Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision and global business, the dream drivers that have made the NYSC an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSC and at ICE exchanges and clearinghouses around the world.
And now welcome inside the ICE House.
Lance Glinn:
Ammonia's historical significance dates back over a century when German scientists Fritz Haber, the father of chemical warfare, filed a patent in 1908 for the synthesis of ammonia, earning him the Nobel Prize in chemistry in 1918. Alongside fellow chemist Carl Bosch, Haber developed a method to produce ammonia commercially through the catalytic reaction of nitrogen and hydrogen at high temperatures and pressures. This process, known as the Haber-Bosch process, is still widely used today.
Ammonia is often associated with common household cleaning products used to maintain the cleanliness of our personal belongings, homes, apartments, and offices, whether it's goods from Clorox, ticker symbol CLX, Procter & Gamble, ticker symbol PG, Unilever, ticker symbol UL, or Kimberly-Clark, that's KMB. We frequently see ammonia listed as an ingredient, pay it no mind, and simply use the product for its intended purpose.
Beyond its presence in the typical household cleaning supplies found under our sinks, ammonia serves as a refrigerant gas, purifies water supplies, and is integral in manufacturing plastics, explosives, textiles, dyes, and other chemicals. But notably about 80 to 90% of the ammonia produced today is used directly or indirectly in agriculture as fertilizer. CF Industries, that's NYC ticker symbol CF, the world's largest producer of ammonia and a leader in the global manufacturing of hydrogen and nitrogen products for clean energy, is at the forefront of this industry.
Under the leadership of today's guest, president and CEO, Tony Will, CF Industries is harnessing ammonia's emerging role as a future clean energy source, producing it to sustainably feed and fuel the world. As he readies to attend the Reuters Global Energy Transition 2024 conference, Tony joins us inside the ICE House to discuss ammonia production and how CF Industries is working to support a global hydrogen and clean fuel economy. We will discuss his decade-long tenure, and some of the strategic partnerships and acquisitions made to move the company forward. Our conversation with Tony will, president and CEO of CF Industries, is coming up right after this.
Audio:
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Lance Glinn:
Welcome back. Remember to subscribe wherever you listen and rate and review us on Apple Podcasts so that others know where to find us.
Our guest today, Tony Will is president and CEO of CF Industries. That's NYSE, ticker symbol CF, as well as a member of the board of directors since 2014. Tony joined the company in 2007 as vice president of corporate development and served in numerous roles before ascending to his current position, leading the company's over 2,700 employees.
Prior to CF Industries, Tony held leadership positions at Sears, Roebuck & Company, Boston Consulting Group, among others. Tony, thanks so much for joining us inside the ICE House and welcome to the New York Stock Exchange.
Tony Will:
It's a pleasure to be here. Thanks for having me.
Lance Glinn:
You're in town to address the attendees at the Reuters Global Energy Transition 2024 conference here in Manhattan. What are some of the key messages you're aiming to convey about ammonia and its pivotal role in the future green economy?
Tony Will:
Yeah, so historically ammonia has been viewed as one of these really hard to abate sectors. It is energy intensive, trade exposed. We face competition from global competitors that are not necessarily on a level playing field, and it's costly to go ahead and reduce your emissions profile.
But we've taken a different approach and view ammonia as being a critical enabler of the transition to a clean energy economy. We have decided to get out there and decarbonize our network and provide clean ammonia to others to help decarbonize other difficult to abate sectors, like energy production and steel production. And so we're really excited about the path that we're on. It's a pleasure to be here and talk about it.
Lance Glinn:
Your tenure covers the past decade, but CF Industries traces its origins back to the mid-1940s when it was founded as the Central Farmers Fertilizer Company. In 2005, the company joined our community of 2,400 listed enterprises on the New York Stock Exchange and today works towards its mission of providing clean energy to feed and fuel the world sustainably.
While the mission appears straightforward on paper and the underlying science and technology are complex, I gave a little bit of an introduction in my intro, but can you further explain the intricacies? What exactly is CF Industries?
