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Abu Dhabi's Fertiglobe set to play 'big role' in global energy transition

January 14, 2022
oil and gas

The ADX-listed company is investing in projects to boost its low or zero-carbon ammonia production and aims to expand global customer base looking to use hydrogen to decarbonise

Fertiglobe, the Abu Dhabi-based chemicals joint venture of energy major Adnoc and Netherlands-listed OCI, is investing in several initiatives to produce low and zero-carbon ammonia to help the world reduce its carbon footprint, its chief executive said.

The company, the world’s top seaborne exporter of urea and ammonia, seeks to help existing and new clients looking to use hydrogen in the form of ammonia for marine fuels, power generation and other industrial applications, Ahmed El Hoshy told The National in an interview.

“We are going to play a very big role in the energy transition because there is a lot of discussion around hydrogen being a solution and its ability to provide energy,” said Mr El Hoshy, who is also chief executive of OCI.

“Today, hydrogen — for our purposes ammonia — can be used to decarbonise over 80 and potentially 90 per cent of global greenhouse gas emissions.”

Ammonia allows for the easy transport of hydrogen, the blue form of which is derived from gas and the green version from splitting water into hydrogen and oxygen using renewable sources.

Ammonia — largely used in fertilisers and industrial applications from manufacturing of plastics to textiles and pesticides, automotive and cosmetics — when heated to extract hydrogen does not produce carbon.

Hydrogen is gaining importance as the fuel of the future and low-carbon ‎hydrogen is deemed essential in decarbonising hard-to-abate industrial sectors including heavy transport in the future.

“Why we think we are well positioned is that a good 50 plus per cent of hydrogen today is delivered in form of ammonia and methanol, and ammonia has the lion’s share of that,” he said.

“If we can produce it in a low-carbon way or no-carbon way, for which we have a few initiatives we are working on now, we can deliver this product all over the world,” Mr El Hoshy said.

Fertiglobe is constantly looking at what it considers “low-hanging fruit” and is prioritising capital expenditure on its existing asset base to debottleneck capacity and convert feedstock from natural gas to hydrogen.

“We have announced some projects and we are working on other projects that aren’t announced [yet]. When you think about capex, we are in a good position,” he said.

Some of these upgrade schemes are at idea stage while others are at feasibility or development stages, he said, declining to specify the amount the company plans to spend.

“We are in a position now that is once in a generation type of opportunity … we see open playing field ahead of us and we are happy to commit investments,” to change Fertiglobe’s asset base, Mr El Hoshy said.

Governments and energy companies around the world are exploring ways on how to use clean hydrogen to lower greenhouse gas emissions and help them reach their net-zero carbon ambitions. The UAE and other countries around the broader Mena region are already pursuing plans to make hydrogen a part of their energy mix and tap into the clean fuel’s potential for different industrial applications.

Last year, Adnoc, Mubadala Investment Company and Abu Dhabi holding company ADQ formed an alliance to develop a global hydrogen hub. Adnoc subsequently announced plans to build a blue ammonia plant in Ruwais, while Abu Dhabi Ports-owned Kizad said it would invest $1 billion in a green ammonia plant.

Other Gulf states are also pursuing similar plans. Oman plans to develop a $30bn green hydrogen plant, the biggest in the world upon completion, which will be powered by 25 gigawatts of wind and solar energy.

Saudi Arabia, the world’s largest oil exporter, is also building a massive green hydrogen plant in Neom. Acwa Power and Air Products are building the $5bn project, which has a capacity of 4 gigawatts and can produce 650 tonnes of hydrogen a day.

Fertiglobe, which currently produces 1.5 million tonnes of ammonia a year, has several projects in the pipeline that will significantly increase its capacity. The company will continue to serve fertiliser and industrial markets, a business that is growing at low-to-mid single digit percentages and has potential to grow more.

“But where we see a lot of excitement is on the nascent market, which is using ammonia as a fuel,” Mr El Hoshy said.

In August last year, Fertiglobe and Adnoc sent blue ammonia shipments to Japan and the company see East Asian consumers of ammonia ramping up demand in the future. However, prospects of growth for ammonia as clean energy fuel are even brighter, he said.

“Today, clean energy demand for ammonia is close to zero [but] by the middle of the decade we see it upwards of 8 million tonnes and by end of 2030 it could be over triple that amount,” Mr El Hoshy said.

Fertiglobe has a “very big advantage” and is able to capitalise on demand boom as it has the infrastructure and the company is backed by “very supportive sponsors in Adnoc and OCI'.

The company has already announced 1 million tonnes of future capacity through its partnership with Ta'ziz in Abu Dhabi, 70,000 tonnes of production increase in its existing Fertil plant in the UAE’s downstream centre in Ruwais and it aims to boost green ammonia production by 90,000 tonnes in Egypt.

“When you look at addition there, we are looking to bring on new capacity as an incumbent, which we think is significant advantage,” he added.

Fertiglobe is an early investor in the low-carbon ammonia in the region. In June, the company said it will join the development of a large blue ammonia plant in Ruwais.

It has taken a “sizeable minority stake” in the project in the Ta'ziz Industrial Chemicals Zone, which is being developed by Adnoc and ADQ to manufacture downstream products, Mr El Hoshy said, declining to give the company's exact shareholding in the project.

Ta'ziz and Fertiglobe are on track to finish feasibility and design work and will likely make the final investment decision this year. Fertiglobe's investment in the scheme will not be a “significant capital outlay”.

The plant aims to produce low-cost blue ammonia that can help reduce the carbon emissions of coal-fired power plants in East-Asia that is a necessary part of energy mix of countries like Japan and Korea, he said.

In November, Fertiglobe selected Plug Power to build a 100-megawatt electrolyser to produce green hydrogen for ammonia production in Egypt. The company is developing the plant in Ain Sokhna with partners Scatec, Orascom Construction and The Sovereign Fund of Egypt to develop the country’s first green hydrogen project.

Fertiglobe, which in August acquired an additional 15 per cent stake Egypt Basic Industries Corporation for $43 million is “constantly evaluating” merger and acquisition opportunities.

“There’s always a possibility of additional deals … we are really looking for high-return opportunities,” Mr El Hoshy said.

Fertiglobe, which last year raised $1.1bn credit facility as part of a new capital restructure to refinance debt and pay dividend to its shareholders, may raise additional debt this year, Mr El Hoshy said.

It is a decision for the company board but “I wouldn’t rule that out as a possibility … our credit profile is strengthening”, he said.

Last year, the company, which is 35 per cent owned by Adnoc and remaining by OCI, raised $795m in its initial public offering, the third-largest IPO on the ADX, and it is “pleased with the listing”.

Any decision of a secondary sell down of additional stake will be a decision of the board and shareholders, “but it’s not something that we have planned at the current time”, Mr El Hoshy said.

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