(Bloomberg) — The United Arab Emirates agreed to sell its first cargo of blue ammonia as the oil producer aims to boost supply of cleaner fuels to buyers in Asia.

State-owned Abu Dhabi National Oil Co. will send the ammonia to Japan’s Itochu Corp. for use in fertilizer production, Adnoc said in a statement, without disclosing financial terms. The UAE company will later ship more of the fuel to Japan, it said, without specifying quantities or a timeframe.

Blue ammonia is made from hydrogen, a gas seen as key to the global energy transition since it emits only water vapor when burned. Turning hydrogen into ammonia allows it to be shipped. While many energy companies are looking to expand in such fuels, they’ve only just started to set up supply chains amid efforts to cut costs, which are far higher than those of traditional oil and gas.

“Starting with this trial of blue ammonia for fertilizer applications, we aim to create a wide range of ammonia value chains for existing industrial applications as well as future energy use,” Masaya Tanaka, executive officer at Itochu, said in the statement.

The planned shipment follows a similar move by Saudi Arabia’s state oil company, which sent a trial cargo of blue ammonia to Japan in September. Both Abu Dhabi and Saudi Arabia are leading a regional push to expand hydrogen and ammonia output as the OPEC members seek to leverage their customer relations and supply chains to sell the fuel.

Saudi Aramco has said it aims to have a “large share” of the blue hydrogen market, but doesn’t expect to see significant volumes before around 2030.

Blue, Gray, Green

“Blue” fuels are the result of a production process that captures the carbon dioxide byproduct for storage or reuse. That compares with “gray” fuels, when the carbon is emitted, and “green,” which are made from renewable energy such solar power that create no emissions.

Adnoc will make its ammonia in a joint venture with the Netherlands’ OCI NV. The Abu Dhabi-based JV, called Fertiglobe, is adding units at its sites to capture and liquefy their carbon emissions, allowing the ammonia to be considered blue. The carbon will then be shipped to an existing facility and injected into oil fields to boost output, Adnoc said, without saying when the new units would be completed.

Adnoc and OCI plan to sell shares in an initial public offering of Fertiglobe as soon as this year, people familiar with the matter said in April.

–With assistance from Verity Ratcliffe.

© 2021 Bloomberg L.P.

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