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© 2009 KBR. All Rights Reserved.

David Mann

Technology Development ManagerFertilizer & Syngas

Global Ammonia Market Update


Topics to be Covered

♦ Ammonia Supply & Demand

♦ Ammonia Plant Market Trends

Revamps

New plants

♦ Summary


Demand for Basic Chemicals-2007 (approximate millions of mt/year)

Sulfuric acid 190

Ammonia 157

Urea 143

Ethylene 114

Chlorine 50

Soda 47

Methanol 40

Sources: Fertecon, Web searches


Ammonia Uses

explosives

fibers

resins

animal feed

Other Uses19%

Fertilizers

81%


0

200

400

600

800

1,000

1,200

1,400

1,600

1980 1990 2000

Mill

ion

s o

f h

ecta

res

Rest of WorldSouthwest AsiaSocialist AsiaFSUEuropeNorth America

Source: SRI

World Arable Land


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1980 1990 2000 2010 2020

Mill

ion

s

Industrialized EE & FSU China India Rest of World

Source: EIA

World Population

Average Annual Growth Rate = 1.35%


125

135

145

155

165

175

185

195

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

MIL

LIO

NS

of

MT

/YE

AR

World Ammonia Capacity & Demand (Source-Fertecon)

Tightening in Supply

Capacity

Demand


World Ammonia Capacity & Demand(Source-Fertecon)

125

150

175

200

225

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Mill

ion

MT

/YE

AR

11

Equivalent 2000 t/d NH3 Plants

6

4

4

Gap = 61 MM t/year

Capacity

Demand


Ammonia Capacity/Demand Gap Analysis

MM T/Year

Anticipated Capacity in 2011 231

Down Time of 10% - 23

Available Capacity 208

Anticipated Demand in 2011 170

Idled Capacity 38(1)

(1) Equivalent to 104 plants each 1000 t/day


Ammonia Capacity/Demand Gap Analysis

♦ Known idled capacity is about 16 million t/year United States (20 plants) Eastern Europe (14 plants) Western Europe (9 plants)

♦ Remaining plants are operating at 22 million t/y below capacity

♦ Overall industry availability = ~81%

♦ Most of these “at risk” plants will be those that came on-line during the large build up of capacity during the 1970s.


Ammonia Plant Capacity by Region – 2007(Source: Fertecon Ammonia Outlook – Issue 2009-2)

ASIA

China 32%India 8%Indonesia 4%All other 6%

3%

10%

6%

12%

6%50%

13%


Ammonia Plant Capacity by Region (2008) (Source: Fertecon Ammonia Outlook – Issue 2009-2)

Total 2008 – 153 million tonnes

Asia/Oceania

MiddleEast

Africa

CIS OtherEurope

EU

Latin America

North America


Global Ammonia Exports – MM MT/Yr (2008) (Source: Fertecon Ammonia Outlook – Issue 2009-2)

Total 2008 – 18.5 million tonnes (12% of production)

Asia/Oceania

MiddleEast

Africa

CIS

EU

Latin America

North America


Trends in Global Ammonia Exports (2007)(Source: Fertecon)

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

YEAR

Millions of tons/year

As a % of Production


Net World Ammonia Trade – MM MT/Yr (2007)(Source: Fertecon)

+0.1

-6.7

+4.6

-3.0

+1.9-2.0

+5.1

Total trade in 2007 = 19.2 MM mt Net trade in 2007 = 11.7 MM mt


Middle East – Ammonia Market – MM MT/Yr(Source: Fertecon Ammonia Outlook – Issue 2009-2)

0

5

10

15

20

25

2005 2007 2009 2011 2013 2015

CapacityProduction (85-93% of Capacity)Exports (19-29% of Production)

2020


CIS(FSU) – Ammonia Market – MM MT/Yr (Source: Fertecon Ammonia Outlook – Issue 2009-2)

0

5

10

15

20

25

2005 2007 2009 2011 2013 2015

CapacityProduction (91-->78-->95% of Capacity)Exports (26-->20-->24% of Production)

2020


Ammonia Price Trends(Source: Fertecon Ammonia Report – 3 SEP 09)

INTERNATIONAL PRICES

0

200

400

600

800

1000

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJAS

US$/t

fob M. East

fob Caribbean

2005 2006 2007 2008 2009


Historical Ammonia Prices - USGC(Source: Fertecon)


Ammonia Price Forecast(Source: Fertecon Ammonia Outlook – Issue 2009-2)

Since mid-October ‘08





Revamps

New plants

♦ Summary


Revamp Market Overview

♦ Older plants often struggle to remain competitive

Higher energy consumption

Located in high gas cost area

Smaller capacities

♦ Some energy efficiency revamps have already taken place

♦ Many operators are now looking at capacity increases

♦ Capacity by revamp can often be added for lower cost/ton than new capacity


Ammonia Plants Built by Decade

0%5%

10%15%20%25%30%35%40%

1950s 1960s 1970s 1980s 1990s 2000sPer

cent

of

Pla

nts

by D

ecad

e


Ammonia Revamp Potential

♦ Plants designed in the 1970s and 1980s have the potential for 50 percent capacity increase.

