Woodside Energy to Acquire Texas Ammonia Project in $2.35 Billion Deal

Woodside Energy (ASX: WPL) has announced a binding agreement to acquire 100% of OCI Clean Ammonia Holding B.V. and its lower carbon ammonia project in Beaumont, Texas, in a deal valued at approximately $2.35 billion. This all-cash transaction includes the capital expenditure required to complete the project's first phase.

The Beaumont Project, currently under construction, aims to commence ammonia production in 2025, with lower carbon ammonia expected to begin production in 2026. The acquisition aligns with Woodside’s strategy to advance in the energy transition, focusing on lower carbon technologies.

Woodside CEO Meg O’Neill emphasized the strategic importance of this acquisition: "This transaction positions Woodside in the expanding lower carbon ammonia market. Lower carbon ammonia has promising applications in power generation, marine fuels, and as an industrial feedstock, helping to replace higher-emission fuels."

O’Neill also highlighted the project's potential impact on Woodside’s sustainability targets: "Global ammonia demand is projected to double by 2050, with lower carbon ammonia expected to account for nearly two-thirds of that demand. This Project surpasses our capital allocation targets for new energy projects. Both phases are anticipated to deliver an internal rate of return above 10 percent and a payback period of less than 10 years.

The first phase of the project will have the capacity to abate 1.6 million tonnes per annum (Mtpa) of CO2-equivalent emissions, with the second phase expected to double this capacity, achieving over 60 percent of Woodside’s Scope 3 abatement target. “

The Beaumont facility, strategically located on the US Gulf Coast, will serve both domestic and international markets. The initial phase is designed with a capacity of 1.1 Mtpa and is scheduled to produce ammonia derived from natural gas by 2025. The transition to lower carbon ammonia, utilizing natural gas paired with carbon capture and storage (CCS), is projected for 2026, contingent upon the commencement of CCS operations.

Woodside has secured agreements for both feedstock and CCS capacity. The nitrogen and lower carbon hydrogen feedstock will primarily come from Linde, with the Linde feedstock facility expected to complete in early 2026. In the interim, feedstock will be sourced from multiple suppliers, including Linde, using available capacity in the Gulf Coast. CCS services, provided by ExxonMobil to Linde, are anticipated to be operational in 2026.

The project’s phased development includes plans for a second 1.1 Mtpa production train (Phase 2), which remains at the pre-final investment decision (FID) stage. Woodside aims to achieve FID readiness for Phase 2 in 2026, with an expected gross capital expenditure between $1.2 billion and $1.4 billion.

Under the terms of the transaction, Woodside will acquire all equity interests in OCI Clean Ammonia Holding B.V., which fully owns the Project through indirect ownership from OCI N.V. and its affiliates (collectively referred to as “OCI”). The Project is covered by OCI’s guarantees related to costs, scheduling, and performance. OCI will oversee the construction of the Project until provisional acceptance, finance the costs until project completion, and is committed to liquidated damages for any delays, thus mitigating financial and timing risks.

Additionally, the deal includes the transfer of skilled personnel who will handle the start-up, operational, maintenance, and technical aspects of the asset. The transaction is expected to close in the second half of 2024, contingent upon approval from OCI N.V.'s shareholders and fulfillment of standard closing conditions.