Aramco Slashes Blue Ammonia Output to Reduce Costs

Saudi Aramco has scaled down its low-carbon ammonia production target by 80 percent due to high costs and low demand.

The company has adjusted its production objective from 11 million tonnes per annum (mpta) by 2030 to 2.5 mpta, it has said.

The new target is still subject to the availability of commercially viable long-term offtake projects, Amin Nasser, Aramco CEO, told analysts during an earnings call this week.

"We refined the target. The market is not evolving quickly enough considering the high cost," Nasser said.

Nasser stated that Aramco, the world’s largest oil company by value, is in discussions with potential ammonia buyers but will only proceed with production if it secures agreements with “appropriate” returns.

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Ammonia is the second-most produced chemical worldwide, widely used in fertilizers, industries, and household products. However, it is also the single biggest carbon-emitting chemical.

Blue ammonia is its low-carbon form, produced from hydrogen using natural gas, where carbon dioxide is captured and stored rather than released into the atmosphere.

It is seen as a transitional solution toward a low-carbon economy, offering a compromise between conventional ammonia and the more expensive, fully renewable green ammonia.

In September 2020, Aramco, in partnership with Saudi Basic Industries Corp (Sabic), shipped the first 40 tonnes of blue ammonia to Japan.

Since then, it has signed initial agreements with companies including Japan’s Eneos and South Korea’s Hyundai Heavy Industries to investigate potential opportunities to establish blue hydrogen and blue ammonia supply chains.

The low-carbon hydrogen industry as a whole faces high costs and project delays.

“After a flow of announcements in the region, the slowdown of hydrogen deployment can be attributed to several factors, with the lack of demand, and consequently of committed offtakers, being certainly a crucial reason,” according to Dii MENA Renewables, Hydrogen and Energy Storage Insights 2030.

The blue ammonia market could grow by more than 60 percent a year, reaching $3.6 billion by 2032 from $80 million in 2024, according to Prescient & Strategic Intelligence.

Other Gulf companies, including the Abu Dhabi National Oil Company (Adnoc) and QatarEnergy, have also announced plans around blue ammonia.

However, Nasser stated that, while green hydrogen costs around $400 for a barrel of oil equivalent (boe) “or more,” blue hydrogen costs around $200 per boe, which is still “very expensive.”

Aramco is bidding for offtake agreements in South Korea and other countries but "until this comes to fruition, our focus is discipline," Nasser said.