US offers $1.56 bln conditional loan for Indiana ammonia facility

Sept 16 (Reuters) - The U.S. Department of Energy has made a conditional loan guarantee of up to $1.56 billion to Wabash Valley Resources to help build a low-emissions ammonia production facility in Indiana, the government body said on Monday.

The project would repurpose a power plant to produce 500,000 metric tons of ammonia annually by utilizing petcoke, a waste product generated during the oil-refining process, and permanently store carbon dioxide underground, it said.

The company must satisfy certain technical, legal, environmental, and financial conditions before the DOE can fund the loan guarantee, the statement said.

WHY IT'S IMPORTANT

Global production of ammonia, used widely to produce fertilizers, contributes to 1% to 2% of global carbon dioxide emissions. Direct emissions from the U.S. agricultural sector contribute to nearly 10% of total U.S. emissions.

The project will be the first to domestically produce low-emissions ammonia for local farmers in the corn belt region of the U.S., primarily comprising Midwestern states, according to the Energy Department.

KEY CONTEXT

Fertilizer prices have remained volatile over the past few years after Russia's invasion of Ukraine upended global supplies.

Several fertilizer companies are setting up ammonia plants in the U.S. to tap into subsidies from the Inflation Reduction Act.

Major oil companies such as Exxon Mobil have signed agreements with fertilizer producers to store CO2 generated from industrial activities inside deep injection wells as part of their endeavor to curb emissions.

QUOTE

"This low-carbon ammonia would be cost-competitive compared to existing ammonia imports, helping to drive down costs for local businesses and consumers," the energy department said in a letter.

NUMBERS

The conditional commitment would be part of the $2.4 billion investment that Wabash Valley aims to secure for the project, expected to be completed in 2026.

The facility would store 1.6 million metric tonnes of CO2 annually once it becomes fully operational.

(Reporting by Sourasis Bose in Bengaluru; Editing by Janane Venkatraman)