Tony Will:
As you mentioned, we are the world's largest producer of ammonia. We take the ammonia and then upgrade it into other derivative products. Those derivative products get used, as you pointed out, principally for agricultural use, but also as intermediate chemicals in other processes for emissions abatement and metals and mining explosives.
And so we play a pivotal role in helping to feed the world based on the agricultural use. But also interestingly, ammonia is starting to be viewed as both a hydrogen carrier and a fuel in its own right. And so we're helping to also fuel the world, and we're doing so with a program around decarbonization of our existing network, which helps us do it sustainably. It's a few simple words, but it really encapsulates what we're all about.
Lance Glinn:
Now tell me this, though. How often do you have to correct people or reiterate to people that ammonia isn't just in our common household cleaners? Because look, it's not abnormal to go under your sink, pick out whatever disinfectant spray, see the word ammonia on it, not think twice as I mentioned, and just go on your way using it. But that's a lot of what people know ammonia for. How often do you have to say, "No, ammonia, really that's a small percentage for what it's used for. It's used for a much greater percentage elsewhere"?
Tony Will:
Many people's exposure to ammonia is exactly what you said is household cleaners.
If you're in the ag space or look at commodities, you understand that it is a critical element in sustaining life. Roughly I think 50% of the world's population get their nutrients, sustenance from crops that are benefited by the products that we and others in our space make. And so we really are integral to sustainability in the broadest sense of the word, and our focus is to try to do that as environmentally friendly as we possibly can.
Lance Glinn:
Let's rewind to 2020 when under your leadership, CF Industries underwent a strategic evolution of sorts to support a global hydrogen and clean fuel economy through the production of green and low carbon ammonia.
Audio:
At CF Industries, we've always answered the call for progress: helping farmers increase the bounty of the land, feeding billions of people around the world, and now transforming the way we power our lives.
Since our founding, we've been energized by the toughest challenges, by the most urgent needs. We focus on making life better today while ensuring it's better for generations to come for our children and for their children. We are answering the call again, transforming our business and the future of energy, focusing our people, our purpose, and our infrastructure to power a global hydrogen and clean fuel economy.
Lance Glinn:
Reflecting four years in the past, what necessitated this strategic change?
Tony Will:
Well, this was an interesting time in human history, which was right in the middle of the COVID Pandemic. Most people were working from home. It actually gave us the opportunity to really as a leadership team step back from the day-to-day running of the business and think about what our future should look like and where we wanted to be. What were the motive forces that were shaping our lives and our industry?
There were a lot of things that were negative headwinds against our business at that time, including the move, which societal-wise is great, towards electric vehicles, which reduces gasoline consumption and ethanol consumption. Ethanol uses about a third of the US corn crop. Corn is a big user of nitrogen fertilizer. The movement away from for health and other reasons meat consumption. That also ripples back into grains for feed and corn production. All of these things were headwinds against our business.
We really stepped back and said there's got to be an opposite side to that coin. The opposite side was the focus on clean energy economy. What role could we play? Because the chemical composition of ammonia that we talked about earlier is NH3. There's three hydrogen atoms for every molecule of ammonia. It turns out that ammonia is both a terrific fuel in its own right, but also a great carrier and storage mechanism for hydrogen, especially if you're moving long distances or intercontinental.
And so it gave us the opportunity to really reevaluate the molecule, which historically the nitrogen component in NH3 was used to help grow crops. All of a sudden the hydrogen component now could be used to help decarbonize and is a clean energy source. There's no carbon in the actual ammonia molecule. And so our thought was we can actually help facilitate this transition to clean energy. We just have to focus on decarbonizing our network and doing it in the cleanest possible way and we can provide a clean fuel to the world.
Lance Glinn:
Can you dive into the technologies used to do that decarbonizing and to do that sequestration and other carbonated projects to really facilitate this change and the strategic evolution?
Tony Will:
Absolutely.
As you mentioned initially, the traditional way of producing ammonia is through the Haber-Bosch process. You're using methane gas, which is CH4, and you're using air, which has both oxygen and nitrogen. You go through this high temperature, high pressure catalytic reaction, you split up the various components, you strip out the CO2, and you're left with H's and N's that make ammonia.
