- World’s first ammonia plant paired with auto thermal reforming
with 95%+ CO2 capture
- Provides early-mover advantage in growing lower carbon ammonia
market1
- Exceeds capital allocation target of 10% internal rate of
return2
- Free cash flow accretive from 2026 and earnings per share
accretive from 2027
- Capacity to abate 3.2 Mtpa CO2-e at full development; over 60%
of Woodside’s Scope 3 abatement target3
Woodside 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 $2,350 million. 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 (Phase 1).
Woodside CEO Meg O’Neill said 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.
“Global ammonia demand is forecast to double by 2050, with lower
carbon ammonia making up nearly two-thirds of total demand.4
“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 percent and payback of less than
10 years.
“This acquisition is a material step towards delivering our
Scope 3 investment and abatement targets. Phase 1 has the capacity
to abate 1.6 Mtpa of CO2-e and with the addition of Phase 2 the
Project has the capacity to abate 3.2 Mtpa CO2-e, or over 60
percent of our Scope 3 abatement target.”
OCI Clean Ammonia Project
The Project is located on the US Gulf Coast (Beaumont, Texas)
and can serve customers domestically and internationally. 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.5
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 CCS services will be provided to Linde by ExxonMobil and are
expected to be available in 2026.
The Project will target conventional ammonia customers at
start-up and will target lower carbon ammonia customers in Europe
and Asia when CCS is operational.
The facility is designed to accommodate a second 1.1 Mtpa
production train (Phase 2). Phase 2 remains pre-final investment
decision (FID). Woodside will target FID-readiness for Phase 2 in
2026 with an expected gross capital expenditure range of $1.2 - 1.4
billion.
The Project’s competitive advantages include:
- World’s first ammonia plant paired with auto thermal reforming
with 95%+ CO2 capture. This results in an emissions intensity of
0.8 tCO2-e/t NH3 relative to an unabated ammonia emissions
intensity of 2.3 tCO2-e/t NH3;6
- Early-mover advantage in the growing lower carbon ammonia
market;
- Utilises proven ammonia synthesis design incorporating
learnings from OCI’s other operational sites;
- Advantaged location on the US Gulf Coast with access to
multiple sources of feedstock and a deepwater port for
international export;
- Capital efficient business model leveraging third-party
feedstocks for hydrogen paired with CCS, and nitrogen;
- Gross equity Scope 1 and 2 emissions of less than 0.1 Mtpa
CO2-e, with potential to further lower emissions with renewable
power;
- Advantaged transaction terms that reduce project cost and
schedule risk; and
- Scalability for a second train in Phase 2, with economics that
benefit from common infrastructure installed during Phase 1.
Returns
Phase 1 is expected to exceed Woodside’s capital allocation
target of a 10% internal rate of return (IRR) for new energy
projects, including acquisition and construction costs. It is also
expected to achieve payback in less than 10 years. Phase 2 is
expected to achieve improved returns leveraging common
infrastructure.
The Project returns benefit from:
- Lower cost - the Project was an early mover and secured
attractive feedstock supply and CCS services;
- High-confidence project cost - advantaged transaction terms
reduce the project cost and schedule risk;
- Property tax abatements - the Project has secured local tax
abatement agreements;
- Regulatory incentives - the Project is positioned to deliver to
markets in Europe and Asia which are incentivised to source lower
carbon ammonia; and
- Scalability - a future Phase 2 development that benefits from
common infrastructure installed in Phase 1.
Forecast IRR and payback period are a look forward from July
2024 and assume Woodside equity of 100% and include the acquisition
price. Lower carbon ammonia price assumes an uplift to Woodside’s
internal unabated ammonia cost assumption. In 2025 the uplift is
$0/t increasing to ~$120/t in 2034 (real terms 2024) aligned with
the phase-in of the EU carbon border adjustment mechanism (CBAM).
Payback period is calculated from undiscounted cash flows from
ready for start up (RFSU).
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.7
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. (together with its affiliates: “OCI”).
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 includes the transfer of experienced personnel
with start-up, operational, maintenance and technical capabilities
for the operation of the asset.
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.
About Woodside
Woodside is a global energy company, providing reliable and
affordable energy to help people lead better lives. Woodside led
the development of the LNG industry in Australia. With a focused
portfolio, Woodside is recognised for its world-class capabilities
as an integrated upstream supplier of energy. Woodside’s proven
track record and distinctive capabilities are underpinned by 70
years of experience.
About OCI N.V.
OCI N.V. operates as a producer and distributor of natural
gas-based fertilisers and industrial chemicals. OCI N.V. produces
nitrogen fertilisers, methanol, and other natural gas based
chemical products, serving agricultural and industrial clients
globally.
