Upstream is the backbone of Yara’s production system, including world-scale ammonia and fertilizer plants, phosphate mines and global trade of ammonia.
Upstream produces ammonia, urea, nitrates, NPKs and other nitrogen-based products as well as phosphoric acid and feed phosphates. Products are mainly sold through the Downstream and Industrial segments. Yara is the world’s number one producer of ammonia, nitrates and NPKs and the largest global trader of ammonia. World-class operational efficiency and competitive raw materials sourcing gives Upstream significant competitive advantages, providing a world-class manufacturing base for Yara’s business.
In Siilinjärvi, Finland, a EUR 60 million investment to increase phosphate rock production by 150 kilotons per annum was completed during 2010, reducing Yara’s dependency on imported phosphate rock for its NPK plants.
Yara management has established Process Safety as a separate focus area in 2010. The aim is to maintain Yara’s industry-leading position and further improve operational safety mechanisms. In addition to the mandatory alignment to our defined technical and operational standards, Yara has intensified and standardized training and competence requirements for operational leaders, engineers and operators. This strengthens hazard and risk awareness and understanding within the company.
To further improve plant reliability and productivity, Yara is leading the way in the field of Risk Based Inspection (RBI). These programs aim to assess the true equipment condition and customize plant inspection programs to specific needs and conditions, following a risk-based approach which considers probability of failure together with consequence of failure. The program has been running for two years, with clearly positive results in the approximately 60 percent of our production units covered to date.
Upstream delivered a strong financial result in 2010, with significant increase in both production volumes and fertilizer prices.
Ammonia production increased ten percent mainly as a result of lower production curtailments compared to last year, limited primarily by lower production in Tertre, Belgium. The Tertre ammonia plant resumed production in late May 2010 after an accident that had halted ammonia production since June 2009. The insurance claim covering both business interruption and property damage is successfully concluded, with the proportional share being included in 2010 results.
Finished fertilizer production increased 15 percent compared with 2009 as production ran at close to full capacity.
European oil and gas costs increased 14 percent, while Yara’s global average gas cost increased 21 percent. Energy cost outside Europe was higher than a year ago, primarily due to higher ammonia and urea prices and higher natural gas prices in North America.
Special items this year reflect mainly the NOK 165 million from Burrup write downs in Australia, the NOK 39 million gain on the Tertre property damage insurance settlement and NOK 69 million related to the sale of Carbonor shares during first-quarter 2010. Last-year special items relate mainly to the Tertre property damage insurance claim settlement of NOK 244 million and NOK 118 million gain related to the sale of Yara’s remaining shares in China Blue Chemical Ltd.
The Upstream Segment in Yara focuses both on ensuring safe and sustainable first-class operation of its existing asset base as well as pursuing the increase of production capacity, mainly through exploring potential projects in areas with competitive and sustainable feedstock for its nitrogen and NPK business.
Yara will continue its long-term strategy of increasing production capacity in areas with competitive and sustainable feedstock for its business portfolio. This includes nitrogen production based on competitively priced natural gas and also production of phosphate and potash for its NPK plants. Efforts are mainly focused on the Middle East, Africa and Canada, but any areas with potential competitive feedstock are of interest.
From 2013, all European ammonia and nitric acid plants will be regulated under the European Emission Trading Scheme (ETS). This will lead to added production costs for Yara and other European producers, especially in the ammonia sector. The European industry is deeply concerned that this will lead to competitive distortion versus non-European producers, resulting in carbon leakage and more global emission of greenhouse gases. Yara expects to meet the new requirements for our nitric acid plants by having installed the company’s N2O reduction technology and examines the possibility for further technical improvements in some of the ammonia plants.
|Revenue and other income
|Share net income equity-accounted investees
|EBITDA excl. special items
|CROGI (12-month rolling average)
|ROCE (12-month rolling average)
|Oil & gas cost (weighted average)1) USD per MMBtu
|Oil & gas cost Europe (weighted average)1) USD per MMBtu
|1) Including Yara share of production in equity-accounted investees.
|Volume & mix
|Oil & gas costs in Europe
|Conversion (NOK vs. USD)1)
|Total variance explained
|1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports.
Upstream is fine-tuning existing operations and expanding capacity in locations that offer secure and competitive raw material sources. Upstream’s projects include:
In Sluiskil, the Netherlands, Yara is completing a EUR 400 million urea expansion project, with start-up planned for the second quarter of 2011. The project will increase capacity by 45 percent, reduce energy consumption and increase reliability.
Qatar Fertiliser Company, which is 25 percent owned by Yara, has made a USD 3.2 billion investment in the Qafco-5 ammonia and urea expansion. Start-up is planned for the fourth quarter of 2011. The Qafco-6 urea project entered the construction phase during 2010, with completion planned for the end of 2012.