LONDON, June 26, 2024 /PRNewswire/ — Global energy and commodity price reporting agency Argus has launched an index to assist companies trading low-carbon hydrogen products distributed to key markets in northeast Asia.
The Argus Japan Korea Low-Carbon Ammonia Benchmark (JKLAB) is for the mass-balanced all-in cost of low-carbon (“blue”), liquid ammonia produced in the US Gulf coast and delivered on a cfr basis to either Ulsan, South Korea, or Niihama, Japan. This cost-based approach is fundamentally different from assessing spot prices and is designed specifically to assist offtake negotiations.
The daily index is based on autothermal reformer ammonia production using Henry Hub-priced natural gas, with carbon capture and storage, for a minimum cargo size of 20,000t. This production route delivers a carbon intensity within the thresholds set by Japan and South Korea.
A key vector for transporting large volumes of hydrogen across oceans is to combine it with nitrogen to form more easily handled liquid ammonia. Northeast Asian power generation companies have successfully trialled the substitution of coal with ammonia, and now intend to roll out commercial co-firing at an initial rate of about 20%, and then raise coal-ammonia blending test rates to 50%.
The lack of a clear market reference for low-carbon ammonia has made counterparty negotiations difficult, with a broad range of formulas used to agree provisional offtake deals. These must now be finalised, yet variations in formula pricing present significant risks for end user utilities that operate on a cost-plus model, as well as developers themselves.
The Argus JKLAB index offers buyers in Japan and South Korea as well as producers in the US and elsewhere a common reference to structure offtake agreements. This enables them to manage their input cost volatility for long-term supply contracts, which often run for over a decade, without having to rely on a myriad of complex instruments. For example, the production cost of US Gulf coast blue ammonia has seen a 12-month price range of 34% and managing multiple input costs is complex owing to their differing market fundamentals.
Argus chairman and chief executive Adrian Binks said: “We have a long history of providing transparency to commodity buyers in Japan and South Korea. Northeast Asia is a nexus in the hydrogen economy as market participants embrace innovative ways to reduce greenhouse gas emissions. Our new JKLAB provides a clear market signal to developers, consumers and governments as they seek to price long-term offtake agreements around a single instrument, rather than having to rely on multiple references to natural gas, power, carbon capture and storage or volatile low-carbon hydrogen or unabated ammonia prices.”
The Argus JKLAB complements Argus’ leading suite of ammonia spot price assessments and hydrogen production costs around the world. These are based on a range of pathways including coal gasification, steam-methane and autothermal reformation of natural gas, as well as grid and direct-coupled renewable electrolysis.
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Argus is the leading independent provider of market intelligence to the global energy and commodity markets. We offer essential price assessments, news, analytics, consulting services, data science tools and industry conferences to illuminate complex and opaque commodity markets.
Headquartered in London with over 1,400 staff, Argus is an independent media organisation with 30 offices in the world’s principal commodity trading hubs.
Companies, trading firms and governments in 160 countries around the world trust Argus data to make decisions, analyse situations, manage risk, facilitate trading and for long-term planning. Argus prices are used as trusted benchmarks around the world for pricing transportation, commodities and energy.
Founded in 1970, Argus remains a privately held UK-registered company owned by employee shareholders and global growth equity firm General Atlantic.
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