Teleconference
A conference call providing an overview of the transaction with
a question and answer session will be hosted by Woodside CEO and
Managing Director Meg O’Neill on Monday, 5 August 2024 at
17:30 AEST/15:30 AWST/02:30 CDT.
We recommend participants pre-register five to 10 minutes prior
to the event with one of the following links:
- https://webcast.openbriefing.com/wds-ic-2024/ to listen to a
live stream of the question and answer session
- https://s1.c-conf.com/diamondpass/10041112-hfg789.html to
participate in the question and answer session. Following
pre-registration, participants will receive the teleconference
details and a unique access passcode.
An investor presentation follows this announcement and will be
referred to during the conference call. It will also be made
available on the Woodside website (www.woodside.com) and has today
been submitted to the FCA National Storage Mechanism and will
shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
A copy of the transcript of the conference call will also be
submitted to the National Storage Mechanism and will be available
for inspection at the web address set out above following the
conclusion of the conference call.
This announcement was approved and authorised for release by
Woodside’s Disclosure Committee.
Definitions
Woodside uses “lower carbon” to describe the characteristic of
having lower levels of associated potential greenhouse gas (GHG)
emissions when compared to historical and/or current conventions or
analogues, for example relating to an otherwise similar resource,
process, production facility, product or service, or activity.
Announcement contains inside information
This announcement contains inside information. Marcela Louzada,
Vice President Investor Relations, is responsible for release of
this announcement.
No offer or solicitation
This announcement is not intended to and does not constitute,
form part of, or contain an offer or invitation to sell to Woodside
shareholders (or any other person), or a solicitation of an offer
from Woodside shareholders (or any other person), or a solicitation
of any vote or approval from Woodside shareholders (or any other
person) in any jurisdiction.
Forward-looking statements
This announcement contains forward-looking statements with
respect to Woodside’s business and operations, market conditions,
results of operations and financial condition, including, for
example, but not limited to, statements regarding Woodside’s
proposed acquisition of OCI Clean Ammonia Holding B.V., the
development, completion and execution of Woodside’s projects,
expectations regarding future capital expenditures, future results
of projects, operating activities, new energy products,
expectations and plans for renewables production capacity and
investments in, and development of, renewables projects,
expectations and guidance with respect to production, investment
expenditure, and expectations regarding the achievement of
Woodside’s net equity Scope 1 and 2 greenhouse gas emissions
targets and Scope 3 investment and abatement targets. All
statements, other than statements of historical or present facts,
are forward-looking statements and generally may be identified by
the use of forward-looking words such as ‘pathway’, ‘guidance’,
‘foresee’, ‘likely’, ‘potential’, ‘anticipate’, ‘believe’, ‘aim’,
‘estimate’, ‘expect’, ‘intend’, ‘may’, ‘target’, ‘plan’,
‘strategy’, ‘forecast’, ‘outlook’, ‘project’, ‘schedule’, ‘will’,
‘should’, ‘seek’ and other similar words or expressions. Similarly,
statements that describe the objectives, plans, goals or
expectations of Woodside are forward-looking statements.
Forward-looking statements in this announcement are not
guidance, forecasts, guarantees or predictions of future events or
performance, but are in the nature of future expectations that are
based on management’s current expectations and assumptions. Those
statements and any assumptions on which they are based are subject
to change without notice and are subject to inherent known and
unknown risks, uncertainties, assumptions and other factors, many
of which are beyond the control of Woodside, its related bodies
corporate and their respective beneficiaries. Important factors
that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to, the
occurrence, or failure or certain events to occur, the potential
that the expected benefits and opportunities of the acquisition, if
completed, may not be realised or may take longer to realise than
expected; challenges inherent in the development of ammonia
facilities, fluctuations in commodity prices, actual demand for
Woodside products, currency fluctuations, geotechnical factors,
drilling and production results, gas commercialisation, development
progress, operating results, engineering estimates, reserve and
resource estimates, loss of market, industry competition,
environmental risks, climate related risks, physical risks,
legislative, fiscal and regulatory developments, changes in
accounting standards, economic and financial markets conditions in
various countries and regions, political risks, project delay or
advancement, regulatory approvals, the impact of armed conflict and
political instability (such as the ongoing conflicts in Ukraine or
the Middle East) on economic activity and ammonia, hydrogen and oil
and gas supply and demand, cost estimates, and the effect of future
regulatory or legislative actions on Woodside or the industries in
which it operates, including potential changes to tax laws, and the
impact of general economic conditions, inflationary conditions,
prevailing exchange rates and interest rates and conditions in
financial markets.
