Woodside Commits $17.5B to Louisiana LNG in Landmark U.S. Expansion

About Woodside Energy Group Limited

Woodside Energy Group Ltd (ASX: WDS) is Australia’s largest independent oil and gas company, specialising in LNG production and global energy supply. The company operates major assets such as the North West Shelf and Pluto LNG and has expanded internationally through strategic mergers and new developments.

Woodside Energy Group Ltd has taken a major strategic step today by approving a $17.5 billion final investment decision (FID) for its Louisiana-based LNG project, positioning itself more aggressively in the global energy market. The announcement marks one of the largest offshore investments by an Australian company into the U.S. in the past decade.

Project Details and Scale

The Louisiana LNG Project, previously referred to as the Driftwood LNG Project, will be developed in four stages. The first phase will consist of three liquefaction trains, targeting a combined production capacity of 16.5 million tonnes per annum (Mtpa), with first LNG production anticipated in 2029. If fully expanded, the facility could reach 27.6 Mtpa across five trains, making it one of the world’s largest LNG terminals. Woodside expects this project to contribute approximately 24 Mtpa to its global LNG portfolio over the next decade, representing around 5% of global LNG supply growth projections. The project will feed into global energy demands, particularly in Europe and Asia, which are rapidly seeking secure, long-term LNG supply contracts in light of ongoing geopolitical tensions and energy security concerns. Management forecasts annual net operating cash flows of around $2 billion once full operations commence, delivering a project internal rate of return (IRR) of 13% and a payback period of seven years. These financial forecasts underpin Woodside’s longer-term ambitions to diversify and expand its revenue base beyond Australia.

Strategic Investment Partners

To fund the massive capital commitment, Woodside has structured a significant financing arrangement with Stonepeak, a U.S.-based infrastructure investment firm. Under the terms, Stonepeak will acquire a 40% equity interest in the project for $5.7 billion, while also covering 75% of the project’s capital expenditures through 2025 and 2026. This strategic partnership significantly de-risks Woodside’s exposure to upfront development costs while allowing it to retain operational control, at least until additional partners are secured. Management has confirmed ongoing discussions with potential investors such as Kuwait Foreign Petroleum Exploration Company, Tokyo Gas, JERA, and MidOcean Energy (backed by Saudi Aramco). These additional sell-downs would reduce Woodside’s final ownership closer to 50%, consistent with its capital-light strategy for mega-projects.

Market Context and Political Risk

Despite optimism around the project’s fundamentals, Woodside’s announcement comes at a time of renewed geopolitical uncertainty. In 2025, the newly re-elected Trump administration introduced new tariffs on imported steel, aluminium, and critical manufacturing equipment, many of which are vital for LNG construction projects. Woodside has confirmed that approximately 50% of the required components for the Louisiana LNG project will need to be imported, raising concerns about cost inflation. However, the project site is located within a Foreign Trade Zone (FTZ), allowing potential tariff exemptions or deferrals to partially mitigate risks. CEO Meg O’Neill acknowledged the risks but expressed confidence that the company’s commercial structures, hedging arrangements, and strategic procurement plans would limit tariff exposure. Furthermore, long-term LNG pricing dynamics remain favourable, with global spot and contract prices forecast to remain elevated through at least 2032.

Financial Impact

The announcement comes shortly after Woodside reported a 13% year-on-year rise in Q1 2025 revenue to $3.32 billion. While quarterly revenue fell slightly compared to Q4 2024 due to weaker oil prices, overall production remains robust, bolstered by new output from projects like Sangomar in Senegal. However, Woodside also reported a 7% decrease in average realised prices compared to the previous year, reflecting broader volatility in global commodity markets. The market suggest that the company’s expanding LNG portfolio, particularly in premium U.S. and European markets, could partially offset downward pressure on prices in the medium term. The company’s cash reserves and debt capacity remain strong. As of March 2025, Woodside held approximately $4.8 billion in cash and cash equivalents, giving it flexibility to manage its capital programs and shareholder returns even while embarking on such a massive project.

Environmental and ESG Considerations

Woodside’s move into U.S. LNG also ties into broader environmental and social governance (ESG) debates. The company has emphasised that the Louisiana LNG facility will implement best-in-class carbon management practices, targeting a lower greenhouse gas intensity than traditional LNG operations. Nonetheless, climate groups have criticised the project, arguing that large-scale LNG expansion is inconsistent with global net-zero targets. Woodside has stated that it will maintain its existing Scope 1 and Scope 2 emissions reduction targets, including a 30% absolute reduction by 2030 from 2016 levels, and net zero by 2050.