February 22, 2021
Welcome
Welcome to this week’s JMP Report,
We saw BSP and OSH do the heavy lifting of the trading last week with BSP 223,187 shares trading unchanged at K12.00 while OSH traded 2,262 shares at K10.02, up 0.02. Refer details below;
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WEEKLY MARKET REPORT 15.02.21 – 19.02.21 |
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STOCK |
QUANTITY |
CLOSING |
CHANGE |
% CHANGE |
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BSP |
223,187 |
12.00 |
– |
|
|
KSL |
– |
3.20 |
– |
|
|
OSH |
2,262 |
10.02 |
0.02 |
+ .02 |
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KAM |
– |
0.90 |
– |
|
|
NCM |
– |
81.50 |
– |
|
|
CCP |
– |
1.70 |
– |
|
|
CPL |
– |
0.50 |
– |
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On the interest rate front, last week’s TBill auction was undersubscribed with the 364 day TBills averaging 7.20%. There have been no announcements to affect either the short end or the long end of the curve. 2, 4 8 and 10 yr bonds remain unchanged at;
2yr – 7.54%
4yr – 9.34%
8yr – 10.72%
10yr – 11.92%
For the smaller investor, a 9.34% return for 4yrs (min investment K5,000) is very good investing plus you have the ability to reinvest the coupon of 9.34% for each of the 6 months coupons. A guaranteed income stream with Government Guarantee.
We are seeing a slight change in the Finance Company rates with FIFl increasing their 1yr money to 5.50%.
What we have been reading;
- Iran wants US to remove sanctions before nuclear talks to clear more crude
Author: Aresu Eqbali
Feb. 23 deadline set by Iran to remove sanctions
Considering allowing US as guest in informal meeting
Back and forth expected next few week/months: S&P Global Platts Analytics
Tehran — A top Iranian foreign ministry official on Feb. 21 said the US needs to remove its sanctions before talks can begin to revive the nuclear deal with world powers at a time when the Islamic Republic is expected to bring as much as 1 million b/d of crude back to the market by the end of this year.
“For us, the criteria is removing the sanctions,” Abbas Araghchi, Iran’s deputy foreign minister for political affairs, said in a television interview published Feb. 21 by state news agency IRNA. He noted Iran has set a self-imposed Feb. 23 deadline for sanctions to be removed or Tehran will quit additional commitments to the Joint Comprehensive Plan of Action.
Araghchi also said Iran is studying a proposal by EU foreign policy chief Josep Borrell to hold an “informal meeting with the US as a guest.” China and Russia are aware, he added. “Principally, we think returning the US to the JCPOA doesn’t need negotiations. If they want to return to the JCPOA, it’s obvious that they should remove the sanctions,” he said.
The Biden administration on Feb. 18 formally offered to restart negotiations with Tehran, inching the two sides closer to a deal that could see the restoration of Iran’s approximately 2.6 million b/d export capacity. President Joe Biden has said the US will rejoin the nuclear deal but only after Tehran resumes full compliance with its terms. In 2018, the US under former president Donald Trump dropped out of the JCPOA signed between Iran and global powers, and imposed tighter sanctions on the country.
“I think there is going to be back and forth between the sides in coming weeks/months, but we still think 1 million b/d of additional Iranian oil by year end is more reasonable to assume,” Shin Kim, head of supply and production at S&P Global Platts Analytics, said Feb. 21 when asked about Iran’s response.
Iranian crude production has climbed steadily since the US election in November. In January, Iran pumped 2.14 million b/d of crude, its highest since November 2019, according to the latest Platts survey of OPEC output
More is likely to come, sources have told Platts, particularly in the run-up to the Iranian new year Nowruz celebrations in late March.
Platts Analytics said the US and Iran could reach a framework agreement to restore the JCPOA as early as in the next one to three months, with Iranian crude supply to grow by 1 million b/d between February and December.
Full sanctions relief may not happen until the fourth quarter, however, assuming Iran would need four months to return its uranium enrichment levels to JCPOA compliance, Platts Analytics said.
“Output then grows by 500,000 b/d by June 2022 and 150,000 b/d by end-2022,” it said in a recent note.
In early January, Iran confirmed a plan to increase uranium enrichment up to 20% as a counter-measure against US sanctions as Iran used measures foreseen in the JCPOA to scale back restrictions in case of non-compliance of parties with their obligations. Iran’s new enrichment level was a further violation of the 2015 nuclear agreement signed with the US, UK, France, China, Russia and Germany. The deal sought to restrict enrichment and uranium stockpiles in order to prohibit Tehran from developing nuclear weapons.
