Woodside approves construction of huge LNG plant in Louisiana

Woodside has committed itself to the ‘game-changer’ Louisiana LNG project, which will test the patience of some investors who have pushed for the company to temper capital expenditure.

Woodside has formally approved the construction of a US LNG facility, Louisiana LNG, as the Australian energy giant accelerates its expansion ambitions.

The approval of the $US17.5bn ($27.22bn) facility had been widely expected after Woodside struck a deal with US infrastructure investor Stonepeak, but it will test the appetite of some investors in the Australian energy company, which have pushed for more restrained capital expenditure.

To temper some concern, Woodside earlier this month said the deal with Stonepeak will see the US infrastructure investor contribute $US5.7bn to construction of the facility, which Woodside said is worth about 75 per cent of project capital expenditure in both 2025 and 2026.

Still, unless Woodside finds another capital investor partner – the company will cover the remaining $US11.8bn in the facility – though the Australian company said the case for Louisiana LNG is compelling.

Woodside said Louisiana LNG will deliver an internal rate of return above 13 per cent and a payback period of seven years – while also delivering on its growth ambitions.

Woodside has embarked on sustained expansion as it moves to bolster LNG production to meet rising global demand, and the company said it expects first production from Louisiana LNG in 2029

That was a key rationale for Woodside when it announced its acquisition of Driftwood from US LNG company Tellurian in a deal worth $US1.2bn. The buyout catapulted it into one of the world’s biggest LNG players. Woodside has subsequently renamed Driftwood to Louisiana LNG.

Woodside chief executive Meg O’Neill said the final investment decision on Louisiana LNG was a historic moment for the company.

“Louisiana LNG is a game-changer for Woodside, set to position our company as a global LNG powerhouse and enable us to deliver enduring shareholder returns,” she said.

“Adding Louisiana LNG to our established Australian LNG business provides Woodside with a balanced and resilient portfolio, combining long-life, flexible LNG assets with high-return oil assets,” she told investors.

Woodside Energy CEO Meg O’Neill.

Some investors continue to fret about Woodside’s outlay, particularly as it expands its US presence at a time when US President Donald Trump has vowed to usher in an era of North American fossil fuel dominance.

Still, Ms O’Neill insists its Louisiana project has a head start over its rivals, and bolstering production would allow the company to capitalise on global demand for gas as countries look to switch away from coal.

Woodside is close to completing works on its $12.5bn Scarborough LNG development, while it has also committed to new projects in the Gulf of America and a US ammonia project, which Ms O’Neill said would likely end its immediate expansion agenda.

Saul Kavonic, energy analyst at MST Financial, said Woodside is cementing its global leader position with the Louisiana development.

“Woodside will become a larger LNG player than most of the majors, eventually accounting for close to 5 per cent of global supply, and operating around 8 per cent of global supply,” said Mr Kavonic.

Investors have largely cheered the expansion as they continue to reap lucrative dividends while the company expands, though the company has been widely criticised by environmentalists – which insist the energy giant is contributing to global emissions and slowing the transition away from renewables.

Will van de Pol, CEO of Market Forces, an environmental advocacy group, said Woodside’s expansion is at odds with global efforts to curtail emissions.

“Woodside has committed $US11.8bn to a project that would export harmful gas until the 2070s. The decision is unleashing emissions equivalent to running Australia’s largest coal-fired power plant for another 120 years,” said Mr van de Pol.

Woodside denies the suggestion – insisting it has a credible plan to achieve net zero emissions and highlights that gas causes lower carbon emissions than coal.

Its shares were up 1.2 per cent to $20.61, giving it a market capitalisation of $39.11bn, in a higher market on Tuesday afternoon.

Originally published as Woodside approves construction of huge LNG plant in Louisiana