The CO2 historically has either been used to upgrade into urea or to be vented. We had the opportunity to enter the first commercial CO2 carbon capture sequestration deal, which we signed with ExxonMobil a couple of years ago. We're getting ready to begin sequestering two million metric tons a year of CO2, which is the first large scale project of this type. We're really excited about the impact that that can have.
We're also looking at N2O abatement coming out of our nitric acid plants. N2O is a very potent greenhouse gas, so we can reduce that dramatically. Now we're looking at new technologies for the production of ammonia, including electrolysis of water. We are starting up a 20 megawatt electrolysis unit to make green hydrogen in our Donaldsonville, Louisiana facility. We're also looking at building a new plant that has extremely low carbon intensity because of the amount of CO2 we can capture and sequester going forward called autothermal reforming. It's a different process, but the good news is you get all of the benefits of the ammonia product with none of the environmental impact.
Lance Glinn:
You mentioned the Donaldsonville plant, and in 2020 the approval of a green ammonia project at that flagship location was announced. This includes the installation of a state-of-the-art electrolysis system, which you just mentioned, designed to generate carbon-free hydrogen from water. With the system now mechanically complete and nearing operational status, can you dive a little bit further into how it works and how it will enhance the production of green ammonia moving forward?
Tony Will:
Yeah, absolutely. As you know, water is H2O. The hydrogens are the critical-
Lance Glinn:
That's the one chemical compound I do know. I can tell you that much.
Tony Will:
You pass a current through water and you can actually separate the hydrogen from the oxygen, and then you separate those two. We have a different process called an air separation unit, basically a giant really cold freezer-like box that separates the components in air. I think about 76% of air is nitrogen. And so you take the hydrogen that you've taken from the water and the nitrogen you get from the air, and then you put those together to make ammonia.
It is an energy intensive process today, but it's an important technology that we feel we need to be on the front edge of given that we're the world's largest ammonia producer. I think it is really the future of ammonia production. But between then and now, there needs to be an appropriate transition. We're trying to play that role with the production of what we call blue ammonia, which is conventionally produced ammonia where we capture the CO2 emissions and inject them in the ground and get rid of them.
Lance Glinn:
This transition that we've been discussing also heralded the establishment of the Environmental Sustainability and Community Committee within CF Industries. How has the board steered the company's operations and policies over the last four years towards the realization of global ESG objectives as well as obviously CF Industries' unique endeavors, too?
Tony Will:
Yeah, I would say it is the realization of a series of initiatives that were undertaken already. This was not new work by any stretch of the imagination, but it found a home in one common committee.
And so our focus has really been on not only reducing our environmental footprint and improving the environmental emission profile that we have, but also dramatically improving the lives of the people in the communities in which we operate in our employees and really focusing on trying to be a leader in all aspects of corporate governance and corporate citizenship like we are in the production of ammonia. All of those things roll under this committee.
We formed a foundation. We're funding stem cell education in the communities in which we have facilities. We're really focused on DE&I initiatives. I'm really excited about the progress we're making on all these fronts. The board has been instrumental in terms of reviewing and endorsing and supporting all of these initiatives.
Lance Glinn:
Let's fast-forward now to the current day, 2024. In the first quarter earnings earlier this year, you reported strong cash flow generation. Net cash operations at 445 million cash flow approximately 200 million. Now, these results came despite dealing with unplanned disruption and downtime in January caused by severe cold temperatures. Now, assuming we are past those cold temperatures of January 2024, and here in Manhattan the 90 degree weather would say that we are, how do you sustain that strong cash flow and positive results throughout the rest of the year?
Tony Will:
Yeah, so ammonia is an interesting product in that it's a commodity chemical produced worldwide and chemically identical no matter where it's produced. And so the advantage that we have is we tend to run our plants more safely and more effectively than our competitors do. Our on-stream factor, our ability to utilize and produce out of our assets, is about 10 percentage points higher than the best North American competitors. Which over the scope of our network means we basically get a full ammonia plant more of production out of the same asset base than others would. An ammonia plant today would run you about $3 billion, so we are very capital efficient in terms of how we run our assets.
