Australia-based Woodside Energy is set to break into the emerging market for low carbon ammonia after agreeing a $2.35b deal to buy OCI’s large-scale production project at Beaumont, Texas—the largest project of its type in the US.

Phase one of the project is already under construction and is expected to start production of unabated ammonia in 2025, follow by low-carbon in early 2026, with a capacity of 1.1m t/yr. The project’s design also includes scope for a second phase, with a capacity of 1.1mt/yr at a projected capital of $1–1.4b.

Woodside said it will target “FID-readiness” for Phase 2 in 2026. Clean ammonia production from both phases of the project could achieve over 60% of Woodside’s scope three emission reduction target, the company said.

Woodside said the deal, which is expected to close in the second half of this year, gives it “early mover advantage” in a market which is expected to grow on the back of emerging applications including low-carbon marine and power generation fuels, as well as its role as a hydrogen carrier.

“Global ammonia demand is forecast to double by 2050, with lower carbon ammonia making up nearly two-thirds of total demand,” said Woodside CEO Meg O’Neill. “This Project exceeds our 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 tenyears.”

The OCI project was an early mover in the clean ammonia sector, enabling it to secure attractive feedstock supply and CCS services, and “lower” costs, Woodside said. The project will take gas-based blue hydrogen feedstock from a $1.8b facility under development at Beaumont by German industrial gases firm Linde, which will also supply nitrogen. CCS services for will be supplied by US oil major ExxonMobil.

Target markets

Woodside highlighted the OCI project’s “advantaged location on the US Gulf Coast with access to multiple sources of feedstock and a deepwater port for international export.”

Europe and Asia are forecast to be the largest demand centres for lower carbon hydrogen and ammonia, driven by supportive policies, Woodside said. It pointed to the EU’s carbon border adjustment mechanism, which imposes a levy on imports of carbon intensive products, as a key demand driver. In Japan and South Korea, demand is expected to be driven by supportive contract for difference subsidy schemes. The OCI project’s output is expected to qualify for use in these markets.

Woodside’s entry into the US ammonia sector comes as it builds a major position in LNG.  In July, it agreed a deal to buy US LNG company Tellurian for $900m, in a deal that includes the Driftwood LNG Terminal in Louisiana.

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Author: Stuart Penson