Woodside Energy shareholders are big on decarbonisation, but the company’s latest clean energy aspirations have been met with mixed reactions.
Woodside Energy has entered into a binding agreement to acquire OCI’s clean ammonia project in Texas for $US2.35 billion ($3.57 billion).
The project is a departure from the company’s typical realm of oil and gas – a leap that Woodside chief executive officer Meg O’Neill is confident will pay off.
“One of the most attractive parts of this opportunity is the returns,” she said.
“Current demand [for ammonia globally] is almost 200 million tonnes of product produced per annum. This means there are established value chains, reducing the market risk.
“Importantly, lower carbon ammonia is expected to make up two thirds of the market by 2050 as industries move to decarbonise and stricter regulations are implemented.
“This project provides Woodside an early mover advantage, well positioned to supply this growing demand and established preferred provider status with customers.”
The project itself is well advanced, with construction 70 per cent complete. Phase 1 ammonia production is slated for 2025, with lower carbon ammonia production targeted for 2026.
The green play follows a significant annual general meeting in April, where 58 per cent of shareholders rejected Woodside’s climate transition action plan. Chief among concerns was that investors wanted to see the company move faster to meet its climate goals.
In the rejected plan, Woodside committed to investing $US5 billion in new energy projects and slashing five million tonnes of carbon emissions from its operations. The company also has a long-term goal to be be net zero by 2050.
The soon to be acquired ammonia project progresses both of these goals, but it seems the market did not share Woodside’s optimism.
On Tuesday, Woodside fell roughly five per cent on the ASX to a low of $25.10 per share, its lowest since 2022.
O’Neill said the market reaction may have been due to the ‘surprise’ that the company opted for acquisition rather than building its own greenfield clean energy projects.
“When you have that surprise factor, which brings those questions forward about the readiness of the markets, what sort of risks are involved, it’s just different from what we’ve historically done,” she told AFR.
Since the dust settled, share prices have shown some signs of new life. Time will tell whether Woodside’s dive into ammonia will pay off.
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