Carbon capture stage:

• A key advantage of ammonia production is that process CO2 emissions in Steam Methane Reforming (SMR)-based ammonia production are quite easy and inexpensive to capture. Typically, this represents 50-70% of an ammonia plant’s CO2 emissions, and several companies already capture this CO2 and sell it to third parties, currently for EOR in the US (as shown in later slides) or for other industrial processes.
• Flue gas CO2 would be much harder and expensive to capture owing to its much lower CO2 concentration, and it is typically released in the atmosphere.
• We would assume that “true” CCS-based blue ammonia production will have to be based on >90% of carbon capture. Using autothermal reforming (ATR) instead of SMR would partly solve this issue, since ATR, despite lower efficiency, would allow for the recovery of a much higher percentage of process CO2 emissions (around 90%) compared with SMR.

• Carbon storage stage:

• EOR, despite being a readily available and cost-competitive storage option might be problematic because captured CO2 would allow the production of additional CO2 from oil that otherwise would have not been extracted, and this might not be viewed as an optimal solution in some jurisdictions. Note that this is already a mechanism that is recognized by the US government in its 45Q scheme — ammonia producers that capture and store CO2 through “permanent” sequestration such as saline aquifers receive a $50/t of CO2 tax credit, while utilization for EOR is only rewarded with $35/t of CO2.
• It is also arguable that lifecycle emissions, including upstream methane leakage, will have to be taken into consideration.
• Using downstream chemicals as carbon sinks might also be problematic owing to the fact that some of the options taken into consideration do not guarantee the permanent storage of CO2 along the entire supply and value chain. Chemicals and plastics as carbon sinks might require a very complex level of certification and verification.
• Storage in deep saline aquifers and depleted oil and gas fields are therefore potentially the only “safe” options from a regulatory point of view, which could greatly limit the geographical scope of blue ammonia, and impact costs depending on the location.

In summary, Argus’ view is that a rigorous certification and verification framework will be as important as early-stage regulatory support and subsidies for the development of a low-carbon ammonia market.