Adnoc inks agreement to explore a low-carbon ammonia supply chain with Germany’s North Rhine-Westphalia

Good morning, ladies and gents. It appears the downpour of news is abating, but we have some bits and pieces for you from the region and around the world.

THE BIG CLIMATE STORY- UAE’s Adnoc has inked an agreement with the government of Germany’s North Rhine-Westphalia and chemical park operator Currenta to explore cooperation in the production and transportation of low-carbon ammonia.

PLUS- We sat down with Climate Resilience Fund co-founder Hossam Allam for (proverbial) coffee and a wide-ranging discussion on what the fund is working on, the impact of agritech on food sustainability — and the importance of insects.

^^ We have more on both in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- Australia is inching closer to passing a landmark emissions reduction bill: Australia’s lower house of parliament approved yesterday legislation that would, if passed, see the country’s top 215 carbon emitting plants slash CO2 outputs by 30% by 2030. Dubbed the Safeguard Mechanism reform, the new bill would stipulate new gas drilling projects be carbon neutral and have net-zero reservoirs, potentially putting a stopper to half of the 116 coal and gas plants currently under consideration in the country. The plan — proposed in January — is expected to garner support from the country’s minor opposition party Australian Greens, setting the stage for it to come into effect on 1 July, 2023. The story got coverage from Bloomberg, The Washington Post, and Reuters.

ALSO- Berliners have turned down a referendum to make the German capital carbon neutral by 2030: Berlin voted against passing a proposal to fully decarbonize the city 15 years ahead of the national net-zero target of 2045. Berlin’s mayor Franziska Giffey says the referendum’s results spotlight the proposal’s unrealistic targets. The story got ink in Reuters, Bloomberg, and Deutsche Welle.

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WATCH THIS SPACE #1- KSA’s Al Rajhi Bank is lining up a sustainable sukuk issuance: Al Rajhi Bank — Saudi Arabia's second-largest lender by assets — plans to issue USD-denominated sustainable sukuk under its international sukuk program announced in April 2022, according to a disclosure to Tadawul. The size and terms of value of the Islamic bond issuance will be determined subject to the market conditions, the disclosure said. Al Rajhi Capital Company, Citigroup, Emirates NBD Bank, Goldman Sachs, HSBC, JPMorgan Securities, KFH Capital, and Standard Chartered Bank were appointed as joint lead managers and bookrunners for the issuance.

WATCH THIS SPACE #2- Are eight more green hydrogen agreements in the works for Egypt? Eight industry players have expressed interest in setting up green hydrogen plants in Egypt, and MoUs are soon expected to be signed, Suez Canal Economic Zone (SCZone) CEO Walid Gamal El Din told CNBC Arabia (watch, runtime: 5:06). Gamal El Din didn’t provide any details about which companies could be involved or when agreements could be signed.

Egypt already signed a spate of agreements last year, including nine framework agreements and another seven MoUs for green hydrogen plants and ammonia facilities in the SCZone. Most recently, China Energy earlier this month said that it could begin working on its USD 5.1 bn plant as soon as May.

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WATCH THIS SPACE #3- Shortages in key components required for wind energy development are likely to crop up by 2026, the Financial Times reports, citing Global Wind Energy Council (GWEC). The squeeze comes as countries — particularly the US and Europe — set ambitious targets for the rollout of domestic renewable energy, including a growing demand for new wind projects. China’s domination of manufacturing components for wind energy stations exacerbates the risk of a supply chain crunch and creates a need to increase investment in the global onshore and offshore wind sector supply chains, GWEC says. Some companies are already experiencing shortages, with Singaporean shipping group Marco Polo warning of a severe shortage of the vessels required to install offshore turbines, the FT reports. China held 60% of the global market for turbine blade manufacturing in 2022, according to GWEC figures, and European wind turbine manufacturers including Vestas and Siemens Gamesa racked up losses last year on the back of rising maintenance costs, supply chain risks, rising inflation, and reduced power installations.

WATCH THIS SPACE #4- Hyundai — the world’s third-largest EV producer — will invest USD 300 mn to manufacture its GV70 EV in its mega US-based production plant, according to Bloomberg (watch, runtime, 00:54). Hyundai’s manufacturing facility produces a GV70 in just 16 hours, and the company has a target to produce 17 other EV models by 2030 in line with its goal to sell some 1.8 mn EVs by the same year.

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The UAE is hosting the International Conference on Green Energy and Environmental Technology (ICGEET) on 18 and 19 April in Dubai. The event will bring together stakeholders from academia, the healthcare industry, and the private sector to discuss energy conservation among other topics.