We're also one of the safest companies out there in terms of the lowest employee injury rate. I think those two things are integrally linked. We operate our assets more effectively than our competitors do, and we have the benefit of being in the best location for those assets. North America has some of the lowest cost natural gas, which is our primary feedstock, our cost structure. It is a region that not only needs all of our production, but we're running at a deficit from the standpoint of nutrients. And so we actually have to bring in nitrogen fertilizer from other parts of the world. And so we get a double benefit, one of which is we're on the very low end of the cost structure, we operate our plants better, and we have to bid in higher cost production from elsewhere in the world.
And so when you think about sustainability, I think it always starts with profitability. We're in an interesting position in that we are highly profitable and just structurally advantaged.
Lance Glinn:
Now, I mentioned that obviously the cold temperatures slowed things down in January. Are there ways to mitigate and get around that potentially unplanned downtime? Because look, you can't control the weather obviously. We could see in 2025 cold temperatures, who knows what's to come in January. But are there ways to mitigate the impact of these cold temperatures and work through them?
Tony Will:
We have plants as far north as Medicine Hat, Alberta, so the temperatures are very cold. We have a plant in just south of Sioux City, Iowa, also very cold during the winter. And then we have some plants in the southern tier.
The plants in the north, we have done significant winterization. A lot of the facilities are inside buildings. We have steam tracing on a lot of the lines to provide warmth and prevent freeze ups. In the south, we have tended not to do that because the implementation of those winterization approaches are very expensive. Historically in the south that's not been a problem.
But actually two of the last four years, we've had really significant problems during the winter. Winter Storm Yuri a couple of years ago was a major issue. And then as you pointed out, this last January, saw a two-week snap of extremely cold temperatures. And so we have evaluated, does it make sense to go through full winterization? I think at this point it doesn't. On the other hand, if this is becoming a normal part of operating assets in those climates, then it will really force our hand in terms of re-evaluating that.
Lance Glinn:
In February we were joined by Missouri governor Mike Parson on episode 401, and in our conversation we discussed the decline in farms and farmland shown in the most recent agricultural census. From 2017 to 2022, 140,000 farms and 20 million acres of farmland were lost, continuing a trend of the shrinking US agricultural sector.
Now, given that ammonia is obviously a key component in fertilizer and that crops require these nitrogen rich soils to thrive, is that something you are keeping an eye on, something that you are monitoring? Because ammonia is huge in that sector, and if that sector continues to shrink, that's obviously something to look close at.
Tony Will:
Yeah, I think at some level this is the implementation of what I would call best management practices on farm. Having buffer zones around waterways, trying to do a variety of things where you're taking poor soils out of production and allowing them to be more carbon sequestering and really focusing intensification on the best soils out there and driving higher yields per acre on really the best farmland is actually not only good for farm economics, but it's actually really good for the environment broadly.
Anytime you have these buffer zones and implement other conservation practices, it really is an investment in the land long term. While you're taking some land out of production, it is the right thing longer term.
Lance Glinn:
I want to talk about you a little bit now. You joined CF Industries in 2007 following experiences in consulting and retail. How did you first become introduced to this industry, which was markedly different from Sears, Roebuck and Company, Boston Consulting Group? How did you integrate yourself into now ammonia manufacturing?
Tony Will:
Yeah, it's funny. My wife grew up on a very small farm in southwest Iowa. I went to Iowa State, which is one of the big land grant ag schools. I didn't study anything in agriculture, and so I was just not that familiar with what went on in agriculture other than when my wife and I would go back to the family farm.
Lance Glinn:
Are you originally from Iowa?
Tony Will:
I'm not. I'm from the Chicago area.
