Exploring the economics and sustainability of the ammonia industry in China

Every year, the Sustainable Gas Institute (SGI) offers unique placement opportunities to students to work in a research Institute for the summer

This year, Tu Yuan Neoh, a third year student from the Department of Chemical Engineering at Imperial College London, benefited from the research opportunities offered through the UROP scheme at Imperial College.

Tu has always been fascinated by the business side of engineering. He also had a yearning to understand the economics behind the ammonia (NH4) industry. The manufacture of ammonia is crucial for the world’s agricultural industry. Ammonia is used to make urea which makes up 90% of the fertilizer worldwide.

What was the overall aim of the research project?

My main task was to build a picture of the supply and demand dynamics of the chemical industry.

I was responsible for collating and contributing data for the industry module of the MUSE energy model. 

MUSE will be launched next year, and is an open source technologically-rich energy systems model that will provide a global perspective on opportunities and challenges for the energy industry.

One differentiation of MUSE over other models is that it simulates investor behaviour and it will help forecast what will happen to global energy distribution and consumption in a carbon tax environment. Carbon tax is still a hotly debated issue and we need tools such as MUSE to examine it.

The overall aim was to understand how the industrial sector might evolve if we were to implement a carbon tax in the future, and I chose the ammonia industry in China as a case study.

So why is understanding the chemical sector so important?

It is an important sector to study because it’s one of the most energy intensive of all economic sectors. This is not surprising as chemicals and their products are fundamental to a modern society and economic growth. It is also a complex area to decarbonise as there are literally hundreds of chemicals being used today and thousands of different production processes with differing energy intensities and carbon profiles.

Why did you pick ammonia?

Ammonia production is responsible for about 17% of the energy consumed in the chemical sector. The ammonia story is particularly interesting as it is closely tied to other economic sectors such as the agriculture. It is the main ingredient for producing urea – a fertiliser used throughout the world.

There are three main types of feedstocks used to make ammonia – either coal, natural gas, or naphtha. But natural gas is the main feedstock globally; about 80% use natural gas as the raw material (International Energy Agency).  Due to the differences in the type of feedstock, large differences exist between the energy intensity of ammonia production.

So why choose the ammonia industry in China as a case study?

There is an interesting anomaly in China where coal is the main feedstock for producing ammonia. In China, about 70% of ammonia is derived from coal, 10% from oil products and 20% from natural gas. This is because China is the largest producer of coal whereas indigenous natural gas is quite sparse, so there is a significant cost advantage.

There are of course many environmental benefits of switching to gas-based processes over coal which include reduced emissions of carbon dioxide and toxic waste. I was interested in seeing what carbon price would be needed for natural gas to be deemed more economical than coal.

What were your final conclusions?

With the current prices of natural gas, coal and ammonia, introducing a carbon tax policy will not make a gas-fed plant more economic than a coal-fed one. However, if you implement a minimum carbon tax, investors may move away from coal to natural gas as it becomes more profitable.

Who do you hope will benefit from your research?

I hope my case study will be used to support the Institute’s research interests in this area, perhaps through MUSE. There are also currently no case studies in the literature that examine this question in a quantitative way so it is adding real value to the research literature.

I also hope that it will spur further research by the stakeholders into this issue as I feel carbon mitigation in the chemical industry will become increasingly pertinent as we work towards our aspirations in combating climate change.

What have you enjoyed most about the research and working at the SGI?

What I liked most is that there was a lot of freedom and trust by Dr Sara Budinis. She gave me the right amount of advice and feedback, and helped me steer the project. But it was my task to figure out how to do it and I had a lot of freedom to do this, which I really appreciated.

Would you recommend working at the SGI?

Yes, definitely! It provides a great environment to learn and also explore your own ideas, and the proximity to Imperial College is a nice bonus.

You can find out more about UROP student research opportunities on the Imperial College website.