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Record natural gas prices roil European industry

Ammonia production is hard hit in the UK and Continent

by Alex Scott
September 1, 2022 | A version of this story appeared in Volume 100, Issue 31

An ammonia plant in Norway.
Credit: Yara International
Yara International is scaling back production at its European ammonia plants, including this one in Porsgrunn, Norway.

European chemical companies that use natural gas as a source of energy or raw material are reeling from another price spike in the region. In the past week, the price of gas hit a record $342 per megawatt-hour, double that of a month ago and several times as much as the price a year ago.

The fertilizer company CF Industries says high prices for natural gas have forced it to temporarily halt production at its ammonia plant in Billingham, England. Natural gas is the main raw material in making ammonia. The firm closed its other UK ammonia plant in September 2021 and now will import the fertilizer.

The new closure is set to have knock-on effects, as the Billingham plant provides about one-third of the UK’s commercial-grade carbon dioxide. Steve Elliott, CEO of the Chemical Industries Association, a UK trade group, says in an email that the chemical industry needs more direct government support.

The latest surge in gas prices is linked to a decision by the Russian gas supplier Gazprom to temporarily close the Nord Stream pipeline, which moves gas from Russia to Germany. On Sept. 1, Gazprom was 2 days into a planned 3-day shutdown of the pipeline; it says the action is required for maintenance.

The Norwegian fertilizer producer Yara International is also struggling with the price of gas. It has already cut ammonia production and now plans to further reduce output to about 35% of normal levels.

Chemical companies in Germany have reduced the output of some products, including ammonia, according to VCI, a German chemical industry association. “Energy costs are exploding, the competitiveness of our export industry is at stake,” VCI says in a press release.

Chemical production by the European Union’s 27 member states fell 0.7% in the first half of 2022 from the same period in 2021, according to the European Chemical Industry Council (Cefic), a trade group. “Generally, the impact of the Russia-Ukraine war continues to weigh strongly on European chemicals producers. The chemical sector remains uniquely dependent on secure and stable supplies of natural gas,” Cefic says in an email.



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