But it was, as many of these things go, a random call from an executive recruiter. I went in and met the management team. I was really captivated by the straightforward mission of feeding the world and doing something that I viewed as being very positive and very good. I really liked the people that I interacted with. I thought not only is this something I can feel proud to do, but I liked the people and I think I can make a positive impact here. I thought, "All right, I just have to roll up my sleeves and dive into it."
I relied heavily on some experiences from my wife and her family, but to get some baseline understanding. And then unfortunately, I had the good grace to have a lot of people around me that were interested in helping develop me.
Lance Glinn:
You gradually transitioned through roles until becoming president and CEO in 2014. Those first 100 days are often critical to a leader's success, however long their tenure may be. What was your experience in those initial months, and how did you implement your vision and philosophy upon taking the helm?
Tony Will:
Again, I had a well-established team around me, and I think the biggest thing I wanted to focus on was an appropriate transition from being a peer to leader, which is often a very difficult transition.
I spent a lot of time both with my chairman at the time, who acted very much as a mentor to me, and went and did some workshops that really made me evaluate my personal style. Made me think about very intentionally what kind of leader did I want to be. I historically, as many people would tell you, have been a little bit... Autocratic might be too strong of a word, but out front and putting my opinions on the table, and I decided that was not what was called for in this role. I tried to really take a backseat and listen and employ more of a Socratic method of asking people over and over and over again different questions, getting them to think about it.
Takes a little longer to ultimately get someplace, but everyone was bought in. I think one of the great things about our culture and our team is that we stack hands on decisions and we're all moving in the same direction. And so I tried to really evaluate my style as a leader over those first 100 days.
Lance Glinn:
Before we head to the break, a recent development for the company under your leadership was the selection of Greg Cameron as executive vice president and CFO. What does Greg bring to the executive team, and how will he help progress the initiatives and goals of CF Industries?
Tony Will:
Yeah, I couldn't be happier than to have Greg join the team. He is a proven leader, a public company CFO, who has done more than just finance. He's been business leads in many different roles. He really brings an understanding of the clean energy space.
Most recently he was at Bloom Energy and really gets our vision and what we're trying to do and understands the move and the space and the direction, and I think is able to hit the ground running and contribute right off the bat.
Lance Glinn:
After the break, Tony will and I will discuss recent acquisitions and partnerships and how these deals will move CF Industries forward. All that and more is coming up right after this.
Audio:
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Lance Glinn:
Welcome back. If you are enjoying this conversation, want to hear more from guests like Tony Will, president and CEO of CF Industries, that's NYC ticker symbol CF, remember to subscribe to the inside the ICE House podcast wherever you listen and give us a five star rating and a review on Apple Podcast.
Before the break, Tony and I discussed CF Industries' 2020 strategic transformation, his journey to ammonia manufacturing and the company's first quarter earnings. In December, CF Industries finalized the acquisition of IPL's Ammonia Production Complex in Waggaman, Louisiana. As we discussed the details surrounding this transaction, could you first describe the company's just strategic approach to MNA? It's such a highly specialized field. When you're manufacturing, what process do you undertake to determine when to expand and the right acquisition to make?
Tony Will:
Yeah, you bet.
We have historically looked at trying to deploy capital back into the business in a way that allows us to grow. As I mentioned earlier, we are, I believe, the world's best operator of these kind of assets. We have the best safety record and we get the best asset utilization. We're the logical owner of assets in the space, but it's a combination of finding a willing seller at the right price, assets that fit into our network in a way that makes sense, and that don't require huge capital investments on back end of acquiring them in order to bring them up to speed.
In this case, the Incitec Pivot, or IPL, asset in Waggaman, Louisiana fit all of those criteria. It was a very new plant, very energy efficient, had a terrific workforce, and honestly just could have benefited from some of the expertise and discipline and capability sets that we bring into this space. It also allows for us to continue to deploy and roll out our carbon capture and sequestration vision that we implemented first at Donaldsonville, Louisiana and are moving across our network in places that make sense.
And so we think we can bring a lot of value into this asset that didn't previously exist and also get more production out of it.
