AW - IfA Breakfast Briefing 2013 - North American Nitrogen Investment

7/27/2019 AW - IfA Breakfast Briefing 2013 - North American Nitrogen Investment

1/30

CRUs Breakfast BriefingNorth American Nitrogen Investment

Alistair Wallace, Senior Consultant

IFA Chicago, May 2013


2/30

22

North American Nitrogen Investment

Why North America?

How much?

What does it mean for imports?

Case study: Mosaic Faustina


3/30

33

Extensive shaleplays

Regulatoryincentives and

mineral rights tolandowners

Weakenvironmental

legislation

Existinginfrastructure

and watertreatment

Stableinvestment

environment

What enabled the US Shale Boom?


4/30

4

In the US high natural gas prices

resulted in a surge of domestic shale gas

drilling...

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

8

9

2000

2002

2004

2006

2008

2010

2012

Tc

f

US$

/GJ

Henry Hub Gas Price

Wellhead Price

Shale Gas Production

0

1

2

3

4

5

6

7

8

9

0

500

1000

1500

2000

2500

2000

2002

2004

2006

2008

2010

2012

US$/GJ

RigCo

unt

Rig Count Gas Price


5/30

5

...which was helped along by a highly

developed conventional gas industry...

Unconventional (red) and Conventional (blue) Natural Gas Basins

Marcellus

Barnett

and

Woodford

Barnett

Baxter,

Mancos,

Cane Creek

Mowry, Gammon and Baken

Fayetteville

Excello/Mulky

New Albany


6/30

6

...and by a favourable

development environment

Incentives for private landowners

favourablemineral ownership laws

Free and responsive market access stemming

from a long history of natural gasproduction, distribution and use

Mature and competitive service industry shale

gas technology development is not at a standstill

Extensive pipeline infrastructure proximal to

both conventional and unconventional resources


7/30

7

The US shale gas revolution hasrejuvenated US producers margins

7

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0

100

200

300

400

500

600

Jan-1995

Jan-1996

Jan-1997

Jan-1998

Jan-1999

Jan-2000

Jan-2001

Jan-2002

Jan-2003

Jan-2004

Jan-2005

Jan-2006

Jan-2007

Jan-2008

Jan-2009

Jan-2010

Jan-2011

Jan-2012

Henry hub(US$/MMBtu)US$/tonne

Site costs

Margins

Closures and mothballing

Henry hub price


8/30

88

0

50

100

150

200

250

300

350

400

450

500

0

5,

000

10,

000

15,

000

20,

000

25,

000

30,

000

35,

000

40,

000

45,

000

50,

000

55,

000

60,

000

65,

000

70,

000

75,

000

80,

000

85,

000

90,

000

95,

000

Site cash costs(US$/tonne)

2012 Urea Production (million tonnes)

The North Americans have movedsignificantly down the curve since 2008


9/30

Country WACC

China 8.2%

USA 9.1%

Brazil 10.0%

Eastern Europe 11.0%

India 11.5%

Russia 12.3%

Qatar 12.8%

Egypt 13.5%

Nigeria 15.1%

WACC for DCF model

9


10/30

10

Results of the DCFanalysis


11/30

1111


Why North America? How much?




12/30

1212

US Nitrogen: 21st Century Gold Rush?


13/30

13

Over 5.0 million tpy of new grossammonia capacity for $7.5 billion

13

Plant Type Gross ammonia Net ammonia Gross urea CAPEX* Start up

OCI Beaumont Restart 250 250 -- -- 2012

PCS Geismar Restart 449 241 -- -- 2013

RenTech Nitrogen Debottleneck 332 225 185 0.1 2014

Dyno, Waggaman Greenfield 750 100 -- 0.8 2015

Agrium Redwater Debottleneck 55 -- 170 0.2 2015

Mosaic Faustina Brownfield 720 720 -- 0.7 2016

CF Donaldsonville Brownfield 1,090 394 1,200 2.1 2016

OCI Iowa Greenfield 726 303 730 1.4 2016

Agrium Borger Debottleneck 490 -- 640 0.5 2016

CF Port Neal II Brownfield 750 -- 1,200 1.7 2016

Yara Belle Plaine II Brownfield 750 46 1,300 0.7 2017

Totals 5,218 2,110 5,425 7.4 --

*US$ billions

*Note, Net ammonia has been estimated for some plants


14/30

14

Over 5.0 million tpy of new grossammonia capacity for $7.5 billion...