The first MENA Solar Conference is accepting applications from published researchers specialized in PV technology until Sunday, 30 April. The Dubai Electricity and Water Authority will be hosting the conference from 15 to 18 November, in conjunction with the Water, Energy, Technology, and Environment Exhibition and the Dubai Solar Show 2023. Researchers can submit their papers here.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

No rest for Adnoc on decarbonization: The UAE’s Abu Dhabi National Oil Company (Adnoc) has signed an agreement with the government of Germany’s North Rhine-Westphalia and chemical park operator Currenta to establish a low-carbon ammonia value chain, according to a statement. The agreement will also see the parties look into cooperating on the production and transportation of low-carbon ammonia and its use as a fuel in energy generation, including a wide industrial-scale testing at Currenta’s site in Germany’s Dormagen.

What they said: “Ammonia has the potential to play an important role in decarbonization — for example as a hydrogen carrier or as a fuel in heat generation. As a chemical park operator with large steam and heat generation plants, Currenta is observing very closely to see whether it succeeds in realizing this potential. An important factor here is the development of global supply chains for ammonia,” Currenta CEO Frank Hyldmer said in the statement.

Been there, done that: Adnoc sent its first low-carbon ammonia shipment to Germany last year. The shipment was delivered to Hamburg-headquartered copper producer Aurubis for use as a fuel source in its wire rod factory. The company said last year it is vying to become a leading exporter of low-emission fuels, exporting 25% of the hydrogen it produces to global markets.

Adnoc’s been on a decarbonization sprint this year: The company signed a MoU earlier this year with German industrial engineering multinational Thyssenkrupp for the joint development of large-scale ammonia cracking to extract hydrogen from ammonia after transportation. The agreement follows several agreements signed between Adnoc and several Japanese firms for collaboration on decarbonization technology.

Coffee With: Hossam Allam (LinkedIn), co-founder and General Partner of Climate Resilience Fund: Hossam Allam, who co-founded the Climate Resilience Fund with Sherief Kesseba last September, previously founded impact VC fund Sandfjord Capital and served as CEO of Hassan Allam’s Property Management arm. An oceanographer by training, Allam is also a board member at Hassan Allam Holding, Legacy Egypt and Education for Employment, and chairman of Acasia Group (formerly Cairo Angels).

The Climate Resilience Fund plans to deploy USD 25 mn over the first two years in seed stage agrifood startups that employ agritech and nature-enabled solutions to address climate change.

ENTERPRISE: Tell us about the Climate Resilience Fund and what it's hoping to accomplish.

HOSSAM ALLAM: We invest in early stage ventures that sit at the intersection of agrifood and climate — sometimes referred to as agrifood x climate — and it’s a new thesis in the startup ecosystem. Most people associate climate with decarbonizing energy and logistics, whereas we look at climate through the lens of the carbon footprint of agrifood and agroforestry. Agrifood has almost as big of an environmental impact as transport and logistics combined, so that’s our angle on planetary health.

We’re an environmental impact, Africa-focused fund which is agnostic in terms of the nationality of the founder, as long as they have substantial operations in Africa and are looking to deliver impact in Africa.

In terms of investments, we’re looking to invest over the course of three to six years and to develop the companies that we invest in from four to 10 years. Although we have clear impact metrics and we commit to seeking venture returns for our investors, all our startups have to stand up to commercial scrutiny.

E: Which sectors are you looking at?

HA: There are a couple of verticals we’re looking at, including farming tech, which focuses on allowing farmers to produce higher yields using fewer inputs like water, pesticides, and fertilizers, but also uses those inputs more selectively so they’re less destructive. The second vertical is farmer enablement, which provides farmers with digital tools to access the value chain and give them a bigger share of the pot. The agrifood industry is huge, but farmers see single-digit percentages of that, and that’s causing a flight of talent from rural areas to urban centers. This is a problem because we need digitally-savvy farmers on our farms.

We’re looking at emerging carbon markets, which is a bit more speculative. We like the transition to nature and biodiversity credits, and we think there will be a constructive outcome when it goes through the shakeout it’s going through now, and that it will spur a new sub-economy that is nature-positive.

And we’re also looking at agrifood tech, which introduces new food groups to human food and animal feed chains. We’d like to see some food groups that are currently imported at an enormous expense substituted with more sustainable, home-grown, lower carbon footprint, lower planetary footprint food and feed. Some of these cost-effective and nutrient-rich food groups can be injected into the economy and have an immediate climate and economic impact.

E: Tell us more about these sustainable food groups.