A more detailed summary of the key risks relating to Woodside
and its business can be found in the “Risk” section of Woodside’s
most recent Annual Report released to the Australian Securities
Exchange and the London Stock Exchange and in Woodside’s most
recent Annual Report on Form 20-F filed with the United States
Securities and Exchange Commission (SEC) and available on the
Woodside website at
https://www.woodside.com/investors/reports-investor-briefings. You
should review and have regard to these risks when considering the
information contained in this announcement.
Investors are strongly cautioned not to place undue reliance on
any forward-looking statements. Actual results or performance may
vary materially from those expressed in, or implied by, any
forward-looking statements. Except as required by law, Woodside
expressly disclaims any intention or obligation to revise or update
any forward-looking statements whether as a result of new
information, future events or otherwise. Woodside has not and does
not intend to independently verify third-party data contained in
this announcement or used in the estimates and assumptions
necessary to the matters discussed in this announcement.
Climate strategy and emissions data
All greenhouse gas emissions data in this announcement are
estimates, due to the inherent uncertainty and limitations in
measuring or quantifying greenhouse gas emissions, and our
methodologies for measuring or quantifying greenhouse gas emissions
may evolve as best practices continue to develop and data quality
and quantity continue to improve.
Woodside “greenhouse gas” or “emissions” information reported
are net equity Scope 1 greenhouse gas emissions, Scope 2 greenhouse
gas emissions, and/or Scope 3 greenhouse gas emissions, unless
otherwise stated.
For more information on Woodside's climate strategy and
performance, including further details regarding Woodside's
targets, aspirations and goals and the underlying methodology,
judgements, assumptions and contingencies, refer to Woodside's
Climate Transition Action Plan 2023 and Progress Report (CTAP)
available on the Woodside website at
https://www.woodside.com/sustainability/climate-change.
The glossary and footnotes in the presentation titled “Woodside
to acquire OCI’s Clean Ammonia Project” provide clarification
regarding the use of terms such as "lower carbon" and “lower carbon
ammonia” in this announcement. A full glossary of terms used in
connection with Woodside's climate strategy is contained in the
CTAP.
Additionally, the developments of environmental and climate
change-related issues in this announcement are based on various
frameworks and the interests of various stakeholders that are
subject to evolve independently of our will. Moreover, our
disclosures on such issues, including climate-related disclosures,
may include information that is not necessarily “material” under US
securities laws for SEC reporting purposes or under applicable
securities law.
Woodside’s Scope 3 investment target is to invest $5 billion in
new energy products and lower carbon services by 2030. It includes
pre-RFSU spend on new energy products and lower carbon services
that can help our customers decarbonise by using these products and
services. It is not used to fund reductions of Woodside’s net
equity Scope 1 and 2 emissions which are managed separately through
asset decarbonisation plans.
Woodside’s Scope 3 emissions abatement target is to take FID on
new energy products and lower carbon services by 2030, with total
abatement capacity of 5 Mtpa CO2-e. It includes binding and
non-binding opportunities in the portfolio, subject to commercial
arrangements, commercial feasibility, regulatory and joint venture
approvals, and third party activities (which may or may not
proceed). Individual investment decisions are subject to Woodside’s
investment targets. Not guidance.
Scope 3 targets are subject to commercial arrangements,
commercial feasibility, regulatory and joint venture approvals, and
third party activities (which may or may not proceed). Individual
investment decisions are subject to Woodside’s investment targets.
Not guidance. It potentially includes both organic and inorganic
investment. For further information on Woodside’s Scope 3 targets
refer to pages 7 and 34 of the CTAP.
1 See disclaimer for information on “lower carbon ammonia”.
2 Refer to “Returns” section for assumptions.
3 Phase 1 emissions abatement capacity of 1.6 Mtpa CO2-e
conditional on supply of carbon abated hydrogen and ExxonMobil’s
CCS facility becoming operational. Woodside will market ammonia
volumes into the global ammonia market, which in 2023 represented
~200 Mtpa. Phase 2 subject to FID. Woodside has made the assumption
to estimate avoided emissions through displacement of conventional
marine fuel. Actual displaced emissions may differ based on actual
use case.
4 Source: Wood Mackenzie Global Ammonia Strategic Planning
Outlook 2024, published 31 May 2024.
5 The supply of carbon abated hydrogen is dependent on
ExxonMobil’s CCS facility becoming operational.
6 EU proposed standards calculation method for carbon
intensity.
7 Source: Wood Mackenzie Global Ammonia Strategic Planning
Outlook 2024, published 31 May 2024.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240805330244/en/
INVESTORS Marcela Louzada M: +61 456 994 243 E:
investor@woodside.com
MEDIA Christine Forster (Australia) M: +61 484 112
469 E: christine.forster@woodside.com
Rob Young (United States) M: +1 281 790 2805 E:
robert.young@woodside.com
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