Abu Dhabi’s ADNOC, OCI partner to create MENA’s largest fertilizer producer

The JV will become the largest export-focused nitrogen fertilizer platform globally

The Abu Dhabi National Oil Company (ADNOC) has formed a new joint venture with OCI, a producer and distributor of natural gas-based fertilizers and industrial chemicals, it announced on Monday.

The partnership will see ADNOC combine its fertilizer business, ADNOC Fertilizers, into OCI’s Middle East and North Africa (MENA) nitrogen fertilizer platform.

ADNOC and Netherlands-headquartered OCI will own a 42 per cent and 58 per cent stake in the JV respectively.

The JV will be based in Abu Dhabi and registered in the Abu Dhabi Global Market (ADGM).

The board of the new entity will consist of six members nominated by OCI and four nominated by ADNOC.

Dr Sultan Ahmed Al Jaber, UAE minister of State and CEO of the ADNOC Group, will be chairman while Egyptian billionaire Nassef Sawiris, who owns OCI, will serve as the CEO of the JV, alongside his current role as CEO of OCI.

The JV will become the largest export-focused nitrogen fertilizer platform globally and the largest producer in the MENA region with a production capacity of 5 million tons of urea and 1.5 million tons of sellable ammonia, a statement said.

Annual revenues for the combined entity are $1.74bn, based on 2018 pro forma figures.

The JV will bring “greater geographic diversity to the platform’s MENA production channels, enabling greater combined market access to strengthen market share”, the statement said.

It will have a centralised commercial team with storage and distribution infrastructure and access to key ports on the Mediterranean, Red Sea and Arabian Gulf.

The transaction is expected to close in the third quarter of 2019, subject to legal and regulatory conditions.

“Pooling our assets and capabilities is a value enhancing step for both companies, allowing us to leapfrog competitors to become the top nitrogen export platform globally,” said Al Jaber.

“It will also enable us to access new markets, benefitting both existing and new customers.”

In conjunction with the JV, ADNOC Fertilizers has also signed a new long-term gas supply agreement with ADNOC, which will provide its facilities in Ruwais with the required feedstock for its operations.

Al Jaber added: “This unique business combination will improve the profitability and cash flow of our fertilizer portfolio. It also supports ADNOC’s objectives to attract investors to Ruwais by leveraging its strategic location, world-class logistics and the UAE’s abundant gas resources at commercially attractive terms.”

ADNOC Fertilizers currently operates two plants in Ruwais. The first plant, FERTIL-1, began production of ammonia and urea in 1983, and the second plant, FERTIL-2, became operational in 2013. The plants combined have an annual capacity of 1.2 million tons of gross ammonia and 2.1 million tons of urea.

ADNOC is currently the sole shareholder in ADNOC Fertilizers after acquiring the 33 per cent stake held by Total in late 2018.