HA: There are a few mn people today who knowingly eat insects and insect derivatives, and a couple of bn more — including you and I — who unknowingly eat them. Insects are the largest phylum in the animal kingdom and should form a much larger part of our diet because they are a very efficient, low-cost, low-carbon footprint source of protein. They will be a substantial part of our diet in Africa, it’s just a question of which cohort of players will tap into this space. There are already engaged players in Egypt, southern Africa, East Africa, and West Africa.

Substituting animal feed with insect- and worm-based derivatives would cut significant emissions related to growing, harvesting and transporting crops like corn and soy. Farming insects and worms has a much smaller footprint and it can be done locally, so you would immediately reduce the footprint of animal feed. On top of that, insect protein, when fed to fish, shrimp, and poultry substantially improves their immunity, because of the phytochemical — bacteria-busting — properties of insects and worms. That’s why they exist, because they digest waste and bacteria and help us to fight disease.

E: How are agrifood and agtech impacting traditional agriculture practice and how far-reaching are their impacts?

HA: I don’t know what the trend is, but I know what the opportunity is. African agriculture produces somewhere between a quarter to half the yields of comparable crops elsewhere in the world and imports 50-70% of its food. If African farmers have access to more money, they can invest in their farms, improve yields, drive down costs, and improve their bottom lines. This means that they will want to employ even more sustainable, high-tech, potentially regenerative ways of farming and increase their yields further and get into a positive cycle as opposed to the negative one they’re in right now. They can potentially double or quadruple Africa’s food output and reduce those imports by an average of 50%, and maybe feed a whole Africa on top of it with a whole new set of food groups. That’s an opportunity to chase.

We see climate risk as a threat to food systems globally, and Africa is particularly vulnerable. Not only is our own farming being disrupted by climate, but there’s also a risk that when the countries that export to us have their climate moment, we’ll be the first countries that they drop off their dispatch sheet. We need to be prepared for that moment. That’s the threat and that’s the opportunity.

E: A report (pdf) by the Clean Energy Business Council last year found that MENA is falling behind on climate tech funding. Is that changing?

HA: I can tell you that over the past five or six years, Africa and the Middle East have attracted less than 1% of agrifood startups funding. Most of Africa is arable and 50-60% of its population is employed in agriculture, so there’s no reason why Africa should attract such a small percentage of startup agrifood funding.

Africa’s share of agri-tech startup funding is only 1%, and that’s an all-time high. But there is evidence that that is about to change. In India and Latin America, agrifood tech startup funding peaked shortly after fintech peaked and we are now in our fintech moment, so it makes sense that agrifood should follow.

The region’s hydrogen agreement boom ahead of national strategies: While the majority of MENA region countries have yet to release their national hydrogen strategies, a total of 68 low-carbon hydrogen agreements were signed in the region last year, according to a summary report (pdf) by the Organization of Arab Petroleum Exporting Countries.

Egypt leads the pack: Egypt signed the most preliminary agreements in the region last year, with a total of 23 agreements, as it hopes to position itself as a global hydrogen hub, the report states. Oman trailed behind at 11 agreements, followed by the UAE with 10, Saudi Arabia with nine, Morocco with seven, Algeria with four, Iraq with two, and Qatar and Jordan with one agreement each.

MENA countries have set ambitious targets: The UAE plans to have a 25% share of the global hydrogen market by 2030, while Morocco is looking to reach a 6% share, followed by Egypt’s sights on a 5% share. Saudi Arabia wants to produce 2.9 mn tons of green hydrogen and ammonia annually by 2030, while Oman aims to produce between 1 and 1.5 mn tons annually by 2030. A report published last month by the International Renewable Energy Agency (Irena) concluded that Egypt, Morocco, KSA, and Oman are leading MENA’s green hydrogen development.

It’s not all green hydrogen production: The report reveals that of the 68 agreements inked last year, 68% were for green hydrogen and ammonia production, 19% for blue hydrogen production, 6% for shipping and aviation hydrogen fuel stations, 4% for hydrogen storage facilities, and 3% for pipeline infrastructure to transport the fuel.

But investment in infrastructure is still lagging: Some 33% percent of over 1.1k senior professionals across 80 countries said that the biggest barrier for the hydrogen economy is a lack of infrastructure needed for the fuel to be produced, moved, stored, distributed, and integrated into the wider energy system, a survey by Norway’s DNV found. 28% said that government-funded infrastructure is the most important enabler of a successful hydrogen economy between now and 2030. Investors rated the MENA and West Asia region’s hydrogen production infrastructure 2.7 out of 5 in another report by sustainability consultant Arup. For the International Energy Agency’s Net Zero Emissions by 2050 Scenario, hydrogen infrastructure — mainly pipelines and storage — requires annual investments of USD 52 bn between 2026-2030, and USD 82 bn between 2041-2050, the organization’s Energy Technology Perspectives 2023 revealed.