Lance Glinn:
The Waggaman plant is located just an hour away from CF Industries' Donaldsonville nitrogen complex. Given the proximity, are there plans to collaborate between the two facilities, particularly in implementing processes such as carbon capture and sequestration?
Tony Will:
Yeah, we have best practice teams that span our entire network, but we also have one of the largest engineering teams embedded in Donaldsonville. And so they have already spent a lot of time in Waggaman, and those teams are integrating very well.
We do want to implement carbon capture sequestration at Waggaman. I think it's a great opportunity for us to sequester about 600,000 tons a year of CO2 that's currently being emitted to the atmosphere, and as well as increasing the production rate there.
Lance Glinn:
How long does that sort of process take to implement that technology into Waggaman?
Tony Will:
Yeah, so currently there is not a CO2 pipeline directly in the area. One of the things that we are focused on is the increasing the capacity and routing of CO2 pipelines. I was really happy to see just the other day that Iowa passed the legislation to enable the Summit CO2 pipeline going through Iowa. Our focus is on if we're really serious about decarbonizing, then we have to have options and outlets to do that.
And so we're working with a couple of potential partners around developing the CO2 pipeline out of Waggaman to nearby storage locations. But that is going to take a little while to process, to permit. A class six storage well also is not instantaneous. It is definitely a process, but I think it's one that's worth investing in because in the long term it's going to dramatically improve the environmental quality.
Lance Glinn:
In evaluating this acquisition, how does it help CF Industries maintain that leadership position in the industry?
Tony Will:
Yeah, I mean I think it gives us a really world-class, brand new ammonia facility that we can run more safely and get more production out of than other people. And it allows us to then serve our customer base better. It gives us more options ship from, ship to reduce logistics costs and make sure that we're meeting our commitments even when we have turnarounds or outages at other facilities. It's just more arrows in the quiver in terms of how to solve some of those challenges.
Lance Glinn:
Over the past two years, CF Industries has entered strategic partnerships with NYC listed companies including ExxonMobil, that's ticker symbol, XOM, and BP, that's ticker symbol BP.
Now, you mentioned the Exxon collaboration earlier. CF Industries will capture up to two million metric tons of CO2 from the Donaldsonville plant, which Exxon will then transport and store. Let's listen as Dan Ammann, head of Exxon Low Carbon Solutions, discusses the environmental impacts of this partnership.
Audio:
We're taking two million tons a year of carbon dioxide emissions out of CF's facility in Louisiana. We're capturing that so it doesn't go into the atmosphere, and then we're transporting it and storing it permanently in geologic storage.
And so that is a huge reduction in emissions. It's equivalent to about changing about 700,000 gas-powered cars into EVs. That's about how many EVs have been sold year to date in the United States. Out of one project, one facility, we're having that kind of emissions impact.
Lance Glinn:
The equivalent to changing 700,000 gas cars to electric vehicles. Is that only the beginning for what this partnership can capture? Could we one day hit one million gas cars? Two million gas cars?
Tony Will:
Absolutely. We are in discussions with ExxonMobil and some of the subsidiaries to replicate this kind of structure in a number of our other plants. We're really excited about the progress that we're making. We think they are terrific partners.
One of the things that has been our focus through this whole journey is finding the right partners that bring the right skill sets and expertise that we don't currently have. I can't imagine a better partner in this instance than ExxonMobil.
Lance Glinn:
While we've extensively discussed green ammonia, this partnership also positions CF Industries to be the first to market with blue ammonia, which you mentioned earlier, with an anticipated market volume of up to 1.7 million metric tons. What is the projected demand globally for this blue ammonia in the coming years? How does it really differ from the green ammonia that we've previously discussed?
Tony Will:
Yeah, so in terms of the chemical composition, it is identical and indistinguishable from conventionally produced ammonia. The difference is the carbon intensity, which is going to become an increasingly important metric for how you think about products is dramatically lower. In this case, about two thirds lower than conventionally produced ammonia.
