Adnoc to sell blue ammonia to Japan's Idemitsu as part of hydrogen strategy

State-owned Adnoc will sell blue ammonia from its joint venture with OCI to Idemitsu for use in the Japanese company's refining and chemicals operations.

Blue ammonia is the chemical compound produced using hydrogen manufactured through steam methane reforming. Ammonia is one of the easiest ways to store and transport hydrogen.

Fertiglobe, the joint venture between Adnoc and Amsterdam-listed OCI, is developing a large blue ammonia plant in the UAE’s downstream centre in Ruwais. The plant will have a production capacity of 1,000 kilotonnes a year.

The shipment was sold at "an attractive premium" to grey ammonia, the company said.

Grey ammonia is produced from fossil fuel-powered hydrogen. While traditionally cheaper than other forms of hydrogen or ammonia, it has a relatively higher carbon footprint.

This is the second agreement between Adnoc and a Japanese company on the sale of blue ammonia.

Earlier this month, the company sold its first shipment of blue ammonia, produced in partnership with Fertiglobe, to Japanese trading house Itochu for use in fertiliser production.

The sale came after the signing of a preliminary agreement in July with Japanese companies to explore the commercial production of blue ammonia in the UAE.

Hydrogen plays an important role in industrial decarbonisation in Japan.

Gulf oil exporters such as Saudi Aramco and Adnoc are looking to capitalise on their existing crude oil trading relationships with buyers in Asia to sell hydrogen. The oil producers are prioritising the production and sale of the cleaner gas as a low-carbon alternative to fossil fuels.

Adnoc is part of an alliance with other Abu Dhabi-based entities such as Mubadala and holding company ADQ to develop a hydrogen economy in the UAE.

Adnoc already produces 300,000 tonnes of hydrogen on an annual basis for its downstream operations and plans to increase its output significantly.

On Monday, Saudi Aramco said it was exploring opportunities in blue hydrogen and is actively looking at exporting to key markets in Asia.

Last year, Aramco shipped blue hydrogen produced in Saudi Arabia to Japan. Aramco shipped the hydrogen in the form of the more easily transportable ammonia for use in zero-carbon power generation in Japan, one of its top importers of crude.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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