14

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

2012

2013

2014

2015

2016

2017

2018

2019

2020

'000 N tonnes

Greenfield Brownfield Debottlenecking/Restart Current Total N Demand


15/30

15

...and if everything being planned getsbuilt,

15

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

2012

2013

2014

2015

2016

2017

2018

2019

2020

'000 N tonnes

Greenfield Brownfield Debottlenecking/Restart Current Capacity Total N Demand


16/30

1616


Why North America? How much?




17/30

17

In our base-case scenario we expectover 3.0 million tpy of new solid urea

17

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

'000 tonnes

Expected Capacity Urea Imports 2012 Import level


18/30

18

Some Canadian and Arabian Gulfexporters likely to continue imports

18


19/30

19

Expansions from CF and OCI will movethe US close to self sufficiency...

19

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

'000 tonnesExpected capacity UAN Imports 2012 Import Level


20/30

20

...likely pushing out European, FSU andeven Trinidadian imports.

20


21/30

21

Mosaic, Dyno, CF and OCI look likely toadd over 2 million tpy of merchant NH3

21

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

'000 tonnes

Expected Capacity Ammonia Imports 2012 Import Level


22/30

22

New ammonia capacity in Lousianalooks likely to squeeze out FSU imports

22


23/30

2323


Why North America?

How much?




24/30

24

A

24


25/30

0

100

200

300

400

500

600

0

300

600

900

1200

1500

1800

2100

2400

2700

3000

3300

3600

3900

4200

4500

4800

5100

5400

5700

6000

6300

6600

6900

7200

7500

7800

8100

8400

8700

9000

US$/tonne Other US Mosaic Tampa FOB

PCSCF Industries Miss-

Phos

25

US DAP site cash costs: 2012

25

BartowNew WalesRiverview

Faustina

PCS CF Industries


26/30

26

Mosaic Faustina: Ammonia cash costs

26

Year 2012 2017

Gas price to plant US$/GJ 3.02 5.46

Gas conversion efficiency GJ/tonne 31.75 31.75

Train capacity tpd 3000 3000

US operational days days 345 345

Train operating rate % 90% 90%

Ex-works Cash Cost

Feedstock cost US$/tonne 95.9 173.4

Labour US$/tonne 4.3 4.8

Electricity US$/tonne 1.7 1.8

Consumables US$/tonne 3.4 3.8

Working capital US$/tonne 2.9 3.3

Maintenance & Sust Capital US$/tonne 13.8 16.8

Total site cost US$/tonne 122.0 203.8


27/30

27

US DAP cash costs: 2017 (leveragingexpanded ammonia cap. at Faustina

27

0

100

200

300

400

500

600

0

300

600

900

1200

1500

1800

2100

2400

2700

3000

3300

3600

3900

4200

4500

4800

5100

5400

5700

6000

6300

6600

6900

7200

7500

7800

8100

8400

8700

9000

US$/tonne Other US Mosaic Tampa FOB

Faustina

CF Industries

BartowNew WalesRiverview

Miss-Phos

PCS


28/30

28

This is the global curve in 2017 withMosaic purchasing merchant NH3

28

0

100

200

300

400

500

600

700

0 10 20 30 40

Site cost(US$/tonne)

DAP Capacity (million tonnes)

Global site costs (non-Mosaic) Mosaic (weighted avg.) Tampa FOB


29/30

29

...and with Mosaic leveraging NH3production at Faustina?

29

0

100

200

300

400

500

600

700

0 10 20 30 40

DAP site Cost(US$/tonne)

DAP Capacity (million tonnes)

Global site costs (non-Mosaic) Mosaic (weighted avg.) Tampa FOB


30/30

Thank you for your attentionQuestions? 30

Documents

AW - IfA Breakfast Briefing 2013 - North American Nitrogen Investment