Europe has recently instituted a CBAM, a carbon border adjustment mechanism. The blue ammonia that will be producing at Donaldsonville is below the threshold of tariffs that would be levied against conventional products moving into Europe. It gives us a variety of options, and I would say advantaged access, into different parts of the world, particularly those that care about the environment and want to focus on lower carbon solutions. We have been in discussions with a number of potential partners and customers of ours that are really focused on reducing their footprint, both scope one, scope two, and scope three. Us having a decarbonized product allows them to achieve some of their goals as well.
Lance Glinn:
The project is slated to commence in early 2025 when it begins in less than a year. What's the expected timeline for installation of all requisite hardware and technology is allowing the partnership to really be fully operational and to achieve that 700,000 gas car to EV goal?
Tony Will:
Yeah, so for the last two and a half years we have been ordering equipment, doing site work, civil work. We've got most of the structures up today. As you said, in the next six months we'll have the rest of the installation done and have the commissioning activities beginning on our side of the fence line.
At the same time, ExxonMobil is working on connecting our plant up to their pipeline network and also getting permitting on a class six sequestration well. We're both marching down the initiatives that we need to do to help facilitate this, but our hope is by this time next year we'll begin sequestering CO2.
Lance Glinn:
CF Industries announced its collaboration with BP in February of 2023. How does this partnership contribute to the attainment of the company's environmental goals, particularly the commitment to decrease scope three emissions 10% by 2030 and to reduce the life cycle carbon intensity associated with ammonia production?
Tony Will:
Yeah, absolutely.
One of the concerns I think globally about the production and use of methane, which is natural gas, is fugitive emissions. Methane is also a very potent greenhouse gas. One of the things that BP brings to the table is, again, an expertise in the production and transport of methane. They have been certified by an independent third party to have extremely low methane slip or fugitive methane emissions. It is helping us reduce our upstream scope three emissions by about 10%.
Just finding the right partner that does things the right way that is focused on reducing their environmental footprint helps us as well.
Lance Glinn:
Through this partnership, CF Industries received 2.2 billion cubic feet of MIQ certified natural gas last year, becoming the first industrial entity to utilize such gas and mitigating scope three emissions. 2024 will bring 4.4 billion cubic feet, double what was obviously previously received.
What benefits does this MIQ certified natural guests provide over others? What's the benefits of having it being certified by a third party like MIQ?
Tony Will:
Yeah, I mean, I think you absolutely can rely on the integrity of the process and hang your hat on the fact that it really is improving environmental conditions when you've got a third party with the quality of MIQ stepping in there and saying, "Yes, we endorse the measurements and the readings that BP is signing up for." Again, it's part of our overall program to reduce our total scope one, two, and three emissions.
Lance Glinn:
In April, CF Industries and Jera, Japan's largest energy company, announced a joint development agreement to explore the development of Greenfield low-carbon ammonia production capacity at CF Industries' Blue Point complex in Louisiana. This follows a memorandum of understanding sign last year between the two companies regarding the supply of 500,000 metric tons per year of clean ammonia beginning in 2027. How does collaborating with the global entity like Jera influence CF Industries' long-term strategy and growth potential worldwide?
Tony Will:
Yeah, this is really an exciting project, Lance. Because in the aftermath of the terrible tragedy at Fukushima, Japan began decommissioning their nuclear power fleet. Unfortunately given the the energy starved nature of Japan, they needed to backfill that with coal-fired power stations. That is completely the antithesis of the direction they wanted to head and opposite of the Kyoto protocols that they were instrumental in helping to develop.
One of the things that we have been talking to them about is taking a decarbonized or low-carbon intensity ammonia product and displacing coal burn and burning ammonia instead in order to generate electricity. And so this is going to allow them to reduce their greenhouse gas emissions coming out of their energy production facilities by at least 20%, the belief longer term as they can get up to 50%. We're going to have a product with almost no carbon associated with it.
And so this is a huge net reduction in global emissions. Because we are the world's leader in ammonia production and they're a leader in terms of electricity production and on the forefront of thinking about decarbonization, it's a natural partnership for us.
Lance Glinn:
How do you balance, when working with an entity outside the United States, different local and national government regulations, legislation? How do you balance that to make sure that what's good here is also good across the world?