“If they are ready to remove the sanctions in one go, we are ready too to restore all commitments in one go. We will act proportionally,” Araghchi said. Lifting sanctions would include allowing crude cargoes to be insured, shipped and paid for without penalty, he said. Iran needs to verify that sanctions removal has materialized before it returns to its commitments in the JCPOA, he said.
“When the oil industry investment sanctions are lifted, there should be a reasonable time until [foreign] companies do their studies and negotiations to conclude a contract,” he said. “Important is that there will be no barrier on their way… they should be confident about the place they are going to make investment in. These are issues that will surface and we have to make arrangements to accelerate and facilitate such process. How long it takes for a company to remove its doubts and hesitations is another matter…for example when a European or Asian company wants to come to Iran for an investment or commercial deal without any barrier then we can say it’s verified.”
- Global hydrogen projects accelerating with $300 billion proposed investment: report
Author: Andreas Franke
Hydrogen Council/McKinsey see $80 billion in advanced stages
Public funding growing, 30 countries pledged $70 billion support
Carbon price key for cost trajectories, technology cost seen falling
London — Hydrogen initiatives are accelerating globally, the Hydrogen Council said Feb. 17 in a report co-authored with consultancy McKinsey.
There are now 228 large-scale projects for a combined $300 billion of proposed investment through to 2030, it said, with $80 billion of this either in advanced planning, having passed a final investment decision or under construction or commissioned.
“A huge step in the fight against climate change has been taken, as both governments and investors now fully grasp the role hydrogen can play in the energy transition,” said Benoit Potier, cochair of the Hydrogen Council and Air Liquide CEO.
Collaboration between governments, investors and companies is needed to allow the projects to proceed, Potier said.
Hydrogen can become a competitive low-carbon solution in more than 20 applications by 2030, including long haul trucking, shipping and steel, the Council said, based on total cost of ownership (TCO) assessments.
Over 30 countries had national hydrogen strategies in place by early 2021, pledging some $70 billion in support, it said.
Some 85% of proposed large-scale projects came from Europe, Asia and Australia, the report said.
Deployment approaches must target key “unlocks,” such as reducing the cost of hydrogen production and distribution.
Deployment through clusters will help suppliers share investments and risks. Clusters are already gaining traction in:
- Industrial centres with refining, power generation, fertilizer and steel production
- Export hubs in resource-rich countries
- Port areas for fuel bunkering, port logistics, and transportation.
Reduced costs from clusters will enable global trade in hydrogen, connecting future major demand centres such as Japan, South Korea, and the EU to regions of abundant low-cost hydrogen production means like the Middle East, North Africa, South America, or Australia, it said.
Parity with grey hydrogen
The report noted that falling costs for renewables and electrolyzers could see cost parity reached between green and gray hydrogen by 2028 in the best-suited regions, and between 2032 and 2034 in average regions.
Blue hydrogen, produced by steam reformation of natural gas with carbon capture and storage, could also breakeven with gray hydrogen by the end of the decade at a cost of $35-$50/mt of CO2 equivalent for transport and storage, it said.
The Hydrogen Council’s production pathways model showed the range of green hydrogen costs falling below $3/kg by the middle of the decade across a wide range of applications and energy inputs.
Including carbon costs, the model showed a sharp rise in gray hydrogen toward 2030, assuming a $50/mt carbon price.
In Europe, S&P Global Platts assessed the price of green hydrogen, the Netherlands, alkaline electrolysis, at Eur2.61/kg on Feb. 16 compared with 98 euro cent/kg for blue hydrogen, the Netherlands, SMR with CCS including carbon. That compared with Eur1.11/kg for gray hydrogen, SMR without CCS.
Platts also offers hydrogen pathway assessments for North America and Japan.
“The Hydrogen Council is proud to provide comprehensive global data and serve as a knowledge partner not only to the industry but also governments, investors, think tanks, civil society and other key stakeholders working towards a clean energy transition around the world,” said Takeshi Uchiyamada, Toyota chairman and cochair of the Hydrogen Council.
- Is ammonia the fuel of the future?
