09 Mar Egyptian billionaire comes with ammonia in Shell
Fertilizer producer OCI is beckoning for a future as a seller of ammonia as fuel for seagoing vessels. Ammonia has recently emerged as a serious alternative to fuel oil, in addition to LNG.
OCI originated from the Egyptian construction and telecom company Orascom. It was listed in Amsterdam in 2013. Part of the merger company is BioMCN from Delfzijl, a producer of bio-methanol. The old fertilizer branch of DSM in Limburg has also been incorporated by OCI.
Ammonia, a combination of hydrogen and nitrogen, is an important raw material for fertilizer.
OCI recently struck a deal with German engine maker MAN, fuel trader Hartmann Group and shipping company Eastern Pacific Shipping on the supply and use of ammonium and methanol from 2023 and 2024. Dozens of tankers from shipowner EPS have to sail on ammonia, just like new ships to be built.
On Monday, OCI further elaborated on its ammonia plans at a strategy meeting for investors. OCI is not the only one who sees bread in ammonia, tank storage company Vopak also keeps its finger on the pulse.
For a long time, liquefied natural gas (LNG) seemed like the slain alternative to marine diesel and heavy fuel oil. Shell is the world’s largest producer and seller of liquefied natural gas (LNG). Container giant CMA CGM, among others, focuses on this, and has ordered several ships on LNG. But rival Maersk recently dropped a bombshell under the LNG revenue model by proposing its fleet look at ammonia and methanol.
Shell did not want to make a point of this at a recent LNG strategy meeting when asked.
Ammonia is toxic, but has the advantage over liquefied natural gas and hydrogen that it is already liquid under less extreme temperatures and pressure, explains consultant (We-Boost Transitions) Thijs ten Brinck. “Ammonia will be a contender for intercontinental container shipping in the coming decades.”
However, he is also still a threshold. “To have truly sustainable ammonia, you need to use sustainably generated hydrogen, and combine it with nitrogen. However, there is still almost no market for sustainable hydrogen. The hydrogen we know today is not made sustainable from natural gas.”
The decision of shipowners to opt for Ammonia instead of LNG can also be an opportunistic one, says Ten Brinck. “Those container ships have to last 30 to 40 years. If you missed the LNG boat, it is not crazy to wait for ammonia.”
OCI is majority owned by Egyptian billionaire Nassef Sawiris. His family owns 54%.
Frank Claassen, analyst at Degroof Petercam, sees that OCI is in the process of significant growth. Since 2016, the company has been boosting revenue and ebitda in a straight line (From €1.9 billion and €0.5 billion respectively to an intended €4.0 and €1.2 billion in 2022). Meanwhile, the company’s hefty net debt (€3.7 billion, equal to the market value) is being phased out. Claassen: “The fertilizer market – in which OCI is a top five player – is picking up and the company has many new factories that are now operational.”
Claassen does not immediately see ammonia as a competitor for LNG, but rather as ‘another route to green heavy fuel oil.’ “Batteries are not an option, and shipping needs to green. The question is how. Ammonia could become a game changer in the coming years. In any case, for OCI, if the demand for ammonia increases, the company can benefit from this anyway.”