COP27: Fertiglobe commissions phase one of Egypt Green 100-MW hydrogen plant for ammonia production

A consortium of fertilizer producer Fertiglobe, renewable power producer Scatec and Egypt's Sovereign Fund are to develop a 100-MW green hydrogen production plant in Ain Sokhna, Egypt, with a first phase commissioned Nov. 8, the group said at the UN Climate Change Conference in Sharm el-Sheikh.

The "Egypt Green" facility will be powered by 260 MW of solar and wind to produce around 15,000 mt/year of hydrogen as feedstock for 90,000 mt/year of ammonia in Fertiglobe's existing production facilities, they said. Fertiglobe is a partnership between OCI and the Abu Dhabi National Oil Company.

The initial phase will be fed by surplus renewable power, secured under power purchase agreements with the Egyptian government, Fertiglobe and OCI CEO Ahmed El-Hoshy told S&P Global Commodity Insights in an interview Nov. 8.

The full 100-MW capacity plant would be powered by dedicated renewables, El-Hoshy said.

Platts, part of S&P Global Commodity Insights, assessed ammonia FOB Middle East cargo prices at $1,015/mt on Nov. 8, compared with CFR Northwest Europe prices of $1,125/mt.

The consortium will build, own and operate the facility, with a long-term offtake agreement established with Fertiglobe. Engineering group Orascom Construction is also part of the consortium.

"We see a massive green hydrogen demand driven by strong policy support globally, and Africa is perfectly positioned to take advantage of its low-cost renewables and strategic position," Scatec CEO Terje Pilskog said in a statement.

A final investment decision on the full 100-MW capacity was expected in 2023, with construction to start shortly afterwards, El-Hoshy said. The group said work to connect up to 100 MW of renewable hydrogen was already in place at Fertiglobe's two existing ammonia plants in Ain Sokhna.

The group is in the process of testing a proton exchange membrane electrolyzer for the first phase of the project.

"Ain Sokhna has a strategic position close to the Suez Canal Economic Zone with the possibility of using renewable electricity to develop an industrial hub near global shipping lanes," the consortium said.

The project "puts Egypt and Africa firmly on the map as one of the best places in the world to develop a green hydrogen hub, thanks to available land, abundant renewable energy sources, the significant pool of skilled labor, and our location on global cross-roads," Fertiglobe executive vice chair Nassef Sawiris said.

Scatec has 4.6 GW of renewable energy in operation and under construction across four continents.

Green ammonia potential

Initial green ammonia production in the first few years would go into existing markets, El-Hoshy said, with around 80% of ammonia used in fertilizer production and 20% in industry. New decarbonization use cases such as power generation and marine fuel would come later, he said.

With soaring natural gas prices pushing global ammonia prices higher, green ammonia was cost competitive today, El-Hoshy said. However, over the course of the 15-20 years of fixed input power costs needed to underpin a green hydrogen and ammonia project, it was not clear whether projects would be competitive, he said.

"I'd say that looking at the last 10 years, it would have been out of the money to make green ammonia," he said, but noted a lack of forward markets for ammonia hampered the ability to lock in prices.

"If I tried to sell a cargo of ammonia for next year, I wouldn't be able to. If I can try to sell forward three months from now at a fixed price, I cannot. Generally, there's no forward market for ammonia."

Securing long-term offtake agreements was key to underpinning the emerging market for green ammonia, El-Hoshy said. However, such deals were so far elusive.

"Nobody is willing to sign a long-term offtake in large scale that we've seen from the customer base. We've had some good discussions, but it's very few and far between."

Fertiglobe produces 6.7 million mt/year of urea and merchant ammonia at subsidiaries in the UAE, Egypt and Algeria.

EU's CBAM critical

The EU's proposed carbon border adjustment mechanism was critical to ensuring the success or otherwise of the bloc's proposed green hydrogen and ammonia import strategy, El-Hoshy said.

The EU aims to import 10 million mt/year of renewable hydrogen or its derivatives by 2030, with an additional 10 million mt/year of domestic production.

For an ammonia plant that was partially decarbonized, it was not yet clear whether the EU would impose a carbon levy on the entire output, or just the share of production that was fossil fuel based, El-Hoshy said. Trusted certification was key to enabling green ammonia trade, he said.

OCI will expand its Rotterdam ammonia terminal to 1.2 million mt/year in 2023, up from 400,000 mt/year at present.

The move was driven by the shifting market dynamics and falling European production in the wake of Russia's invasion of Ukraine, as well as with an eye to future green ammonia opportunities, El-Hoshy said. OCI's Netherlands production capacity has been running at 40%-50% capacity for the last 14 months, he added.

The US had taken a leap forward with renewable hydrogen and ammonia projects with the Inflation Reduction Act offering subsidies of up to $3/kg for clean hydrogen production, he noted.

"We're yet to see something similar for developing markets or even the European markets."

OCI has five or six decarbonization projects in Europe awaiting final investment decision, El-Hoshy said. The company had taken FID two months ago on two projects in the US that had not existed a year ago, he said.