Woodside Energy to Buy OCI Clean Ammonia Holding

Woodside Energy on Monday said that it has entered into a binding agreement to acquire 100% of OCI Clean Ammonia Holding B.V., and its lower carbon ammonia project in Beaumont, Texas (Project) for an all-cash consideration of approximately $2.35 billion.

The Project is under construction and targets production of first ammonia from 2025 and lower carbon ammonia from 2026. The consideration is inclusive of capital expenditure through completion of the first phase.

Woodside CEO Meg O’Neill said that the acquisition supports Woodside’s strategy to thrive through the energy transition. This transaction positions Woodside in the growing lower carbon ammonia market. The potential applications for lower carbon ammonia are in power generation, marine fuels and as an industrial feedstock, as it displaces higher-emitting fuels, O’Neill said.

“Global ammonia demand is forecast to double by 2050, with lower carbon ammonia making up nearly two-thirds of total demand and this project exceeds Woodside’s capital allocation framework targets for new energy projects. Both phases are expected to achieve an internal rate of return above 10% and payback of less than 10 years, O’Neill said.

OCI Clean Ammonia Project

The Project can serve customers both domestic and international. Phase 1 has a design capacity of 1.1 Mtpa and is under construction. First ammonia production, derived from natural gas, is targeted for 2025.

Lower carbon ammonia production, derived from natural gas paired with carbon sequestration, is targeted for 2026 following commencement of CCS operations.

Agreements for the feedstock and CCS capacity are in place. The nitrogen and lower carbon hydrogen feedstock will be sourced primarily from Linde. The Linde feedstock facility is currently under construction, targeting completion in early 2026. Ahead of completion, early supply of feedstock for the project will come from multiple suppliers, including Linde, from available capacity in the Gulf Coast.

The facility is designed to accommodate a second 1.1 Mtpa production train (Phase 2). Woodside will target FID-readiness for Phase 2 in 2026 with an expected gross capital expenditure range of $1.2 billion to $1.4 billion.

Ammonia Market

Lower carbon ammonia demand is forecast to grow through the energy transition. The current ammonia market is nearly 200 Mtpa, of which approximately 80% is used for fertiliser applications with the remainder used for various industrial applications. Lower carbon ammonia demand will be driven by the decarbonisation of traditional end-use sectors and emerging applications in marine fuels, power generation and as a hydrogen carrier.

Europe and Asia are forecast to be the largest demand centres for lower carbon hydrogen and ammonia driven by supportive policies. The EU CBAM imposes a levy on imports of carbon intensive goods based on carbon intensity. This results in a carbon tax saving for lower carbon ammonia relative to unabated ammonia. In Japan and South Korea, demand is expected to be driven by supportive ‘contract for difference’ subsidy schemes, which aim to cover the difference between the prices of lower carbon fuels and conventional fossil fuels. The Project’s designed carbon intensity is expected to qualify for these schemes.

Transaction Details

Under the transaction, Woodside will acquire 100% of the equity of OCI Clean Ammonia Holding B.V., which indirectly wholly owns the Project, from OCI N.V. and the project is subject to cost, schedule and performance guarantees from OCI.

This means that OCI will manage the construction of the Project through provisional acceptance, will fund Project costs through Project completion and has agreed to liquidated damages for certain delays, reducing cost and schedule risk.

The transaction is targeted to complete in the second half of the 2024 and is subject to OCI N.V.’s shareholder vote and satisfaction of customary conditions precedent.