24/12/16
CBAM to drive low-carbon NH3 market: Woodside Q&A
London, 16 December (Argus) — 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. By Lizzy Lancaster Send comments and request more information at
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