Industry sees the agricultural chemical as a convenient means to transport hydrogen
Yara’s plant in Sluiskil, the Netherlands, where the firm plans to install green ammonia capacity
Ammonia saved the world once; it might do it again.
A century ago, the world faced a looming food crisis. A booming population was pushing farmers to grow crops faster than nitrogen-fixing bacteria in the soil could keep up, and the South American deposits of guano and natural nitrates they applied as fertilizer were dwindling.
In what may still be the biggest global problem solved by chemistry, Fritz Haber and Carl Bosch developed a process to react hydrogen and atmospheric nitrogen under pressure to make ammonia, which farmers adopted in place of natural fertilizers. The Haber-Bosch process is still responsible for nearly all the world’s ammonia, as well as derivatives like urea and ammonium nitrate.
Today’s crisis is climate change. This time, ammonia could come to the rescue by capturing, storing, and shipping hydrogen for use in emissions-free fuel cells and turbines. Efforts are also underway to combust ammonia directly in power plants and ship engines.
Chemical companies smell an opportunity. Several firms are developing green ammonia, a route to ammonia in which hydrogen derived from water electrolysis powered by alternative energy replaces hydrocarbon-based hydrogen, making ammonia production virtually carbon dioxide–free. They are also investing in carbon capture and storage to minimize the carbon impact of making conventional ammonia, creating what the industry refers to as blue ammonia.
Blue ammonia should play an important role, whether it’s a role as a transition or it’s a role as part of the long-term energy mix.
Andrea Valentini,, principal for Asia-Pacific and the Middle East, Argus Consulting Services
Tony Will, CEO of the world’s largest ammonia producer, CF Industries, sees a fundamental shift in the industry’s prospects. “Up to this point, we have made a business by selling the nitrogen value of the molecule,” he says. “What’s really exciting about this is now there is an opportunity and a market that values the hydrogen portion of the molecule.”
But establishing an ammonia fuel industry won’t be easy. By most estimates, green ammonia will cost two to four times as much to make as conventional ammonia. And some of the technologies needed to harness the molecule, such as ammonia-burning engines, are still experimental. Governments and the marketplace will have to decide if green ammonia is worth the effort.
Nature has given ammonia attributes that seem to make it a perfect commodity for a future hydrogen economy.
A report compiled last August by Haldor Topsoe, an ammonia production technology firm, and other companies noted a number of those qualities. Ammonia has a higher energy density, at 12.7 MJ/L, than even liquid hydrogen, at 8.5 MJ/L. Liquid hydrogen has to be stored at cryogenic conditions of –253 °C, whereas ammonia can be stored at a much less energy-intensive –33 °C. And ammonia, though hazardous to handle, is much less flammable than hydrogen.
Furthermore, thanks to a century of ammonia use in agriculture, a vast ammonia infrastructure already exists. Worldwide, some 180 million metric tons (t) of ammonia are produced annually, and 120 ports are equipped with ammonia terminals.
The ammonia industry has informally adopted a color scheme to describe the carbon intensity of the different methods for making ammonia. The system also applies to hydrogen.
Blue
Blue ammonia is conventional ammonia for which by-product CO2 has been captured and stored, reducing climate impact compared with gray ammonia. Many fertilizer makers have embarked on such projects in recent years. Blue ammonia is controversial and in need of industry standards. Using CO2 for enhanced oil recovery, for example, isn’t as environmentally beneficial as injecting it into the ground permanently.
Gray
Also called brown ammonia, this is conventional ammonia that has been made the same way for 100 years. The Haber-Bosch process, responsible for nearly all of the world’s 180 million t of annual ammonia production, reacts hydrogen and atmospheric nitrogen. The hydrogen often comes from the steam reformation of methane, a process that emits CO2.
Green
Green ammonia is made with hydrogen that comes from water electrolysis powered by alternative energy. Projects abound, though most are on a modest scale of tens of thousands of tons, an order of magnitude smaller than a typical ammonia plant. A massive project in Saudi Arabia, however, aims to make more than 1 million metric tons of ammonia per year.
Turquoise
This process uses pyrolysis to convert methane into pure carbon and hydrogen, which is reacted with nitrogen to make ammonia. The industry thinks of turquoise ammonia as somewhere between green and blue. A prominent project is Monolith Materials’ carbon black plant in Nebraska.
But pivoting all that infrastructure toward environmentally friendly fuels will take time. Until last year, most proposed green ammonia projects were small, tens of thousands of tons rather than the half million tons per year, or more, that a conventional ammonia plant puts out.