2023 is shaping up to be a promising year for the region’s nascent sector: KSA’s Neom Green Hydrogen Company has signed several financing agreements worth a collective USD 8.5 bn to fund the development of its utility-scale green hydrogen facility. Saudi Arabia’s sovereign wealth fund signed an agreement with Japanese trading and investment conglomerate Marubeni to jointly conduct a feasibility study for a green hydrogen production facility in KSA. Japan’s Jera signed an MoU with Abu Dhabi National Energy Company (Taqa) to jointly explore the feasibility of low-carbon thermal energy, ammonia, and green hydrogen production projects in MENA in February. UAE’s Al Fattan Energy signed an agreement with South Korea’s LTechUVC to build a USD 400 mn, 200 MW green hydrogen and ammonia facility.

So what’s the status of these anticipated national hydrogen strategies? To date, Oman is the only country to have released its strategy, while Morocco and the UAE have released a hydrogen roadmap, according to the report. In 2022, Saudi Arabia was developing a national hydrogen strategy, outlining its production, export and domestic uses. Egypt is expected to announce its hydrogen strategy within weeks. Without “clear policy frameworks that are transparent on long-term goals,” it will be difficult to drive hydrogen investments, a hydrogen business manager at Shell Norway said in the DNV report. DNV’s survey found that out of 10 enabling factors for hydrogen sector growth, regulation came in first place.

Biden’s Inflation Reduction Act is going to spike EV prices: Regulations under the Inflation Reduction Act to begin the immediate manufacture of EV components including chargers in US-based production plants are drawing concern from automakers, industry sources tell Reuters. The US currently lacks the domestic capacity to engage in full fledged EV production in line with the IRA’s targets, especially on EV chargers, the newswire notes, adding that industry players worry strict enforcement of the Act would slow the rollout of EVs and hike production costs.

An unrealistic timeline: Moving production from foreign markets takes as long as 18 months and immediate enforcement of the bill to relocate manufacturing to the US could drive EV costs up by 25-30%, co-founder of EV chargers manufacturer XCharge Aatish Patel tells Reuters. A mandate to source 55% of EV costs in the US has been postponed from its 2023 deadline to July 2024, according to a White House statement. The EV industry expects more deferrals in other terms to follow for the IRA’s EV production targets to be met, Reuters notes.

Americans are eager to switch to EVs: 34% of US respondents to a recent poll by Reuters and French market research and consulting firm Ipsos said they would consider purchasing electric vehicles for their next car. The Biden-Harris administration has a target to have hybrid and EV models comprise half of all new domestic car sales by 2030.

Oman plans to build out fully dedicated hydrogen infrastructure even though plans are still at an early stage, Zawya quoted Dii Desert Energy CEO Cornelius Matthes as saying this week on the World Hydrogen Leaders platform. France-based Geostock is currently evaluating the geological potential for underground storage in the country, Matthes said, adding that a new hydrogen pipeline network connecting Salalah, Duqm, Sohar, and Muscat is at the early planning stage. Oman is also eyeing plans to build hydrogen filling station infrastructure across the country, he added.

Oman is well on its way in terms of agreements: Oman’s state-owned green hydrogen company Hydrom — owned by Energy Development Oman — signed six binding term sheet agreements worth a combined USD 20 bn for the production of green hydrogen earlier this month with companies from Belgium, the Netherlands, the UK, Japan, Singapore, Germany, India, Kuwait, and the UAE.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The Dubai Freezones Council held a meeting to discuss the strategy to reduce the freezone companies' demand for electricity and energy consumption. The strategy aims to reduce demand for energy and water by 30% by 2030 for both freezones and companies. (Statement)

Scotland’s Flotation Energy was selected to develop two floating offshore wind stations with 1.9 GW generation capacity in Scotland, Reuters reported this week. Flotation Energy — fully acquired by Tokyo-based utility giant TEPCO Renewable Power in November — will develop the two offshore wind farms with Norway-based company Vårgrønn, with one set to become operational in 2027 and the second in 2028. In the long term, the company aims to deliver more than 12 GW of commercial scale fixed and floating offshore wind farms.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Australia-headquartered mining firm BHP Group and Chinese steel manufacturer HBIS Group will invest USD 15 mn over three years to trial carbon capture and storage technologies at HBIS steel mills. (Reuters)