Ahmed El-Hoshy (OCI): 'Sustainability is Not a Zero-Sum Game'

Ahmed El-Hoshy (OCI): 'Sustainability is Not a Zero-Sum Game'
OCI is working on decarbonizing products and processes through the use of waste and renewable energy sources. CEO Ahmed El-Hoshy sees it as his task in the industry to do what is possible within his organization. He urges for a clear framework and regulations for the benefit of all. We are not rivals in the pursuit of sustainability. ‘If our competition is successful in reducing the CO-2 emissions and can create a market for green and blue hydrogen, it would be good for them as well as ourselves.’

Ahmed El-Hoshy is CEO of OCI N.V, a global producer and distributor of hydrogen-based products. The company has nine plants spanning the US, the MENA region (Middle East and North Africa) and the Netherlands. OCI started out as a small family-run business which has grown to have a significant global footprint in producing low carbon fertilizers, fuels and raw materials. OCI strives to provide sustainable solutions to the agricultural sector and industry. El-Hoshy believes sustainability should be seen as a business opportunity rather than a threat.
‘We see sustainability as a win-win situation through which value can be created. And that is embedded in our strategy,’ says El-Hoshy. Of the company’s nine plants, El-Hoshy says that six and a half are nitrogen-based and two and a half are methanol-based. The company is working to decarbonize its products and processes using waste and renewable sources of energy and is also the world leader in bio-methanol, which has a much lower carbon footprint than traditional fuels.
El-Hoshy is in conversation with Marc-Jan Reumers, managing partner for Benelux at global consultancy firm Kearney. Kearney works with all major sectors in the Netherlands, as well as government and non-profits. 

You say you see sustainability as an opportunity. Can you elaborate on your growth strategy and how you are making that sustainable? 
‘I have been at OCI 13 years now, and we have grown the business from one operation in Egypt to a world leader in the field of ammonia, nitrogen fertilizer and methanol. Our current growth  is closely linked with sustainability in what is commonly referred to as the hydrogen economy. There is a growing focus on using hydrogen to decarbonize many products. The products we produce, ammonia and methanol, can help. They are relatively efficient transporters of hydrogen over long distances and can replace fuels such as diesel, natural gas and coal. It means that there are many different industries we can have an impact on. Considering all the sectors where fossil fuels can be replaced -  industry, transportation, the energy sector and agriculture – it might be possible to deal with up to 90 percent of the total greenhouse gases.
One of our main sustainability goals is to reduce the CO2 we produce when we make our products. We have several projects looking at how to do that and perhaps generate more volume while we are doing it. We can do things like carbon capture and sequestration. We can use renewable energy from industrial- or food waste, and we can use hydrogen. Let’s start with the low-hanging fruit. Stop trying to go from zero to hero, start with baby steps. Take hydrogen, for example, which can be produced  in a renewable way, leveraging existing infrastructures. It is not necessary to go out into the middle of the desert and build something from scratch. If you are running your plants on natural gas, you could gradually reduce emissions by producing hydrogen renewably, using electrolysis, and using renewable resources for your electricity.’

So maybe not one big leap towards the future, but small steps. If you could look 20 years ahead, how would your company be different compared to today?
‘It is very hard to look into the future. Last year we did an ESG day, where we set out targets for 2030: a 20% reduction in carbon intensity, scope-one and scope-two emissions. We intend to revisit that target in the course of the decade. And to the extent that the environment is conducive from a regulatory standpoint, from a commodity risk standpoint and from a consumer appetite standpoint, we will see how to decarbonize more quickly. I am not preaching. I simply find it to be our task in the industry. OCI is the second largest producer and consumer of hydrogen in the Netherlands. And we have the infrastructure - we have the plants that convert hydrogen into ammonia and methanol, so why should we not start with the use of hydrogen rather than natural gas?
And why not do other things? Capture CO2 and put it in the ground. Use the existing plant, the people and the storage facilities that exist, the barges, the vessels, the trains, and do it over time.
We are working on some large projects in the United States and the Middle East that are taking advantage of existing infrastructure to create a much less carbon intensive version of our products. And in the Netherlands, we are involved in six or seven potentially quite sizable projects.’

Some say fertilizer is unsustainable, while others claim we cannot feed the world without it. What’s your perspective?
‘Of those two camps, the latter is, I think, a more practical view. Without nitrogen fertilizer produced by plants like ours, the world’s population would have to be capped at around 4 billion people. If you go completely organic, the global supply is simply not enough to meet the current world population’s needs. That however does not mean we can claim the right to run our business as we like because the world needs feeding. We need to ask ourselves how we can make nitrogen fertilizers more sustainable.
At a project in IOWA, for example, in which we last month decided to invest, we produce around two million tons of fertilizer at a state-of-the-art plant. We started a carbon sequestration project where we take 450,000 tons of CO2 and put it in the ground, reducing emissions by that much. So, we can reduce scope-one emissions there and also reduce emissions further downstream, and we can still feed the world. We continue to produce fertilizer because we must, but we do so in a much more sustainable way. I do not think those two things are mutually exclusive.’

