Comment: The ADNOC and OCP JV initiative - a new order in phosphates industry structure?

"...the new agreement may augur a new order in phosphates industry structure, outside the movement of jv sulphur to Morocco."

• ADNOC and OCP announce strategic JV initiative; proposed partnership will lead to jv company with assets in Morocco and UAE
• Integrated phosphates jv operations for ADNOC and OCP could be the answer to other global majors’ strategic moves

Abu Dhabi National Oil Company and OCP have announced a strategic jv initiative to broaden their existing partnership into a world-class fertilizers joint venture. These aim to combine ADNOC’s world-scale sulphur production, ammonia and gas expertise, and logistics with OCP’s world-beating phosphate resources and leading position in the fertilizer industry. This proposed partnership will lead to the phased creation of a joint-venture company holding assets in both Jorf Lasfar, Morocco, and Ruwais, UAE.

The announcement came right after the inaugural Profercy World PKS Forum in Abu Dhabi and just ahead of ADNOC’s own Downstream Investor Forum held in Ruwais.

Fundamental industry re-structure?

While there have been no specifics nor detailed comments since the jv announcement, the new agreement may augur a new order in phosphates industry structure, outside simply the movement of jv sulphur to Morocco. One outline could be along the following lines:

For OCP: The new understanding may open the field for new-generation phosphates production in UAE, based on Moroccan phosphate rock exports to Ruwais and perhaps in time supporting integrated downstream phosphates capacity there. This could be focused on phosacid-only but also perhaps for DAP, MAP, NPs and potentially NPKs, if new ammonia and potash imports were contemplated. For now, there is very little surplus ammonia from ADNOC’s existing nitrogen operations, reckoned at around 25,000t ammonia for export per year, so under today’s known fundamentals, the scope would look more positive for phosacid. Either with acid or with fertilizer downstream, this could open the way for future ADNOC/OCP phosphates jvs to compete from a closer geographical base into the rising fertilizer demand curve East of Suez. This would also free OCP of some logistical constraints faced at Jorf Lasfar during Q1 times of high Atlantic swell.

For ADNOC: Similarly, a fully integrated phosphates jv between OCP and ADNOC in Morocco (at either or both at future Jorf or Safi Phosphate Hubs) would give ADNOC access to the fertilizer value chain linking phosphates to the prime agricultural markets of Africa and Latin America. At one point in the issued press-release below, there is a hint even at G2G/nation state-level co-operation going forward.

For both: Integrated phosphates jv operations for ADNOC and OCP would be an answer to other global majors’ strategic moves. Examples of these would be Ma’aden’s Phase III initiative aimed at a further 50% increase in phosphates capacity in Saudi Arabia by 2023-2024; Mosaic’s diversification into offshore production in Saudi Arabia (with jv interest in mind for the Ma’aden III complex noted above), as well as in Peru and Brazil, the latter including distribution too; the Nutrien merger, optimising production, distribution and retail assets of the earlier PotashCorp and Agrium companies; both Eurochem and Acron moves into potash production to complement existing positions in nitrogen, phosphates and compound fertilizers; and Yara’s investment in phosphates production in Brazil (Galvani), nitrogen production in India, and potentially Eastern Canada.

The above analysis was published by Profercy Phosphates & NPKs, edited by Tom Jago, on 15 May 2018. No obligation trials of the Profercy Phosphates & NPKs Service, including regular market news and weekly market analysis, are available.