Woodside to acquire OCI's low carbon ammonia project with CO2 capture in US

Australia's Woodside Energy has entered into a binding agreement to acquire chemical firm OCI Clean Ammonia Holding's low carbon ammonia project in the US which starts production next year and integrates with Carbon Capture and Storage operations the following year, Woodside said Aug. 5.

the US' landmark climate and energy law, the Inflation Reduction Act, with an estimated $800 billion to $1.2 trillion in tax credits over 10 years, has driven global investors to set up new energy plants in the US, drawn by the prospects of attractive costs and access to global markets.

"This transaction positions Woodside in the growing lower carbon ammonia market," said Meg O'Neill, CEO of Woodside. "Global ammonia demand is forecast to double by 2050, with lower carbon ammonia making up nearly two-thirds of total demand."

The project is located in Beaumont, Texas, on the US Gulf Coast and can serve customers domestically and internationally, Woodside said. Phase one has a design capacity of 1.1 million mt/year and is under construction.

Initial ammonia production, derived from natural gas, will start in 2025, while the low carbon ammonia, derived from natural gas, paired with CCS will follow in 2026, Woodside said.

Nitrogen and low carbon hydrogen feedstocks, needed to produce the low carbon ammonia, will be sourced primarily from Linde, Woodside said.

The Linde feedstock facility is currently under construction, targeting completion in early 2026, Woodside said. Ahead of completion, early supply of feedstock will come from multiple suppliers.

CCS services will be provided to Linde by ExxonMobil and are expected to be available in 2026, it said.

The deal was sealed by Woodside for an all-cash consideration of approximately $2.350 billion.

Phase two

The facility is designed to accommodate a second 1.1 million mt/year production train (phase two). Phase two remains in pre-final investment decision state and Woodside will target FID readiness for it in 2026.

"This acquisition is a material step towards delivering our scope three investment and abatement targets," Woodside said. "Phase one has the capacity to abate 1.6 million mt/yr of CO2-e and with the addition of phase two, the project has the capacity to abate 3.2 million mt/yr CO2-e, or over 60% of scope three abatement target."

The project's competitive advantages includes gross equity scope one and two emissions of less than 0.1 million mt/year CO2-e, with potential to further lower emissions with renewable power.

The existing global ammonia market stands at 200 million mt/year, traded on a blend of spot and medium-term contracts, Woodside said.

Woodside's project is in a favorable location on the US Gulf Coast with access to multiple sources of feedstock and a deepwater port for international export, it said.

Demand

The project will target conventional ammonia customers initially and will target low-carbon ammonia customers in Europe and Asia when CCS is operational, Woodside said.

"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.

Meanwhile, Woodside said April 19 that its US liquid hydrogen project H2OK(opens in a new tab) will continue to make progress even as the US government's final guidelines on hydrogen production tax credits under IRA are awaited, for a likely announcement in the second half of 2024.

Woodside's other renewable hydrogen projects include the H2Perth in Kwinana in Australia, the H2Tas in Tasmania, and the Southern Green Hydrogen in New Zealand.

Woodside's most advanced CCS project, the Angel CCS joint venture off the northwestern coast of Western Australia, signed a memorandum of understanding with Yara Pilbara Fertilisers to study the feasibility of using CCS with the decarbonization of Yara Pilbara's existing operations near Karratha in Western Australia, the company said on April 19.

Platts, part of S&P Global Commodity Insights, assessed US Gulf coast ammonia at $475/mt basis CFR USGC on Aug. 2, up 14.45% month on month.

It assessed Northwest Europe blue ammonia at $582.55/mt basis CFR Aug. 2, up 14.47% from a month ago.