Polish ammonia production drops by 19pc in 2022

Poland's ammonia production fell by 19pc in 2022 from a year earlier, as high gas prices caused producers to reduce production or shutter plants for much of the third quarter.

Ammonia is a key ingredient in the production of nitrogen and nitrogen fertiliser products, and gas is the main feedstock, making the fertilizer sector one of the most gas-intensive industries.

Polish state-owned PGNiG, now part of PKN Orlen group, is the sole supplier of gas to dominant producer Grupa Azoty, and in July last year signed an agreement extending this position until October 2023.

Comparing PGNiG's bi-annual gas sales to nitrogen plants with bi-annual ammonia production in January 2020-June 2022 suggests average gas consumption of 977m³, or roughly 38.2mn Btu, to produce one tonne of ammonia, hewing closely to Argus Consulting estimates. PGNiG is yet to release sales figures for the second half of this year, but an estimate can be calculated based on the relationship between sales to nitrogen plants and ammonia production in January 2020-June 2022. This would suggest that gas sales fell to 838mn m³ in the second half of 2022 from 1.23bn m³ in the first half.

The 32pc decline in Polish ammonia output in the second half of the year was much steeper than the 6pc in the first half, as high gas prices forced a reduction and then shutdown of Polish ammonia output. In outright terms, ammonia production fell to 858,000t from about 1.25mn t (see table).

The decline in Polish gas consumption was similarly much steeper in the second half of the year. Gas consumption was down to 6.4bn m³ in July-December from 9.2bn m³ in January-June, and in aggregate it slumped by 19pc in 2022 on the year.

Poland is one of the largest ammonia producers in Europe — Grupa Azoty has four production sites, and PKN Orlen runs one through subsidiary Anwil at Wloclawek. Together, they have a combined ammonia production capacity of just over 2.9mn t/yr.

In late August, Azoty announced reduced rates or the closure of ammonia production at Kedzierzyn and Pulawy, and its two ammonia units at Police were off line for maintenance in July and August, while Anwil halted production at Wloclawek. Production only began to recover in mid-October.

Similar actions were taken by ammonia producers all over Europe. Argus estimated in August that roughly 17.85mn t/yr of ammonia production capacity was already off line or would be by the next month.

By Brendan A'Hearn