OCI will sell fertilizer assets for $7.2 billion

As part of a strategy to refocus its business on low-carbon ammonia and methanol, the Dutch firm OCI has struck deals worth a total of $7.2 billion to sell its US and Middle Eastern nitrogen fertilizer businesses to Abu Dhabi National Oil Co. (Adnoc) and Koch Industries.

Adnoc will pay OCI $3.6 billion for its 50% interest in Fertiglobe, a joint venture Adnoc and OCI formed in 2019. With 6.6 million metric tons (t) per year of urea and ammonia capacity in the United Arab Emirates, Egypt, and Algeria, Fertiglobe is the largest fertilizer maker in the Middle East.

Fertiglobe had $5.0 billion in revenues and $1.8 billion in net earnings in 2022. Following the transaction, Adnoc will own 86% of Fertiglobe; the rest will continue to trade on the Abu Dhabi Securities Exchange.

Adnoc has been aggressively pursuing acquisitions over the past year. The state oil company has held talks about buying the German polyurethane chemical maker Covestro, and it has submitted bids to acquire a controlling interest in the Brazilian petrochemical maker Braskem.

Separately, OCI has agreed to sell Iowa Fertilizer Co. to Koch Ag & Energy Solutions for $3.6 billion. Iowa Fertilizer operates a plant in Wever, Iowa, that started up in 2013 and has 3.5 million t per year of capacity for nitrogen fertilizers and diesel exhaust fluid, which is based on urea. Iowa Fertilizer had $1.9 billion in sales and $290 million in profits in 2022.

In recent years, OCI has been pushing into markets for low-carbon ammonia and methanol fuels. The company is working with the industrial gas maker Linde to build an ammonia plant in Beaumont, Texas, that will use carbon capture and storage to abate carbon dioxide emissions from the production of natural gas-based hydrogen. The company is also planning capacity in Beaumont that will make ammonia from hydrogen produced via water electrolysis.

OCI has also discussed capturing some of the CO₂ emissions at the Iowa plant.

In its methanol business, OCI is planning to expand capacity in Beaumont for methanol derived from electrolysis-based hydrogen and from renewable natural gas, such as gas collected in landfills.

“Our strengthened balance sheet will support the acceleration of our strategy in the field of decarbonization projects, driving future growth and supporting the energy transition goals we share with many of our stakeholders,” OCI chairman Nassef Sawiris says in his company’s announcement of the Koch deal.

In a note to clients, Charlie Bentley, a stock analyst at Jefferies, made a similar point. “This, in combination with the divestment of its Fertiglobe stake, implies OCI will be meaningfully net cash, with significant potential to both return cash to shareholders and fund decarbonisation projects,” he wrote.