Argus Creates Global Benchmark for Low-Carbon Ammonia

Oil and Gas 71 Megapixl Darrenbaker 1 Argus launches global low-carbon ammonia benchmark

LONDON, June 26, 2024 — Global energy and commodity price reporting agency Argus has launched a new index to help companies trading low-carbon hydrogen products distributed to key markets in northeast Asia.

Argus Media Logo (PRNewsfoto/Argus Media)

The Argus Japan Korea Low-Carbon Ammonia Benchmark (JKLAB) is for the mass-balanced all-in cost of low-carbon (“blue”), liquid ammonia produced in the US Gulf coast and delivered on a cfr basis to either Ulsan, South Korea, or Niihama, Japan. This cost-based approach is different from assessing spot prices and is designed to help offtake negotiations.

The daily index is based on autothermal reformer ammonia production using Henry Hub-priced natural gas, with carbon capture and storage, for a minimum cargo size of 20,000t. This production route delivers a carbon intensity within the thresholds set by Japan and South Korea.

A key way to transport large volumes of hydrogen across oceans is to combine it with nitrogen to form more easily handled liquid ammonia. Northeast Asian power generation companies have successfully tested using ammonia instead of coal, and now intend to roll out commercial co-firing at an initial rate of about 20%, and then raise coal-ammonia blending test rates to 50%.

The lack of a clear market reference for low-carbon ammonia has made negotiations between companies difficult, with a wide range of formulas used to agree provisional offtake deals. These now need to be finalized, but variations in formula pricing present significant risks for end user utilities that operate on a cost-plus model, as well as developers themselves.

The Argus JKLAB index offers buyers in Japan and South Korea as well as producers in the US and elsewhere a common reference to structure offtake agreements. This allows them to manage their input cost volatility for long-term supply contracts, which often run for over a decade, without having to rely on a variety of complex instruments. For example, the production cost of US Gulf coast blue ammonia has seen a 12-month price range of 34% and managing multiple input costs is complex due to their differing market fundamentals.

Argus chairman and chief executive Adrian Binks said: “We have a long history of providing transparency to commodity buyers in Japan and South Korea. Northeast Asia is a key part of the hydrogen economy as market participants embrace innovative ways to reduce greenhouse gas emissions. Our new JKLAB provides a clear market signal to developers, consumers and governments as they seek to price long-term offtake agreements around a single instrument, rather than having to rely on multiple references to natural gas, power, carbon capture and storage or volatile low-carbon hydrogen or unabated ammonia prices.”

The Argus JKLAB complements Argus’ leading suite of ammonia spot price assessments and hydrogen production costs around the world. These are based on a range of pathways including coal gasification, steam-methane and autothermal reformation of natural gas, as well as grid and direct-coupled renewable electrolysis.

Argus contact information 

London: Seana Lanigan
+44 20 7780 4200

Houston: Matt Oatway
+1 713 968 0000

Singapore: Tomoko Hashimoto
+65 6496 9960

About Argus Media

Argus is the leading independent provider of market intelligence to the global energy and commodity markets. We offer essential price assessments, news, analytics, consulting services, data science tools and industry conferences to illuminate complex and opaque commodity markets.

Headquartered in London with over 1,400 staff, Argus is an independent media organisation with 30 offices in the world’s principal commodity trading hubs.

Companies, trading firms and governments in 160 countries around the world trust Argus data to make decisions, analyze situations, manage risk, facilitate trading and for long-term planning. Argus prices are used as trusted benchmarks around the world for pricing transportation, commodities and energy.

Founded in 1970, Argus remains a privately held UK-registered company owned by employee shareholders and global growth equity firm General Atlantic.

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