Woodside Energy Continues to Expand: Acquisition of an Ammonia Project in Texas

The Australian energy giant Woodside Energy has completed a second significant deal involving US assets within a matter of weeks. The Perth-based company, Australia's largest oil and gas developer, is acquiring a low-carbon ammonia project in Texas from OCI Global for $2.35 billion. This acquisition follows the $1.2 billion takeover of the struggling US company Tellurian, a developer of liquefied natural gas, at the end of July. Woodside is keen to bolster its growth through strategic acquisitions and aims to establish itself as a "global LNG giant." With roots tracing back to the 1950s, the company doubled its size in 2022 through the acquisition of BHP's oil and gas division. The purchase expands Woodside’s involvement in ammonia, a substance used in fertilizers that has gained importance in recent years as a means of storing and transporting hydrogen. This method is seen as an approach to decarbonizing sectors such as trucking and shipping. Blue ammonia is produced similarly to traditional ammonia using gas, but the resulting carbon dioxide is captured and stored. This carbon capture technology has not yet been developed on a large scale and is criticized for extending reliance on fossil fuels. Several major oil and gas companies, including ExxonMobil, Saudi Aramco, and the Abu Dhabi National Oil Company, have invested in blue ammonia facilities, hoping that these will play a role in the energy transition. The OCI plant in Beaumont, Texas, is one of the largest projects of its kind under construction and is expected to produce 1.1 million tons annually. For OCI, a chemical and fertilizer company listed on the Amsterdam Stock Exchange and led by Egypt's richest man, Nassef Sawiris, the sale is part of a comprehensive and ongoing divestiture plan. The OCI board approved a strategic review of all business segments and its Dutch listing last year, after US activist Jeff Ubben acquired a five percent stake and urged the company to explore options to improve shareholder returns. Ubben had highlighted the Texas ammonia project as one of OCI's assets that could potentially attract interest from energy companies. Production is expected to commence next year. Woodside is taking over 100% equity in the project, with the acquisition anticipated to close in the second half of the year. Sawiris has already divested other parts of OCI. In December, he sold two fertilizer stakes to Adnoc and Koch Industries for about $3.6 billion each. In a rare interview with the Financial Times earlier this year, Sawiris mentioned that OCI could be transformed into an acquisition vehicle for new industrial sectors. In its 2023 annual report, OCI announced plans to distribute at least $3 billion to shareholders this year. OCI shares have fallen 17 percent this year, bringing its market value to €4.7 billion. Woodside’s shares have declined 20 percent, with a market value of $34 billion.