Woodside strengthens presence in the area of lower-carbon ammonia production

The Australian energy company Woodside has reached a definitive agreement to acquire OCI Clean Ammonia from OCI Global for 2.35 billion USD (3.62 billion AUD). With this acquisition, Woodside aims to strengthen its position in the lower-carbon ammonia market, which is growing due to the increasing demand for sustainable energy solutions. The asset in question is a clean ammonia project currently under construction in Beaumont, Texas. Woodside will pay 80% of the purchase price upon the transaction's completion. The remaining balance will be due upon project completion, which is subject to certain conditions. The deal includes capital expenditures (Capex) through the completion of the project's first phase. The first project phase is planned to have a capacity of 1.1 million tons per year and is expected to produce ammonia from natural gas starting in 2025. Subsequently, the plant will transition to producing lower-carbon ammonia from 2026 by combining natural gas with carbon capture and storage (CCS). OCI will retain control over the construction, commissioning, and startup of the facility, directing contractors until it reaches full operational readiness. Once operational, control will transfer to Woodside. The project has secured agreements for feedstocks and CCS capacities, with Linde providing nitrogen and lower-carbon hydrogen feedstock from a facility set to be completed in early 2026. In the interim, feedstock will be supplied by Linde and other Gulf Coast suppliers. CCS services will be provided by ExxonMobil starting in 2026. Initially, the project will serve conventional ammonia customers, with plans to supply lower-carbon ammonia customers in Europe and Asia once the CCS facilities are operational. The plant is designed to accommodate a second production train, with Woodside targeting an investment decision for this phase in 2026 and projecting gross capital expenditures of 1.2 to 1.4 billion USD. Woodside CEO Meg O'Neill stated: "This transaction positions Woodside in the growing market for lower-carbon ammonia. Potential applications for lower-carbon ammonia include power generation, marine fuels, and as an industrial feedstock, as it displaces more carbon-intensive fuels." Energy experts project that global ammonia demand will double by 2050, with lower-carbon ammonia accounting for nearly two-thirds of total demand. This project exceeds the targets of our capital allocation framework for new energy projects. Both phases are expected to achieve an internal rate of return above 10% and pay back within less than ten years. The transaction is expected to close in the second half of 2024, subject to OCI shareholder approval and customary conditions. This acquisition follows Woodside Energy's recent agreement to acquire the U.S. LNG company Tellurian for 1.2 billion USD.