Fertiglobe, a major ammonia producer jointly owned by Abu Dhabi National Oil Company (ADNOC) and OCI, aims to secure more long-term sales contracts for low-carbon ammonia. This strategic move follows ADNOC’s acquisition of a majority stake in Fertiglobe, as highlighted by CEO Ahmed El-Hoshy.
Accelerating Low-Carbon Ammonia Exports
El-Hoshy emphasized that the partnership would accelerate exports of low-carbon ammonia, a product where carbon dioxide emissions are captured and stored underground during production. He noted that this process allows Fertiglobe to operate on a “cost-advantage” basis, enhancing its competitiveness. “With Fertiglobe’s existing capabilities and ADNOC’s integration, our ability to secure long-term, enduring contracts with end users will improve,” El-Hoshy said in an interview with The National.
ADNOC’s Increased Stake and Strategic Transfers
On Tuesday, ADNOC announced that it had completed its acquisition of OCI Global’s stake in Fertiglobe, increasing its ownership to 86.2%. This move follows a binding agreement made in December for ADNOC to acquire the stake for $3.62 billion.
As part of the arrangement, ADNOC will transfer its interests in all current and future low-carbon ammonia projects, including two projects in Abu Dhabi, to Fertiglobe at cost. These new facilities in Abu Dhabi will add approximately two million tonnes per annum (mtpa) to Fertiglobe’s capacity, more than doubling its merchant ammonia production to 1.6 mtpa and expanding its total sellable capacity to 8.6 mtpa of ammonia and urea.
Market Leadership and Earnings Stability
Fertiglobe, already the world’s largest seaborne exporter of urea and ammonia combined, holds around 10% of the global trade market share in these products. El-Hoshy expressed optimism that expanding low-carbon ammonia production would stabilize earnings by creating a predictable revenue stream tied to gas costs, amidst recent volatility in nitrogen fertilizer prices caused by events such as the COVID-19 pandemic and the Russia-Ukraine conflict.
Fertiglobe plans for low-carbon ammonia to become the majority of its ammonia output in the future. The company anticipates production to “double and potentially triple,” El-Hoshy stated.
Pioneering Renewable Ammonia Production
Fertiglobe’s recent achievements include winning H2Global’s pilot auction for renewable ammonia, becoming the first company to do so. The contract stipulates that Fertiglobe will produce up to 397,000 tonnes of renewable ammonia by 2033, starting with an initial output of 19,500 tonnes in 2027.
Looking ahead, all upcoming projects transferred from ADNOC to Fertiglobe will focus on low-carbon ammonia production, achieving at least a 50% reduction in emissions compared to traditional grey ammonia. Currently, Fertiglobe’s production primarily focuses on grey ammonia, used in fertilizers and chemicals, which emits carbon dioxide that is not captured during the production process.
Navigating the EU Carbon Border Adjustment Mechanism (CBAM)
Fertiglobe’s shift to cleaner ammonia production coincides with the EU’s upcoming Carbon Border Adjustment Mechanism (CBAM), which will be fully implemented in 2026. CBAM aims to impose a carbon price on imported carbon-intensive goods to protect European companies that adhere to the EU’s emissions trading system. This mechanism currently covers goods like cement, steel, aluminum, fertilizers, and hydrogen products.
El-Hoshy highlighted that CBAM’s implementation would be a significant development for Fertiglobe, providing an advantage to producers with lower emissions. “This will allow us to accelerate the decarbonization of our ammonia production, leveraging our gas advantage in the Middle East while also benefiting from a CO2 cost advantage,” he explained.
The ADNOC Partnership: A Strategic Move
The partnership with ADNOC focuses on the production and export of low-carbon ammonia, a crucial step for Fertiglobe as it continues to expand its reach in the energy transition space. The CEO highlighted that the collaboration will enable Fertiglobe to leverage ADNOC’s infrastructure, expertise, and international market access, providing a competitive edge in delivering low-carbon solutions on a global scale.
Ammonia’s Role in the Energy Transition
Ammonia is gaining traction as a clean fuel alternative, especially in sectors like shipping and heavy industry, which are challenging to decarbonize. Fertiglobe’s focus on low-carbon ammonia production aligns with the global push for greener energy solutions. By partnering with ADNOC, Fertiglobe can enhance its capabilities and secure more long-term agreements with international buyers looking for sustainable energy sources.
Looking Ahead: Long-Term Contracts and Market Opportunities
El-Hoshy is optimistic about the future, noting that Fertiglobe’s strategic partnership with ADNOC will enable the company to pursue further long-term deals. By focusing on reliability, low-carbon production, and strategic global positioning, Fertiglobe is set to capitalize on the growing demand for ammonia as a sustainable energy carrier.
The CEO’s statement underlines Fertiglobe’s ambitions to become a market leader in ammonia, leveraging its strong foundation and partnerships to forge new paths in the clean energy sector. As global markets shift toward sustainability, Fertiglobe’s alignment with ADNOC not only strengthens its position but also sets the stage for transformative opportunities in the years to come.
Strategic Global Positioning
With ADNOC’s international ammonia projects becoming part of Fertiglobe, the company plans to explore strategic opportunities like product exchanges. For instance, instead of shipping US-produced ammonia through the Panama Canal to Asia, the US plant could supply Europe, while the Abu Dhabi plant ships directly to Asia, cutting down on both shipping expenses and emissions.
Last month, ADNOC acquired a 35% stake in ExxonMobil’s proposed blue hydrogen and ammonia facility in Texas, expected to be the world’s largest. This project is set to produce up to one billion cubic feet of blue hydrogen daily, capturing approximately 98% of carbon dioxide emissions, and over one million tonnes of low-carbon ammonia annually.
Fertiglobe’s partnership with ADNOC marks a significant step forward in the company’s strategy to expand its low-carbon ammonia production and secure long-term contracts. With ongoing efforts to decarbonize and optimize its operations, Fertiglobe is well-positioned to capitalize on global demand for sustainable energy solutions, particularly as international regulations like the EU’s CBAM come into play.
