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IFDC FOCUS ON FERTILIZERS
AND FOOD SECURITY
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Issue 3; July 1, 2008
India Gives
Fertilizer Sector Top Priority for Natural Gas
Soaring Natural Gas
Prices Impacting U.S. Fertilizer Industry
India has announced that
it will give its fertilizer sector top priority for the allocation of
natural gas from the key offshore Krishna-Godavari Basin, according to a
United Press International (UPI) report and an official of India’s Petroleum
and Natural Gas Ministry. |
Back Issues of Focus on Fertilizers
and Food Security June
2, 2008 -
World Fertilizer Prices Soaring June
15, 2008 -
Establishment of African Fertilizer Financing
Mechanism |
 Natural
gas is the major feedstock for producing ammonia, the building block for all
nitrogen fertilizers. The cost of natural gas accounts for 70% to 90% of the
production cost of a ton of ammonia, according to a report in the May 2008
issue of TFI Advocate, published by The Fertilizer Institute.
Once the Indian fertilizer
sector’s demand for natural gas is met, the remaining gas will go to
existing gas-based power units, UPI reported.
The action is critical to
ensure continued fertilizer production to help farmers provide food security
for Indian consumers, said Ram Vilas Paswan, India’s Chemical and Fertilizer
Minister.
The Hindu, a
prestigious Indian national daily newspaper, reported that the action is
part of India’s new gas policy regime. More than 20 fertilizer plants that
use natural gas as a fuel and feedstock will be immediately affected.
Meanwhile, soaring natural
gas prices in the United States will likely affect fertilizer
production—increasing prices and affecting plant operations. Natural gas
prices in some parts of the United States are 50% to 75% higher than 1 year
ago.
According to the Kansas
City Star, the recent rise in natural gas prices has been overshadowed
by the rising gasoline and diesel costs. Natural gas prices have also
received relatively less attention because most natural gas consumers will
not feel the impact of the increased prices until winter.
But the world fertilizer
industry has felt the impact of rising natural gas prices for years. TFI
Advocate reported that “…with the escalation in natural gas prices, 26
U.S. nitrogen plants have shut down since 1999.” The U.S. fertilizer
industry once supplied almost all domestic demand, but only 30 nitrogen
plants operate in the United States today. About 55% of the nitrogen
fertilizer used domestically is imported.
Analysis
Factors that increase the
price of fertilizer further threaten food security, especially now as food
prices are soaring worldwide and world leaders seek ways to avoid famine.
Rising natural gas prices and spot gas shortages are among the many forces
contributing to the escalating fertilizer prices worldwide. Governments such
as India are wrestling to ensure that farmers will have enough fertilizer to
produce food for their citizens.
Natural gas is the most
costly component in manufacturing nitrogen fertilizers. When natural gas
prices rise substantially, as in recent years, the price of nitrogen
fertilizer surges and domestic production is lost as plants are forced to
close.
Solutions
There are no easy
solutions to the problem of rising natural gas prices, which are driven by
supply and demand. But as high natural gas prices and other factors continue
to drive up the price of fertilizers, agricultural scientists, such as those
at IFDC, must continue to seek ways to increase the efficiency of fertilizer
use. More long-term research is needed.
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