Several are government-supported projects in Australia. For example, the Norwegian fertilizer maker Yara intends to install electrolyzers to make 3,500 t per year of green ammonia at its plant in Pilbara, and the ammonium nitrate explosives makers Dyno Nobel and Queensland Nitrates are studying 9,000 t and 20,000 t of green ammonia output, respectively. Pilot programs are also underway in New Zealand and Chile.
Several much larger projects were announced last year. By far the most ambitious one is in Saudi Arabia. The $5 billion project is a partnership between the US company Air Products and Chemicals, the local firm ACWA Power, and NEOM, a developer building a carbon-free city in Saudi Arabia.
Slated for completion in 2025, the installation will sit on the Red Sea coast. Solar cells will harness the sun during the day, while turbines will capture night time winds to generate 4 GW of electricity for water electrolysis plants. The hydrogen will be fed into a traditional Haber-Bosch plant to produce 1.2 million t per year of ammonia—a large amount even by conventional standards.
Air Products will spend an additional $2 billion to set up a novel distribution scheme. It will ship the ammonia around the world to specialized plants installed at depots for buses and trucks fuelled by hydrogen cells. These units will dissociate the ammonia to recover the hydrogen, enough for up to 15,000 trucks and buses in all.
When Air Products CEO Seifi Ghasemi unveiled the project last summer, he told analysts that he sees it as a feasibility study for an entirely new industry. “We are proud to be part of this undertaking because it is the first and largest and the most innovative project to make mankind’s dream of carbon-free energy a reality,” he said.O CONTINUE WITH CONTENT
Other firms followed suit with big projects. In October, Yara said it was considering installing electrolyzers at its ammonia plant in Sluiskil, the Netherlands, to generate enough hydrogen for 75,000 t of ammonia. The plant would run on 100 MW of power from a new offshore wind farm.
And in December, the company announced an even larger project: new electrolyzers at its plant in Porsgrunn, Norway, for 500,000 t per year of ammonia production.
The energy would come from Norway’s energy grid, which is already 98% renewable thanks to the country’s lush hydroelectric resources. Yara wants to sell the ammonia as a fuel for ships. The company is seeking incentives from the Norwegian government before it moves forward.
CF Industries is launching the first big green ammonia project in the US. Over the next 3 years, the company will spend $100 million to convert 20,000 t per year of conventional ammonia at its flagship plant in Donaldsonville, Louisiana, to green by installing electrolyzers. The electricity for the plant will be renewable power purchased from the grid.
By CF’s estimates, green ammonia will cost about $500 per metric ton to make, about three times as much as conventional ammonia. But the company estimates that it could fetch $2,200 per metric ton in the alternative energy marketplace, about eight times as much as conventional.
Moreover, Will says, the market is potentially huge. “Ammonia taking even a relatively small portion of marine applications, let alone overall hydrogen applications, and you’re talking about more than doubling the current production capacity of global ammonia,” he says.
Up to this point, we have made a business by selling the nitrogen value of the molecule. What’s really exciting about this is now there is an opportunity and a market that values the hydrogen portion of the molecule
Tony Will, CEO, CF Industries
CF has been studying ammonia fuels for some time and lately has been getting a lot of “inbound inquiries,” Will says. Many have come from Japan, where power companies are experimenting with cofiring ammonia in coal-based power plants with the aim of converting entirely to ammonia one day.
Not everyone is as bullish as Will. Andrea Valentini, a principal for Asia-Pacific and the Middle East at Argus Consulting Services, points to a number of hurdles the industry must clear if it is to establish green ammonia as an alternative fuel.
One problem is that marine engines capable of using ammonia aren’t available yet. “Developers are talking about 2024, perhaps, as a timeline, Valentini says. “I don’t think that’s unrealistic.”
In one such initiative, the Finnish engine maker Wartsila is beginning this year to test an ammonia-fueled four-stroke marine engine. In another, MAN Energy is perfecting a two-stroke ammonia engine.
And where companies see high profit margins for green ammonia, Valentini sees costs. “From a supply side, talking about a premium is always a nice thing, but a premium for a supplier means that someone else further down the line will have to bear the brunt, and that means us as consumers,” he says.