Your sustainability journey is about more than just making the right investments. What are the hurdles you see?
‘I would say historically the hurdles had much more to do with the production cycle – gas prices, the price of ammonia and methanol, the factors we saw as commodity risks. The challenges now are more regulatory - policy decisions in different regions can have far-reaching implications. New regulations can have enormous implications and complicate the whole process.
In August, the United States Congress passed the Inflation Reduction Act, which is an absolute game-changer for the hydrogen industry. The US is going to subsidize green and blue hydrogen heavily – green hydrogen being zero-carbon hydrogen and blue hydrogen being hydrogen produced where the CO2 is sequestered. Those subsidies are so significant that I think they put many US projects, including the two that we recently announced, in a much stronger position. But projects outside the US are put in a much weaker position in terms of competitiveness.’

So, you could argue that as well as subsidies helping, they can also hinder some projects?
‘The subsidies help our American production facilities, but long-term agreements are signed at a hydrogen price for one or two decades. It is very difficult to say whether our price will be competitive – we might be priced out of the market. That is the challenge right now. That does not mean that it’s not a good thing: it’s positive because it’s catalyzing the market. The US initiative will help spearhead innovation but is channeling much of the capital and attention towards the United States now, and I think that other markets like the European Union, the Netherlands and the Middle East could take similar steps.

What is the demand from your clients? Is it about a good price or a green product? How do you see the market changing?
‘Green is much more expensive, and we are pioneering in green. We have done pilot shipments and been able to get some premium, but the issue is, will anyone sign for a project? We have to be able to invest in carbon sequestration, in pipelines that put carbon into the ground and in renewable electricity. Green and blue ammonia and methanol will be needed for another 20 years. But we do not sell our commodities more than one or two months forward. There is no forward market, certainly no green forward market, and that is a barrier to entry, particularly for the large projects. Customers do not sign up for 10 or 20 years.’

Do you feel supported by your non-executive team in this journey towards sustainability?
‘We enlarged our HSE committee: it is now the Health, Safety, Environment & Sustainability Committee. We expanded our knowledge with leading experts in the sustainability space. We are facing the same issues they face in their own companies, and they are extremely supportive. They agree with OCI’s mantra of not just going blindly into sustainability – it also needs to be financially feasible.
We keep telling our executives and non-execs that bad ideas do not exist. And we look for the low-hanging fruit. We really go all-in when we see a clear opportunity, like the situation in the US. We had a lot of discussion about extending our Rotterdam storage capacity for ammonia because of the increased uncertainty around gas prices. We want to produce more ammonia and use it instead of natural gas. By producing lower carbon emissions we want to do something lasting for the environment. We do this by sequestering the carbon and using electrolysis.’

How do you approach this from a personal leadership perspective as CEO?
‘After my studies, I went into finance, and I spent a lot of time thinking about bad investments. Then, 13 years ago, I joined OCI and was afforded the opportunity to drive around Iowa and look for land, get the natural gas connection, negotiate and build a plant in the middle of a corn field. I had the experience of working for things that will make a long-term difference. Give people the opportunity to question the status quo is my view. Ask questions, make a risk assessment and then move fast. If we can make a good decision, we can decrease the risk, get a good return and achieve a sustainability target.’

You have a very experienced board, do you also attempt to influence the government to do the right things, offer the right incentives?
‘I think we recognize that OCI is a large player in the Netherlands in nitrogen fertilizer, and in nitrogen fertilizer and methanol globally. But we are not a mega-company or a household name. What is important for us is linking up with others in our industry. I am a member of the Hydrogen Council, which is made up of leaders from many industries. We have a lot of workshops with members of the International Fertilizer Association and broader industry organizations to unify the message to politicians.  
Politicians have to deal with the geopolitical situation, and we try to simplify the message, provide solutions and create energy independence for their systems at the same time. That is what politicians will go for, the least invasive way of moving forward without being too much out of pocket.  Put yourself in their shoes, right? And that is where the board can be and has been helpful.
The Dutch government has been very receptive. Of course, it will make its own decisions, but it has value to listen to industries; what keeps them up at night and how they are functioning in the commodity environment. To explain that is a role we all need to take on. But a tiny minority can be so loud that it is very difficult for a government official to make a decision, because they’re concerned about the 2% or the 5%. We see that with social media, and it is a challenge.’

You mentioned earlier that you are working with different companies in the value chain, including farmers, to improve sustainability across the whole chain.
‘We have programs specifically focused on downstream retailers, who are speaking to the farmers every single day. Programs that we fund to reduce those emissions, to think about best practices in how to apply fertilizer. We are part of the Fertilizer Institute in the US, so the farmers get a unified message rather than four different fertilizer manufactures telling them something similar but not the same.
We need to do the same thing on certification so that it is not proprietary. This is not a zero-sum game. If our competitors are successful in decreasing their carbon emissions, and creating a market for green and blue hydrogen, that is going to be good for both us and them. We do not have to fight it out – let’s focus on agreeing on a regulatory framework. That will make it easier for politicians.’

Many industries are taking steps towards sustainability, but are we moving fast enough?
‘We are now the leader in nitrogen fertilizer and methanol. It was not our goal to be number one, but we saw an opportunity and we worked to move forward. The challenges are many, and I think it is about stepping up and saying we are prepared for it. Don’t try everything but do take a bit of risk. I think we all have the same goal, and it is simply about stepping up and doing what it takes to achieve it.’

This interview was published in Management Scope 09 2022.

This article was last changed on 26-10-2022