Australia-headquartered Woodside on Monday announced a binding agreement to acquire a lower carbon ammonia project in, Texas, US, for $2.35-billion.

CEO Meg O’Neill said the acquisition of OCI Clean Ammonia Holding and the project supported Woodside’s strategy to thrive through the energy transition.

Woodside expects demand for ammonia, which is used in power generation, marine fuels and as an industrial feedstock, to double by 2025, with lower carbon ammonia making up nearly two-thirds of total demand.

O’Neill also said that the project exceeded Woodside’s capital allocation framework targets for new energy projects, with both phases expected to have an internal rate of return of more than 10% and a payback of less than ten years.

Phase 1 has a design capacity of 1.1-million tonnes a year 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 the start of carbon capture and sequestration (CSS) operations.

Woodside stated that agreements for the feedstock and CCS capacity were in place.

The facility is designed to accommodate a second 1.1-million-tonne-a-year production train, Phase 2. This phase remains pre-final investment decision (pre-FID). Woodside will target FID-readiness for Phase 2 in 2026, with an expected gross capital expenditure range of $1.2-billion to $1.4-billion.

“We are exceptionally proud to have put in motion on a global scale the first FID’d blue ammonia project, with first production expected in less than a year from now. This pioneering investment will contribute to the global availability of low-carbon-intensity ammonia, with significant potential to reduce carbon emissions in hard-to-abate sectors, including existing markets in fertiliser and industrial sectors, as well as in new applications in power and shipping. We are confident that in Woodside we have found the rightful custodian for this landmark asset and its talented employees. Under Woodside’s leadership, OCI Clean Ammonia will play a vital role in the global energy transition, delivering new energy products and lower carbon services to reduce Woodside’s customers’ emissions globally," commented OCI executive chairperson Nassef Sawiris.