Ahead of the Argus Clean Ammonia Conference Europe in Rotterdam this month, Argus spoke to Rick Beuttel, vice president for new energy at Australia's Woodside Energy, about its recently acquired carbon capture and storage (CCS) ammonia production project in the US Gulf. Edited highlights follow.
Tell me about Woodside Energy and how you ended up buying OCI's 1.1mn t CCS ammonia project in Beaumont, Texas?
Woodside is a global energy company founded in Australia, providing reliable and affordable energy across the world. Our global portfolio includes LNG, oil and gas assets across Australia, the Gulf of Mexico, the Caribbean, Senegal, Timor-Leste and Canada. Our capital allocation framework also includes target investment criteria for new energy opportunities as we work towards creating a diversified and flexible portfolio that can respond to changes in demand and supply for our products.
With respect to the Beaumont Clean Ammonia project, our acquisition positions Woodside to be an early mover in the lower carbon ammonia industry and meet growing customer demand globally. It supports our strategy to thrive through the energy transition with a low-cost, lower carbon, profitable, resilient and diversified portfolio.
How is the Beaumont plant progressing? Is it still on track to start producing in 2025, with CCS operational from 2026?
Woodside continues to target first ammonia production from 2025 for phase 1. Lower carbon ammonia production is targeted for 2026, following commencement of CCS operations to be provided to Linde by ExxonMobil.
How is the regulatory market shaping up in Europe and what affect does this have on you as a producer?
We believe that Europe's carbon border adjustment mechanism (CBAM) is going to be the driving force that pushes consumers of ammonia or hydrogen to adopt lower carbon molecules from 2026 onwards as a way to remain compliant and reduce costs.
But Europe is not the only end market. There are tenders for lower carbon ammonia in Asia, and the OCI team and now Woodside have been active in pursuing those opportunities.
In Asia, buyers prefer long-term contracts. European opportunities follow more closely the traditional ammonia market, whether for fertilizer or as a chemical feedstock, and are shorter term contract durations. Beaumont gives us the opportunity to have a balanced portfolio, both geographically and from a contract perspective.
How achievable are premiums for low-carbon ammonia in the current market and do you expect CBAM implementation will aid this?
For Woodside, phase 1 of the project exceeds our capital allocation targets.
And we'd love a huge premium on day one. But you have to be pragmatic. While there is a great deal of climate sensitivity, people are running businesses and cost is a concern. In our view the return on investment is there and the premium will increase as the CBAM percentage increases.
You also have to consider the underlying cycle of the ammonia market, global events, Europe's position with respect to gas supply and the efficiency or competitiveness of existing ammonia assets. All of these will likely cast as long a shadow as CBAM, particularly in the early years.
The Woodside project adds 1.1mn t to the market in 2026. Do you see enough demand from new cases to consume the additional supply?
There is also another project in Texas City, which will come on line soon. Of course, these two new assets coming on stream will have an impact. But if we look at the underlying competitiveness of the Gulf Coast, with low-cost gas and these new, large scale, very efficient assets, we believe they will compete. But we are not going to be running the facility at full rates from day one and we are more looking forward to trading the lower carbon ammonia. Some of that will go to Europe and some to Asia.
Speaking of which, have you participated in either the Japanese or Korean tenders?
We are looking at all markets where there is lower carbon ammonia activity, whether that is power generation, bunkering or other markets.
Looking at power generation markets in Asia, Woodside has long-standing relationships with many of the countries from an LNG perspective. Making lower carbon ammonia from natural gas and shipping it around the world is very much analogous to shipping LNG.
