Adnoc deal will pave way for more long-term ammonia contracts for Fertiglobe, CEO says

Fertiglobe aims to secure more long-term sales contracts for low-carbon ammonia, following Adnoc’s acquisition of a majority stake in the company, according to its chief executive.

The move will “accelerate” exports of the commodity, in which the carbon dioxide emitted during production is captured and stored underground, and it will do so on a “cost-advantage” basis, Ahmed El Hoshy told The National in an interview.

“With the work Fertiglobe has already been doing, combined with Adnoc now integrating into it, our ability to market this to end users for long-term, enduring contracts will [improve],” he said.

On Tuesday, the Abu Dhabi-based energy company announced the completion of its acquisition of Netherlands-based OCI Global’s stake in Fertiglobe, increasing its share in the company to 86.2 per cent.

In December, they entered into a binding agreement for Adnoc to purchase OCI's entire stake in Fertiglobe for $3.62 billion.

Adnoc will transfer its stakes in all current and future low-carbon ammonia projects, including two in Abu Dhabi, to Fertiglobe at cost, Mr El Hoshy said.

The Abu Dhabi plants will add about two million tonnes per annum (mtpa), more than doubling Fertiglobe's merchant ammonia capacity to 1.6 mtpa and increasing its total sellable capacity to 8.6 mtpa of ammonia and urea.

Fertiglobe is the world’s largest seaborne exporter of urea and ammonia combined, with roughly 10 per cent collective market share of global trade in those products, according to Adnoc.

Mr El Hoshy said that expanding the company's involvement in low-carbon ammonia production can help stabilise its earnings.

“We can get a delivered price that's just based on our gas costs. We can create that kind of predictable revenue stream,” he said.

Nitrogen fertiliser prices have experienced significant volatility in recent years, largely due to the Covid-19 pandemic, the Russia-Ukraine war, and the resulting supply chain disruptions.

Fertiglobe expects low-carbon ammonia to make up most of the company’s ammonia output in the longer-term, with production of the fuel expected to “double and potentially triple”, Mr El Hoshy said.

This year, the company won Germany-based H2Global’s first pilot auction for renewable ammonia. Fertiglobe will produce up to 397,000 tonnes of renewable ammonia by 2033, starting with an initial output of 19,500 tonnes in 2027, an H2Global entity said at the time.

In upcoming projects that will be transferred to Fertiglobe by Adnoc upon completion, “every single incremental tonne will be low-carbon, at least 50 per cent lower carbon than a typical grey ammonia tonne”, Mr El Hoshy said.

Currently, the company mainly produces grey ammonia, which is used as a component in fertilisers and chemicals. However, the production process releases carbon dioxide emissions that are not captured.

EU carbon tax

The UAE's move into cleaner forms of ammonia comes as the EU prepares to fully implement the Carbon Border Adjustment Mechanism (CBAM) in 2026.

CBAM, which seeks to protect European companies that pay for their emissions under the EU's trading system from unfair competition, will impose a carbon price on certain goods imported into the bloc.

The regulation currently focuses on carbon-intensive goods such as cement, iron and steel, aluminium, fertilisers, electricity and hydrogen products.

“There's no price of carbon that's properly implemented yet, CBAM will be the first taste of that in 2026 and … then [we will be] able to get an advantage if we produce less carbon when we make the ammonia,” Mr El Hoshy said.

“This is going to allow us to accelerate the decarbonisation of our ammonia production. That allows us not only to have the gas advantage we have sitting in the Middle East … but also the CO2 cost advantage.”

With Adnoc's international ammonia projects set to become a part of Fertiglobe, the company could explore beneficial strategies such as product exchanges, Mr El Hoshy said.

For example, instead of shipping US-produced ammonia through the Panama Canal to Asia, the US plant can supply Europe, saving on freight costs, while the Abu Dhabi plant ships to Asia. This would reduce both shipping expenses and emissions, he added.

Last month, Adnoc announced the acquisition of a 35 per cent equity stake in oil major ExxonMobil’s proposed blue hydrogen and ammonia production facility in Texas.

The project, set to be the “world’s largest” of its kind, will be capable of producing up to one billion cubic feet daily of blue hydrogen, with about 98 per cent of carbon dioxide removed, and more than one million tonnes of low-carbon ammonia per year, Adnoc said at the time.