♦ Newer plants are more tightly designed and so more costly to debottleneck.


Ammonia Revamp PotentialPlants built in 1970s & 1980s

MT/D

Total Nameplate 100,000

Current production 110,000

Potential production 150,000

Potential extra production 40,000

About 100 KBR plants @ 1000 t/d


Ammonia Revamp PotentialStudy Results

Plant 1 Plant 2 Plant 3

Year on-line 1976 1978 1976 Capacity, tons/day Base case 1150 1150 1070 Revamp case 1500 1500 1500 ISBL Energy, Gcal/t Base case 8.3 8.2 8.6 Revamp 7.8 8.1 7.8


10

9

8

7

6

5

11G

cal/m

t -

LH

V

THEORETICAL MINIMUM

1950 1960 1970 1980 1990 2000

Trends in Energy Consumption – New Plants


Ammonia Plant Awards by Region

0

2

4

6

8

10

12

14

16

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Year of Award

Th

ou

san

d M

TP

D LAMEIN - AFAPACEuropeNA

Projects shift to ME and LA where gas is available at lower cost and to APAC where growth is higher.

Source: KBR Marketing


Average Capacity Built by DecadeKBR Licensed Plants

0

500

1000

1500

2000

1950s 1960s 1970s 1980s 1990s 2000s

Met

ric

To

ns/

Day


Indicative CAPEX(Assumes 0.7 exponent)

60%

70%

80%

90%

100%

1 1.5 2 2.5 3 3.5 4

Capacity Factor

Rel

ativ

e $/

MT


Trends in Maximum Capacity

♦ All licensors are now claiming that they can design single-train plants for >3000 mt/day

♦ KBR has a 2200 mt/day plant operating that could be revamped to 2800 t/d

♦ KBR offered and guaranteed a single-train 4000 mt/day plant in Trinidad

♦ KBR internal studies have shown that a single train capacity of 5000 mt/day is possible


Implications

♦ There will be fewer projects of larger capacity (2000+ T/D)

♦ Large amounts of ammonia (& urea) will suddenly come on the market

♦ Projects will require more capital, leading to increased industry partnering to share risks

♦ Mega-Capacity projects will be in low gas cost areas


Implications (Cont’d)

♦ “Mega-capacity” plants will be located at coastal sites

♦ There will be some logistics issues moving large volumes of product

♦ Plants that are older, smaller, and in locations with high feed costs will increasingly tend to either Revamp to increase capacity & reduce energy to reduce cost/ton Shut down





Revamps

New plants

♦ Summary


Market Summary

♦ Tightening in supply 2004-2005♦ This caused:

Ammonia prices to increase

Projects to be undertaken

♦ Price Run-up 2007-2008 Gas & oil prices increased

Supported by high crop prices

♦ Price Collapse 2008-2009 World-wide economic downturn

Steep decline in oil & gas prices

Decline in commodity prices

♦ 2009+ Price Recovery

125

135

145

155

165

175

185

195

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

MIL

LIO

NS

of

MT

/YE

AR


Market Summary

♦ A lot of capacity will come on line in next three years

♦ Expect capacity rationalization in high gas cost areas

125

150

175

200

225

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Mill

ion M

T/Y

EA

R Gap = 61 MM t/year


Project Summary

♦ 1970s – a period of rapid capacity expansion

♦ 1980s – a period of reduced energy consumption

0%5%

10%

15%20%25%30%

35%40%

1950s 1960s 1970s 1980s 1990s 2000sPer

cen

t o

f P

lan

ts b

y D

ecad

eG

cal/m

t -

LH

V

THEORETICAL MINIMUM


Project Summary

♦ 1990s – a decade of moving projects to low gas cost areas

♦ 2000s – a decade of increased plant capacities Large Capacity Plants Revamps (up to 50%)

0

2

4

6

8

10

12

14

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

Year of Award

Th

ou

san

d M

TP

D LAMEIN - AFAPACEuropeNA

0

500

1000

1500

2000

1950s 1960s 1970s 1980s 1990s 2000s

Met

ric

To

ns/

Day


Opportunities

♦ New Plants Large Capacity (2000+ MTPD) for low $/Ton NH3 Minimum Energy Consumption to reduce operating cost High Reliability to ensure maximum profitability

♦ Revamps Increase Capacity to Reduce $/Ton of NH3 Reduce Energy Consumption to Reduce Operating $$

KBR offers Proven Solutions to meet all these Objectives


Thank you very much…

Questions?

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