Tony Will:
Yeah, I mean, I think environment is one of those things that is a global problem. It is not bounded on national lines drawn on maps. Longer term we have the same objectives that they do. We have been really engaged with not only their leadership team, but also with the Japanese government on what their objectives are and how they want to approach this. It's very consistent with what our goals are in terms of on-shoring and developing jobs and production capabilities here in the US. And so I think it fits both countries objectives but also has a larger purpose in the global environment.
Lance Glinn:
To the more recent joint development agreement for the low carbon ammonia plant, how does that reflect the broader trend of increased investment and innovation in renewable energy and low carbon technologies within the energy industry as a whole?
Tony Will:
Yeah, so this particular plant that would be the joint venture with Jera at our Blue Point facility would be a new technology of producing ammonia that I mentioned earlier called autothermal reforming. We're able to capture roughly 95 to 97% of the CO2 emitted during conventional ammonia production and do permanent geological sequestration.
You're talking about producing an extremely clean energy source as a result of doing this. Therefore, when they do use this to displace coal, you really are getting that net benefit in terms of aggregate emissions reduction going into the environment.
Lance Glinn:
As we near the end of our discussion, the climate initiatives we've discussed are equipped with roadmaps for successful implementation in the coming years, from reducing scope three emissions to achieving net-zero carbon emissions. Do you have confidence right now that these long-term goals will be achieved as intended when laid out?
Tony Will:
Yeah, so we put forward not only a long-term vision of getting to net-zero by 2050, but we put forward an intermediate goal of reducing our carbon intensity by 25% as of 2030. We are well on the way to achieving that. A number of the initiatives that we've talked about here today will get us there, and I'm fully confident that as time goes on, we will find cost-effective ways to deploy either existing or new technologies that'll help us get the rest of the way there.
Now, what I'll tell you is we have a roadmap for what we need to do to get to net-zero. Some of those initiatives are not actionable today because they're cost prohibitive. But I think a combination of new investment in technology development as well as government interaction and support, like happened with the 45Q credit that's part of the Inflation Reduction Act, will help us reach that goal by 2050. I think it's something we have to do not only for us, for our kids, and our grandkids.
Lance Glinn:
How big of a role does AI play in reaching those goals?
Tony Will:
AI is a really interesting way for us to be even better from an asset utilization and on-stream factor. I think we can get a lot of predictive information around finding issues before they break. Instead of running to break fix, which is a horrible way to run these kinds of plants, you see vibration increasing or temperature increasing or pressure drop increasing. You think, "Okay, we've got an issue. We need to go ahead and get in there and solve it." I think AI provides, machine learning in this case, a terrific way to go through all of the data that comes out of our distributed control systems and evaluate what we need to do to get even more production out of our existing asset base.
Lance Glinn:
Tony, given CF Industries' evolution over the nearly 80 years into the world's largest ammonia producer, with the recent partnerships and acquisitions we've discussed, how do you envision the company's trajectory in the years ahead?
Tony Will:
Yeah, I think the sky is the limit. I think we are one of the early movers that is actually helping to facilitate the energy transition. There really is no limit to what we can accomplish when we're working with world-class partners like ExxonMobil, BP, Jera, and others.
Again, we do what we do very well, better than anyone else. I think ammonia plays a really pivotal role in helping the world decarbonize.
Lance Glinn:
There's no limit to what we can do. The sky is only the limit. Tony, thanks so much for joining us inside the ICE House.
Tony Will:
Lance, thanks very much. Enjoyed it.
Lance Glinn:
That's our conversation for this week. Our guest was Tony Will, president and CEO of CF Industries. That's NYC ticker symbol CF. If you like what you heard, please rate us on Apple Podcasts so other folks know where to find us. Got a comment or question you'd like one of our experts to tackle on a future show? Make sure to leave a review. Email us at [email protected] or tweet at us at ICEHousePodcast. I'm Lance Glinn signing off from the library of the New York Stock Exchange. Thanks for listening. We'll talk to you again next week.
Speaker 1:
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