Another question for the green ammonia sector is whether there will be enough renewable power to support it. Forecasts for renewables are bullish. For example, BP’s latest Energy Outlook says renewables will grow from 5% of the world’s energy supply in 2018 to 45–60% by 2050 as costs decline by 30–70%.
Blue ammonia might offer a quicker and cheaper route to a hydrogen economy, according to Valentini. “Perhaps the market has been focusing more on green ammonia because of the perfectly green credentials,” he says. “But if you look at the potential of using existing facilities and existing energy resources, blue ammonia should play an important role, whether it’s a role as a transition or it’s a role as part of the long-term energy mix.”
This could especially be true in North America, where the large oil and gas industry keeps the cost of producing conventional ammonia low and creates opportunities to use carbon dioxide in enhanced oil recovery (EOR) or to store the greenhouse gas permanently underground.
Indeed, as CF announced its green ammonia project, it also promised to pursue 3.5 million t per year of blue ammonia projects. These will be relatively low cost, akin to that of conventional ammonia, Will says, noting that the company already captures CO2 for urea production.
Little additional capital investment is needed to compress the CO2 and get it to pipelines for sequestration, Will says. And tax breaks would offset those expenses. For instance, the new 45Q tax credit in the US offers $50 per metric ton for permanent CO2 storage and $35 per metric ton for use in EOR.
Another fertilizer producer, Nutrien, is also betting on blue ammonia. In 2019, the company started up a system in Redwater, Alberta, to inject nearly 300,000 t per year of CO2, the by-product of about 250,000 t of ammonia production, into a new $1.2 billion EOR pipeline. Since 2013, Nutrien has been selling about 250,000 t per year of CO2 into the EOR market from its Geismar, Louisiana, plant.
At present, according to Ashley Harris, Nutrien’s senior director of environmental performance and innovation, the only financial benefit of capturing CO2 is the additional revenue stream from selling it. “As we look forward, if a market for blue ammonia emerges where we find partners that are willing to pay for the low-carbon ammonia, then that would be a different type of business,” he says.
Experts say blue ammonia is in need of certified industry standards, similar to the distinction the 45Q tax credit makes between CO2 permanently sequestered or reused. Some shades of blue ammonia are lower carbon than others, and not one is as low carbon as green ammonia.
Ammonia makers hope to have standards in hand by the end of the year. “End markets need clarity,” Harris says. With certification, a premium for blue ammonia would likely emerge. Nutrien is “working with potential end users on determining the value of the product for them,” Harris says.
Unlike CF, Nutrien has kept the focus on blue ammonia in the short term and hasn’t thus far made an investment in green ammonia. “We have a low-carbon solution that significantly reduces carbon intensity at a much lower cost than the green technology today,” Harris says.
Another approach, called turquoise ammonia, is the path that the start-up Monolith Materials is taking. Last July, the company completed a plant in Hallam, Nebraska, that breaks down natural gas into hydrogen and elemental carbon, a material known to industry as carbon black. Carbon black is sold as a filler for tires and rubber.
The plant’s reaction is initiated by a plasma torch powered with renewable energy. “The beauty of this plant is that we can make hydrogen from natural gas without emitting any CO2,” says Monolith CEO Rob Hanson.
The plant started with a capacity of 14,000 t per year of carbon black. As a follow up, Monolith is now building a new, 180,000 t carbon black plant and will use the coproduct hydrogen to make 270,000 t of ammonia.
Making ammonia is a relatively new idea for Monolith. Its original plan was to sell the hydrogen to the Nebraska Public Power District to burn for electricity. But Monolith executives with experience in fertilizers had other ideas when they studied the project. “It is certainly going to be more valuable to make ammonia with hydrogen than it is to burn it to make electricity,” Hanson says.
The company has a different model than the green ammonia developers, however. The plant, which sits in the middle of the US corn belt, will sell the ammonia as low-carbon fertilizer rather than as fuel.
Valentini, the consultant, continues to be cautious about low-carbon ammonia, but he does see an important sign that the approach might prevail: ammonia makers, end users, and governments seem to want it to succeed and are backing it with real time and money. “Many stakeholders across different levels of the value chain are all going toward the same direction,” he says. “They all have pretty much the same goals.”
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Have a great week, stay safe and please feel free to contact us if you would like more information regarding our investment opportunities and strategies
Regards
Chris Hagan
Head, Fixed Interest and Superannuation
JMP Securities
Level 1, Harbourside West, Stanley Esplanade
Port Moresby, Papua New Guinea
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