The contrast couldn’t be starker: A swathe of Europe’s ammonia industry in retreat just as Abu Dhabi ups its game and takes full control of Fertiglobe right on the continent’s doorstep.
In name only, Fertiglobe is a relatively new kid on the block. It was founded in 2019 when OCI and the Abu Dhabi National Oil Company pooled resources to create the world’s largest export-focused nitrogen platform, although its roots date way back to the 1950s.
Today brings another step change.
ADNOC completed the purchase of OCI’s 50% + one share stake in Fertiglobe, creating a platform that can house all its projects in this space. While some of Europe’s historic names, including BASF, are either shutting ammonia capacity or working out when is the optimal moment to do so, Fertiglobe is sporting a new strategy to expand globally whilst juggling the transition to low-carbon molecules.
Ahmed El-Hoshy, who had been CEO of both OCI and Fertiglobe, is now focused purely on the latter. With the bundling together all of ADNOC’s interests in ammonia, Fertiglobe is the new home for all things to do with low-carbon ammonia as a key energy transition fuel. That includes existing and future development projects across the United Arab Emirates and beyond. Fertiglobe will also become the controlling shareholder of the existing 1 million tons low carbon ammonia project in the UAE.
Part of the plan eventually is to expand in adjacent markets including AdBlue, used to reduce harmful diesel-vehicle emissions. Even in Europe, where diesel vehicles are most on the wane, the market is growing at a mid-single-digit percentage rate, El-Hoshy said in an interview with chemicalESG.
Plus, there’s a second phase of expansion with another project in the UAE already in the pipeline. Just the two projects in Abu Dhabi would add ~ 2 million tons per annum, bringing its total sellable capacity to 8.6 mtpa of net ammonia and urea combined.
All of this puts Fertiglobe alongside Yara as a truly global player in the space with access to cheaper feedstock and direct transportation links to Europe and Asia.
“Some plants in Europe are going to struggle to survive. Particularly the ones that are landlocked and can’t import. These small, 200-300,000 ton ammonia plants are in trouble. They have to spend on capex and have had very volatile earnings and negative free cash flow for the last few years. How do they do turnarounds?” El-Hoshy said.
Here, another contrast jumps out.
For most companies and startups, there are huge barriers to entering clean ammonia and hydrogen as developers need to find the cash upfront to bankroll what’s likely to be a multi-year project.
“That’s why people are scared to FID projects,” El-Hoshy said in the interview. “The ammonia industry is trading below replacement cost so people are afraid to go build something, spending let’s say $250 million a year and only going operational and having dividends four years from now. You spend all this money and your balance sheet gets hit.”
Right now, Air Products’ CEO Seifi Ghasemi is coming under pressure from activist investors for his bold multi-billion-dollar expansion into hydrogen. Analysts feel he hasn’t provided enough clarity around the costs involved, let alone orders and the payback. And this is a company with a $71 billion market value.
By contrast, ADNOC is putting up the funds to carry Fertiglobe through to the operational stage. Then the project gets transferred over at cost for El-Hoshy to take it from there.
“So we start spending on it when we start to actually get volumes-sold and EBITDA,” El-Hoshy said.